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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 ..... erved the following: - "17. In short, the effect of non-registration would not vitiate the recovery of the debt, however by the language of Section 77(3) of the Companies Act, 2013 as amended post the introduction of the Code read with Section 52 of the Code and Regulation 21 of the IBBI (Liquidation Process) Regulations, 2016, the security interest created becomes void against the Liquidator. 18. The decision of case ICICI Bank Ltd. Vs. SIDCO Leathers Limited & Others [MANU/SC/2337/2006] relied upon by the Applicant does not support its contention as the issue dealt by the said decision only deals with the right of the first charge holder over the right of the second charge holder, whereas the issue under consideration before this Tribunal is restricted to determine the legality of the communications of the Liquidator under the factual circumstances of the case." and dismissed the 'Application', without costs. Appellant's Submissions : 3. The Learned Counsel for the Appellant submits that M/s. Sree 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 offer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent cannot brush aside the aforesaid document, by citing Section 77(3) of the Companies Act, 2013 and there should not be any conflict between two 'Central Act'. Moreover, the 'Transfer of Property Act', 1882 confers absolute rights on the 'Mortgagee', in regard to the 'Mortgage' and the Respondent, cannot reject the Appellant's mortgage rights, based on the reasons that the charge was not registered before the Registrar of Companies. Later, the Appellant had registered the charged on 05.06.2022 before 'CERSAI' although 'CERSAI Registration', was made compulsory from 14.02.2020. 9. The grievance of the Appellant is that it is having 95.76% voting share, ought not to have treated the Appellant, as an 'Unsecured Financial Creditor'. The Appellant had informed the Respondent, through a letter dated 28.06.2022 that they are continuing 'SARFAESI Act', action against the mortgaged asset, in terms of Regulation 37 (7) of the IBBI (Liquidation process) Regulations, 2016. 10. According to the Appellant, Regulation 37(7) of the IBBI (Liquidation process) Regulations, 2016 specifically mention that the 'SARFAESI Act', or the 'Recovery of Debts and Bankruptcy Act', shall prevail ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of the 'Second Charge Holder' and that in a given case where the debts due to both the 'First Charge Holder' and the 'Second Charge Holder' are to be realised from the property belonging to the mortgagor, the 'First Charge Holder' will have to be repaid first. 15. Such a valuable right having regard to the legal position as obtaining in common law and as also under the provisions of the 'Transfer of Property Act', 1882 must be deemed to have been known to the Parliament. Thus, "while enacting the Companies Act, the Parliament cannot be held to have intended to deprive the first charge holder of the said right. Such a valuation right, therefore, must be held to have been kept preserved". 16. According to the Appellant, since Regulation 21 of IBBI (Liquidation process) Regulations, 2016 came into force only in the year 2016, the Respondent ought to have given credence to the 'MOD', executed in favour of the Appellant the pre-existing rights conferred in favour of mortgagee by virtue of the 'Transfer of Property Act', and 'SARFAESI Act', will not get diluted by virtue of Regulation 21 of IBBI (Liquidation process) Regulations, 2016 which admittedly came into force only in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said case held that proceedings under SARFAESI Act, 2002 are civil proceedings in a Court. 32. The judgement of the Hon'ble Supreme Court in Indian Bank (supra), thus, fully support the submissions of the learned Counsel for the Appellant. There being adjudicatory order of the Debt Recovery Tribunal in favour of the Appellant, the mortgage and hypothecation was created in favour of the Appellant by the Corporate Debtor, hence, non-registration of Mortgage and hypothecation under Section 77 of the Companies Act, cannot be a ground to hold that the Appellant was not a 'secured creditor'. Under the order of the Debt Recovery Tribunal, the Corporate Debtor having not deposited the amount within 30 days time period', the Appellant was at liberty to realise the amount from mortgaged and hypothecated assets. The security interest was created by virtue of the judgement of Debt Recovery Tribunal dated 26th April, 2017." 21. The Learned Counsel for the Appellant/Bank submits that the Adjudicating Authority/Tribunal should have recognised the Appellant's rights, which is holding valid mortgaged rights over the 'Secured Assets' and, therefore, prays for setting aside the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant had failed to furnish the documents, requested by the 'Liquidator', as per Regulation. 26. It is represented on behalf of the Respondent that since no documents were furnished to prove the existence of security interest, under Regulation 21 of IBBI (Liquidation process) Regulations, 2016 the Assets of the Corporate Debtor will form part of the 'Liquidation Estate'. Also, that there is a 'Fixed Deposit' (A/c No. 140025439149) in the name of M/s. Sree Ganesh EPC P. Ltd. of Rs. 16,94,453/- lying with the Appellant/Bank. The said amount is a mutual credit between the Appellant and the 'Corporate Debtor', and this was not adjusted in the claim sum. 27. It is the stand of the Respondent that the Appellant in paragraph 8 of the Appeal had admitted that they had subsequently registered the charge with 'CERSAI', on 05.06.2022 although 'CERSAI Registration', was made compulsory since 2020 itself and this is quite evident that it was an after thought to register the charge before 'CERSAI'. 28. The Learned Counsel for the Respondent refers to the order dated 19.10.2020 of this Tribunal, in M/s. Volkswagen Finance Ltd. Vs. Shree Balaji Printpack Pvt. Ltd. vide Comp. App. (AT) (Ins.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (CHE)/2021 in IBA/92/2019), wherein the security interest created by a 'Creditor', was upheld after submission of claim form with 'Liquidator', will be considered as 'Unsecured Financial Creditor'. Further, the 'Liquidator', already had intimated the Appellant about the UCO Bank's order passed by the Adjudicating Authority/Tribunal, Chennai in the 'Claim Determination Note', share to the Appellant on 04.06.2022. 30. The Learned Counsel for the Respondent refers to Section 52(3) of the I&B Code, 2016 that before any security interest is realised by the 'Secured Creditor', the 'Liquidator', shall verify such 'Security Interest', and permit the 'Secured Creditor', to realise only such 'Security Interest', the existence of which may be proved either- a. by the record of such 'Security Interest' maintained by an information utility; or b. by such other means as may be specified by the Board. 31. According to the Respondent, Regulation 21 of IBBI (Liquidation process) Regulations, 2016 specifies the other means to establish the existence of security interests: (i) The records available in an information utility, if any; (ii) Certificate of registration of charge issued by the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The Learned Counsel for the Respondent while summing up prays for dismissal of the instant Appeal along with connected applications. Secured Creditor's Rights : 37. A Secured Creditor is not obligated to resort to its security. In fact, he may also rely upon his security and proceed to realise his 'debt', in ordinary law and may stand entirely outside the winding up the proceedings as per decision in Gujarat State Financial Corporation V. Official Liquidator (1996), 87 Company cases pg. 658 (Guj-DB). 38. A Secured Creditor has a right to prefer a winding up petition after securing a 'Decree' from the Debt Recovery Tribunal and a Recovery Certificate based thereon as per decision in Swaraj Infrastructure Pvt. Ltd. V. Kotak Mahindra Bank Ltd., 2019 3 SCC at pg. 620. If a Creditor who had selected a method of having its 'Claim' adjudicated upon ought not then to be in a position to select another method of adjudication as per decision in Craven V. Blackpool Ghreyhound, Racing Ltd. (1936) 3 ALL ER 513. 39. It is to be remembered that prior to the assailing of the Assets of the 'Corporate Debtor', to the 'Liquidator', it is the duty of the 'Adjudicating Authority', to consider t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g their security. The competition among Secured Creditors, assuming that all their interests have been duly perfected will lie outside the Insolvency Law. 45. The pari passu Principle has different manifestation, which is beyond the contractual provisions. In fact, it provides the under pinning for other Insolvency Rules pertaining to proof of 'Debt'. The general Rule is that the 'claims' are to be valued as on the date of commencement of winding up, is designed to ensure that one is comparing like with like so that the Assets are distributed pari passu. Ambit of Section 52 of the Code : 46. Section 52 of the I&B Code, 2016 provides that in a liquidation proceeding, the Secured Creditor may choose to relinquish its security interest and take part in the distribution of Assets or realise its security interest outside the 'Liquidation Proceeding'. If a Secured Creditor determines to realise its security, the sum of IRP costs payable by the Secured Creditor shall be deducted from the realised proceeds. If there is a surplus realised from the enforcement of a Security Interest, the Secured Creditor has to account for the same to the Liquidator. 47. In respect of the proceeds of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (f) of the 'Transfer of Property Act', 1882 and 'Rule 8 of the Security Interest (Enforcement) Rules, 2002', comes to a resultant conclusion that 'mortgage', 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'. 53. 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. 54. It cannot be lost sight of the fact that 'CERSAI Registration', became 'mandatory', o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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