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TMI Blog2024 (3) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... is the result of the Act of Parties, where the Transfer of Ownership Interest, in a particular Immoveable Asset is created, and that the conclusion arrived at by the Adjudicating Authority / Tribunal, in upholding the decision of the Liquidator, in classifying the Appellant / Petitioner / Bank, as an Unsecured Financial Creditor, is an illegal and an invalid one, in the eye of Law and in the Liquidation Proceedings, the Appellant /Bank, is to be treated as Secured Creditor, as held by this Tribunal. In addition, the non-registration of the Mortgage, as per Section 77 of the Companies Act, 2013, is not a sufficient / enough ground, to come to an opinion, that the Appellant, is not a Secured Creditor. In reality, the rights of a Mortgagee, under the Transfer of Property Act, 1882 and the SARFAESI Act, are not to be diluted, in terms of Regulation 21 of IBBI (Liquidation process) Regulations, 2016. It cannot be lost sight of the fact that CERSAI Registration, became mandatory, only in February, 2020, much after the Mortgage, was created in the instant case. Further, the fact remains that the Mortgage, was registered in the Office of S.R.O., Thovalai, Kanyakumari District, Tamil Nadu, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee Ganesh EPC P. Ltd. had availed the credit facilities from the Appellant to an extent of Rs. 23 crores for which the Corporate Guarantor M/s. Cape Engineers Pvt. Ltd. had offered its immovable property as collateral security besides executing Corporate Guarantee Agreement . The said Corporate Guarantor , along with Borrower Company M/s. Sree Ganesh EPC P. Ltd. had duly executed MOD on 07.07.2015, regd. as document No. 747/2015/SRO Thovalai. 4. According to the Appellant, the borrower Company went into CIRP pursuant to an order made in CP(IB)/786(CHE)/2019 in an application filed u/s 10 of the I B Code, 2016. Also, the Corporate Guarantor , had preferred an Application in CP(IB)/785(CHE)/2019 (under Section 10 of the I B Code) and by an order dated 06.09.2019, this Tribunal , was pleased to appoint Mr. J. Manivannan as Interim Resolution Professional , and later, he was replaced by another Resolution Professional , by name Mr. S.Rajendran. 5. It is represented on behalf of the Appellant that the Respondent had determined 95.76% voting share to the Appellant herein, based on the loan security documents, executed by the Corporate Guarantor , Company. In fact, in IA 1342/IB/2021 an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess) Regulations, 2016 specifically mention that the SARFAESI Act , or the Recovery of Debts and Bankruptcy Act , shall prevail over the Regulation. While so, the Respondent cannot prevent the Secured Creditor , from enforcing its mortgage, under the SARFAESI Act. 11. It is projected on the side of the Appellant that upon the receipt of Respondent s email on 01.07.2022, the Appellant had filed an IA No. 887 / 2022, before the Adjudicating Authority / NCLT Bench II, Chennai, contesting the stand of the Respondent that MOD cannot be considered as Security Interest , and the same was dismissed on 14.06.2023, on the grounds that, if the Charge , is not registered, as per Section 77 of the Companies Act, 2013, before the Registrar of Companies , the Lender , cannot be classified as Financial Creditor and the Appellant , has not furnished any record available in Information Utility . 12. The Learned Counsel for the Appellant takes a plea that the Adjudicating Authority/Tribunal should have given preference to Section 58(f) of the Transfer of Property Act , 1882, which is much before the advent of the I B Code, 2016. To put it differently, the MOD, was registered before the advent of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BBI (Liquidation process) Regulations, 2016 which admittedly came into force only in the year 2016. In fact, the Registration of CERSAI , has become mandatory in February, 2020 only and the same cannot be applied retrospectively. In any case, the Appellant had registered the Security Interest , in CERSAI , on 05.06.2022, before the Respondent / Liquidator, gave his decision vide communication dated 01.07.2022. 17. According to the Appellant, had not the I B Code, 2016 not to come into force the Appellant can very well enforce the security interest based on Section 58(f) of the Transfer of Property Act , 1882 and Rule 8 of Security Interest (enforcement) Rules, 2002. 18. According to the Appellant, the Section 35 of the SARFAESI Act , 2002 for adjudication of the above case, which is perimetria with section 238 of the I B Code and the same is as follows: - The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. 19. According to the Appellant, the Respondent has relied upon the decision in M/s. Volkswagen Finance Ltd. Vs. Shree Balaji ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, prays for setting aside the impugned order dated 14.06.2023 passed in IA(IBC)/887(CHE)/2022 in CP(IB)/785(CHE)/2019 by the Adjudicating Authority/NCLT, Division Bench II, Chennai. Respondent s Contentions : 22. According the Respondent / Liquidator the Appellant had submitted their claim against the Corporate Debtor, for the Corporate Guarantee , and collaterals given by the Corporate Debtor , for the Loan Sum , availed by M/s. Sree Ganesh EPC P. Ltd. from the Bank for an amount of Rs. 23 crores. In fact, the property belonging to the Corporate Debtor , bearing door No. 7/IB2 located at 534/1B of Kumarapuram village, Thovalai Taluk, Kanyakumari, was provided as collateral to the Appellant bank for the loan sanctioned in favour of M/s. Sree Ganesh EPC P. Ltd. 23. It is represented on behalf of the Respondent that on 27.05.2022 Liquidator sought for documents to establish the existence of security interest as per Regulation 21 of the IBBI (Liquidation process) Regulations, 2016, to classify the Appellant as Secured Financial Creditor , but the Appellant / Bank had not submitted the documents. Further, the Appellant had not registered charge for any of the alleged collate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Comp. App. (AT) (Ins.) 02/2020, wherein at paragraph 29, it is observed as under: - 29. From the documentary evidence on record it is clear that no Charge has been registered under the provisions of Section 77(1) of the Companies Act 2013, in relation to the Subject Property. The Liquidator has rightly referred to Regulation 21 of IBBI (Liquidation Process) Regulation, 2016 and observed that the Appellants Claim was not supported by any evidence as prescribed under the said Regulation. It is also an admitted fact that the Charge was not registered under Central Registry of Securitization Asset Reconstruction and Security Interest of India. We are keeping the ratio of the aforenoted Judgements of the Hon ble Supreme Court and Section 52(3) of the Code read with Regulation 21(c) of the (Liquidation Process), Regulations, 2016, in view. We are of the considered opinion that the contentions of the Learned Counsel appearing for the Appellant that Registration with Motor Vehicle Authority under Section 51 of the Motor Vehicles Act, 1988 would suffice, cannot be sustained. Section 51(1) of the MV Act, 1988 only provides for entry in the Certificate of Registration regarding the agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies or; (iii) Proof of registration of charge with a Central Registry of Securitisation Asset Reconstruction and Security Interest of India. 32. Further, according to the Respondent the Appellant has failed to fulfil the requirements as per Section 52 of the Code r/w Regulation 21 of the Liquidation Process Regulations . Also, that the Appellant is an Unsecured Financial Creditor , of the Corporate Debtor , and the aspect of the applicability of the Transfer of Property Act , 1882 does not arise. 33. The Learned Counsel for the Respondent points out that in regard to the letter sent by the Appellant on 28.06.2022 initiating action on the Corporate Debtor s Asset under the SARFAESI Act , it is to be noted that Section 33(5) of the Code prohibits initiation of suit or other legal proceedings, when a Liquidation Order , is passed against the Corporate Debtor . Considering the fact, that the Appellant has failed to establish the security interest, as per I B Code, 2016 and Regulations therein, the Appellant does not have the right to initiate the action under SARFAESI Act , on an Asset which forms part of the Liquidation Estate . 34. In regard to the Appellant/Bank issuing a notice on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sit out of Liquidation, as per Section 52 of the Code and any order in violation of the same is liable to be set aside, as per decision in Bank of Baroda V. Mrs. Deep Venkat Ramani (2020) 158 SCL 320 (NCLAT), New Delhi. 40. A cumulative reading of Section 52 and 53 of the I B Code, 2016 shows that the Legislature in their wisdom thought it fit to give an option to the Secured Creditor armed with a security interest to choose out of the two options (i) either enforce security interest against the Asset out of Liquidation Estate being the subject of security interest or relinquish the same and claim as Secured Creditor in the manner mentioned in Section 53(1)(b) and further ranking equal to other Secured Creditors. 41. A First Charge Holder , will have priority in realising its security interest if it elects to realise its security interest and does not relinquish the same. In the event of the Secured Creditor opting to relinquish its interest, the distribution of Assets will be governed by Section 53(1)(b)(ii) whereby all the Secured Creditors having relinquished security interest rank equally. 42. Before winding up, each Creditor is free to pursue whatever enforcement measures ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itor, he may file a claim in accordance with priority of payments as per Section 53 of the I B Code, 2016 for such an unpaid portion. 48. A Liquidator is not to ask the Secured Creditor to relinquish the Secured Interest over the assets of the Corporate Debtor. The Liquidator is not to prefer an Application , praying for directions to the Secured Creditor, to respond to his request for relinquishment of Security Interest over the Assets of the Corporate Debtor to the Liquidation Estate. On receipt of such notification the Liquidator is to verify the same and permit those Secured Creditors , to exercise their right, under 52 of the I B Code, 2016 if they find that they had Security Interest , over such Assets . To put it precisely, since the I B Code, 2016 overrides the SARFAESI Act , 2002, the Liquidator ought not to prefer a petition, based on the SARFAESI Act , 2002. 49. As far as the present case is concerned, the Appellant/Bank before the Adjudicating Authority/NCLT Bench II, Chennai in IA 887/2022 in CP(IB)/785(CHE)/2019 (filed u/s 60(5)(c) I B Code, 2016 r/w Rule 11 of NCLT Rule, 2016) has sought the relief of quashing the communication dated 01.07.2022 and 04.06.2022 caused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Office of S.R.O., Thovalai, Kanyakumari District, Tamil Nadu, which is again a Public Office, providing information , on the Mortgages , registered in it. Suffice it for this Tribunal , to unhesitatingly, to hold, that the Appellant s rights, in holding a Valid Mortgage Right , over the Secured Assets , is to be protected, by any means whatsoever. Looking at from any angle, this Tribunal , holds that the Impugned Order , dated 14.06.2023, in IA(IBC)/887(CHE)/2022 in CP(IB)/785(CHE)/2019, passed by the Adjudicating Authority / NCLT , Division Bench-II, Chennai, in upholding the decision of the Liquidator , in classifying the Appellant/Petitioner , as an Unsecured Financial Creditor , is an invalid and illegal one and the same is set aside, by this Tribunal , to secure the ends of Justice. Accordingly, the Appeal succeeds. Disposition : In fine, the instant Comp. App (AT) (CH) (Ins) No. 277 / 2023 is allowed . No costs. The Impugned Order , dated 14.06.2023, in IA(IBC)/887(CHE)/2022 in CP(IB)/785(CHE)/2019, passed by the Adjudicating Authority / NCLT , Division Bench-II, Chennai, is set aside by this Tribunal , for the reasons ascribed in this Appeal . The IA(IBC)/887(CHE)/2022 in CP ..... X X X X Extracts X X X X X X X X Extracts X X X X
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