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TMI Blog2025 (4) TMI 1546X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial Creditor and for having admitted claim of only Rs 30 Cr. as against a claim made of Rs 156,23,71,177 by the Appellant. Aggrieved by the impugned order, the present appeal has been preferred by the Appellant-Brihanmumbai Electricity Supply and Transport Undertaking ("BEST" in short). 2. Coming to the factual matrix of the present case, the Corporate Debtor-Spark Green Energy-(Satara) Ltd. was admitted into Corporate Insolvency Resolution Process ("CIRP" in short). Since the CIRP proved unsuccessful, the Corporate Debtor was put into liquidation on 28.07.2023. The Liquidator-Respondent made an announcement inviting claims following which the Appellant submitted their claim in Form-D on 24.08.2023 of Rs 156.23 Cr. as a Secured Financial Creditor of the Corporate Debtor. The Liquidator however classified the Appellant as an Unsecured Financial Creditor and out of the total claim of Rs 156.23 Cr. admitted only a claim of Rs 30 Cr. in respect of the principal amount but did not admit the interest amount of Rs 126.23 Cr. Aggrieved by the decision of the Liquidator, the Appellant had preferred an appeal before the Adjudicating Authority. The Adjudicating Authority dismissed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). It was also contended that the Corporate Debtor had assured that the second charge in favour of the Appellant would be registered once the first charge of the project lenders was created. Since the Corporate Debtor had deliberately failed to register the charge which constituted a breach of their statutory obligation under Section 77 of the Companies Act, 2013 besides violating their contractual commitments, they cannot be allowed to derive an unfair advantage of their own wrong doing. In such circumstances, for a wrong committed by the Corporate Debtor, the Appellant could not have been denied the benefit of being a Secured Financial Creditor. 5. Refuting the contentions made by the Appellant, Shri Prakhar Tandon, Ld. Counsel for the Respondent strenuously contended that both the EPA and IA provided for interest free deposit and hence the Appellant could not have claimed entitlement to interest on the said deposit. It was also contended that the receipt of power from the Corporate Debtor at a subsidised price on account of delay did not amount to time value of money or interest. The Liquidator is required to admit the claims on the basis of records/documents placed before it a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value for money. It is also the contention of the Respondent that the contractual terms and conditions of the EPA had been looked into by Maharashtra Electricity Regulatory Commission (MERC) as the competent authority for adjudicating on disputes arising out of such contractual agreements. While upholding the termination of two EPAs, the MERC after considering the terms of the EPAs did not award any interest amount and held the security deposit to be interest free. 9. At this stage it may be useful to refer to the relevant provisions of the IA which reads as below: "Whereas: (1) ..... (2) ..... (3) The Company needs funding to set up, construct, develop, operate and maintain a 25 MW biomass based power project at Lonand MIDC, Taluka Khandala, District Satara, Maharashtra in accordance with the Business Plan ("Project"), and accordingly the Company Promoters had approached the Investor with a proposal to make an investment in the Company vide an Interest Free Deposit amounting to Rs.30 crores at the time of signing of this Agreement, and the Investor has agreed to make such an investment on certain mutually agreed terms and conditions as mentioned below: The BEST needs re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e number of units sold to the other power offtaker other than BEST. In case of delay in refund of deposit after expiry of the 60 months (i.e:- 5 years term, starting on the date of the commissioning of the project and ends 60 months thereafter) term of this agreement and the EPA/LOI the company shall continue to sell the energy at the rate of last year and other terms remaining the same to BEST till the date of refunding of Deposit. In case of delay in commissioning of the project beyond the stipulated 18 months from the date of the signing of this agreement, subject to Force Majeure Conditions defined elsewhere in this agreement, the company shall give additional discount spread evenly on the power units sold in the first year of operation proportionally to compensate the Investor for the loss of interest on their interest free deposit advanced to the company." (Emphasis supplied) 10. From a plain reading of the above clauses of the IA, it becomes clear that an investment was made by BEST-Appellant in the Corporate Debtor by way of an interest free deposit amounting to Rs.30 crores. The compensation for delay on account of non-commissioning of the project was provided for in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 12. This brings us to the other principal contention of the Appellant that since the Corporate Debtor had failed to commission the project, the security interest of the Appellant stood crystallised. It was also contended by the Appellant that the security interest which had been created by the Corporate Debtor in their favour was in the form of a floating charge over the assets of the Corporate Debtor. It was vehemently contended by the Appellant that it was wrong on the part of the Liquidator to have held that the charge was invalid merely on grounds of the non-registration of charge with the ROC. Argument was canvassed that the absence of prior registration did not invalidate a floating charge as it is an equitable interest that becomes enforceable upon crystallization. It was asserted that floating charge remains effective and enforceable even in the absence of prior registration. It is also the case of the Appellant that it was the responsibility of the Corporate Debtor to create the charge on its assets in favour of the Appellant pursuant to the IA/EPA which however, the Corporate Debtor had failed to get done. In such circumstances, for a wrong committed by the Corporate D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d; (31) "security interest" means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person; Provided that security interest shall not include a performance guarantee." 15. When we look at Regulation 21 of Insolvency of IBBI (Liquidation Process) Regulations, 2016, it clearly provides the various modalities by which security interest can be proven by a Secured Creditor. Liquidation Process Regulation 21 is as reproduced below: 21. Providing security interest- The existence of a security interest may be proved by a secured creditor on the basis of- (a) the records available in an information utility, if any; (b) certificate of registration of charge issued by the Registrar of Companies; or (c) Proof of registration of charge with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India. 16. We may now peruse Section 77(3) of Companies Act 2013 where ..... X X X X Extracts X X X X X X X X Extracts X X X X
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