TMI Blog2024 (4) TMI 727X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is secured creditor or not and further in the above context Section 77 of the Companies Act was looked into - Hon ble Supreme Court did not consider it appropriate to rule on the submissions of the Liquidator, vis- -vis the fact of non-registration of charges under Section 77 of the Companies Act. On looking into the definition of Section 3(31), it is clear that 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 any obligation and includes mortgage, charge, hypothecation, assignment and encumbrances or any other agreement or arrangement securing payment or performance of any obligation of any person , no transaction has been placed on record, under which a security interest is created in favour of the Corporate Debtor with regard to assets of the Corporate Debtor. As noted above, mortgages of immovable property and non-agricultural land were mortgages, which were referred in Sanction Letter, were mortgages by Guarantors and no assets of the Corporate Debtor was mortgaged to the Appellant. The Sanction Letter cannot be said to be a transaction, which secures payment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Kumar Wadhawan. (ii) The Corporate Debtor being unable to repay the overdraft amount, the account was declared as Non-Performing Asset ( NPA ). (iii) The Ministry of Finance vidts its Gazette Notification amalgamated PMC Bank with the Appellant. (iv) The Adjudicating Authority vide order dated 15.02.2023 initiated Corporate Insolvency Resolution Process ( CIRP ) against the Corporate Debtor. (v) In pursuance to the publication made by the Resolution Professional ( RP ), Appellant field its claim on 03.03.2023. In the List of Creditors published by IRP, the Appellant s claim only to the extent of Rs.2.53 crores was admitted as secured claim. On the request of the RP, the Appellant filed its revised claim in Form-C. The RP asked the Appellant to provide certain clarification by letter dated 22.05.2023. (vi) The RP sent list of updated claims to all Committee of Creditors ( CoC ) Members, wherein the Appellant s claim is bifurcated into secured as well as unsecured. On 13.07.2023, final list of creditors was uploaded the RP, where claim of the Appellant for Rs.139,57,65,086/- was admitted as unsecured claim. The Appellant sent an email to the RP to accept the entire claim as secure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he period of CIRP having come to an end on 13.08.2023, the approval of the Plan after expiry of the CIRP period is contrary to the provisions of the IBC and deserved to be set aside on this ground alone. The Appellant is secured Financial Creditor of the Corporate Debtor and the RP without considering the scheme of the IBC has raised objection that there is no registration of charge under Section 77 of the Companies Act, 2013 filed by the Appellant and the Appellant cannot be treated as secured creditor. It is submitted that the Adjudicating Authority had directed the RP on 08.01.2024 to reconsider the claim of the Appellant and the objection raised by the RP was overruled. It is submitted that the mere fact that charge was not registered under Section 77 of the Companies Act, 2013, was no ground to reject the claim of the Appellant as secured Financial Creditor. It is submitted that the Appellant was entitled to be declared as secured Financial Creditor on the basis of sanctioned mortgage over draft facility to the Corporate Debtor by letter dated 04.11.2011 and 17.01.2013 as well as letter dated 04.11.2011 of the Corporate Debtor of Lien and Set-off. It is submitted that the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant. Hence, the Appellant was declared as unsecured creditor by letter dated 30.01.2024. Thus, the order dated 08.01.2024 was fully complied with and the Appellant having been declared unsecured creditor, approval of Resolution Plan, treating the Appellant as unsecured creditor does not suffer from any error. It is submitted that in any view of the matter, the Appellant has failed to prove that any security interest was created in the assets of the Corporate Debtor in favour of the PMC Bank. Hence, no error has been committed by the Adjudicating Authority in approving the Resolution Plan. 6. We have considered the submissions of learned Counsel for the parties and have perused the records. Both the parties relied on judgment of Hon ble Supreme Court as well as this Tribunal in support of their submissions, which shall be considered while considering the submissions of the parties. 7. The question be answered in this Appeal, is as to whether the Appellant is secured creditor of the Corporate Debtor or not and whether the decision of the RP declaring the Appellant as unsecured creditor is in accordance with law. 8. The Appellant in support of its submission has referred to S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions stated in legal opinion report obtained for the said property for sustaining a clear and marketable title on the property are compiled with. Bank will register mortgage charge at Central Registry established under SARFAESI Act 2002. For creation and for any subsequent modification of security interest in favour of Bank, charges to be borne by the borrower. 3. Stamp document charges as per State Stamp Act will have to be borne by you. 4. The rate of interest applicable for the proposed mortgage overdraft limit is 16.50% p.a. Floating rate (Monthly rest) subject to revision rate of interest of Bank from time to time or as per RBI directives from time to time. 5. The Company Surety should execute necessary documents before disbursement. 6. Board resolution of M/s. Privilege Industries Limited for applying enhancement of Mortgage Overdraft limit, authorizing director to execute bank documents and any other documents pertaining to said limit to be submitted. 7. Company should maintain share linkage as per our Bank s norms. 8. Company should undertake the following : a. To authorize the Bank to deduct all the documentation, valuation charges and any other related charges in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accept the above Terms and conditions M/s. Privilege Industries Limited. For PRIVILEGE INDUSTRIES LTD. Sd/- Director Authorised Signatory Sd/- Surety 9. The above Sanction Letter itself refers to security by mortgage of immovable property and mortgage of land by M/s Blue Star Realtors Pvt. Ltd. and Mr. Rakesh Kumar Wadhawan respectively. The letter does not indicate creation of any other security assets in favour of PMB Bank in assets of the Corporate Debtor. Subsequent letter dated 17.01.2023 again refers to the registered mortgage of non-agricultural land in the name of Mr. Rakesh Kumar Wadhawan. Letter dated 17.01.2023 is as follows: Ref. No./PM/CO/710/12-13 Date : 17.01.2013 M/s. Privilege Industries Limited 9-09, Dheeraj Arma, Anand Kanekar Marg., Station Road, Bandra (East), Mumbai 400 051. Sir, Subject : Your application for Mortgage Overdraft Limit. We draw your attention to the captioned subject and are pleased to inform that at your request, the company has been sanctioned a Mortgage Overdraft of Rs.10.00 Crore, on the following terms and conditions:- Nature of Limit Mortgage Overdraft Limit. Amount Rs.10.00 Crore (Rupees Ten Crore Only) Prime Security Registered mortgage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be utilized for speculative purposes. d. That the account will be operated within the sanctioned limit. Acknowledgement: Please return to us the duplicate copy of this letter duly signed by the Director in *** the accep ** herein above. Yours faithfully, Sd/- I/We accept the above Terms and conditions M/s. Privilege Industries Ltd. Sd/- c. Deed of Mortgage duly stamped will be obtained from owners of the property. d. All Original Title deeds pertaining to the said property should be submitted such as Chain of agreements, duly transferred in name of Owners name, registration and stamp duty paid receipts, etc. e. Property owner should give an undertaking to our bank that during the pendency of the limit they will not deal with , dispose off, or part with or create any third party interest or induct any third party in the said property until an intimation is given by the Bank to that effect. Further Company should incorporate the clause for crediting the sale proceeds to overdraft limit account in the agreement for sale which the mortgagor will be entering into with the prospective buyers. 3. Stamp document charges as per State Stamp Act will have to be borne by you. 4. The rate of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o me/us combine or consolidate all or any of my/our accounts with and liabilities to you and set off or transfer any sum or sums standing to the credit of any one or more of such accounts in or towards satisfaction of any of my/our liabilities to you on any other account or in any other respect, whether such liabilities be actual or contingent, primary or collateral and several or joint. 5 3. That any balance of the sale proceeds shall remain in the hands of the Bank after the sale of the securities, the Bank may at its sole discretion apply the balance, if any towards any sum or sums of money that may be owing by me/us to the Bank upon any other account or any other transaction or transactions separate or distinct from the security, and you will pay to me/us any surplus which may remain after settlement of all clalms of your Bank against me/us. Dated this Mumbai Day of 4th November 2011. Sd/- Yours faithfully, For PRIVILEGE INDUSTRIES LTD. Sd/- Director/ Authorised Signatory 12. The above letter in no manner can be read to be a letter creating any securities on the assets of the Corporate Debtor. The contents of the letter are self-explanatory. 13. The submission, which has been p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 3(3) and definition of security interest in Section 3(31), do not contemplate registration of security interest under Section 77. Section 3(3) and 3(31) are as follows: (30) secured creditor means a creditor in favour of whom security interest is created; (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; 16. It is true that Section 3(31) does not refer to any registration of charge under Section 77. We may notice the judgment of the Hon ble Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd. vs. Raman Ispat Pvt. Ltd. - (2023) 10 SCC 60, which has been relied by learned Counsel for the Appellant. The above was a case where a claim was filed under IBC for government dues. The assets of the Corporate Debtor were attached and in the above context issue arose as to whether El ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... feree of the premises cannot be made liable for the outstanding dues of the previous owner since electricity arrears do not automatically become a charge over the premises. Such an action is permissible only where the statutory conditions of supply authorise the recovery of outstanding electricity dues from a subsequent purchaser claiming fresh connection of electricity, or if there is an express provision of law providing for creation of a statutory charge upon the transferee. This Court held that the creation of a charge need not necessarily be based on an express provision of the 2003 Act or plenary legislation, but could be created by properly framed regulations authorised under the parent statute. In these circumstances, the argument of Pvvnl that by virtue of Clause 4.3(f)(iv) of the Supply Code, read with the stipulations in the agreement between the parties, a charge was created on the assets of the corporate debtor, is merited. A careful reading of the impugned order [Raman Ispat (P) Ltd. v. Paschimanchal Vidyut Vitran Nigam Ltd., 2018 SCC OnLine NCLT 25732] of the NCLT also reveals that this position was accepted. This is evident from the order of Nclat which clarified th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudice any contract or obligation for the repayment of the money secured by a charge. 60. Section 78 enacts, that when a company whose property is subject to charge, fails to register it, the charge-holder (or the person entitled to the charge over the company's assets) can seek its registration. Section 3(31) IBC defines security interest in the widest terms. In this Court's opinion, the liquidator cannot urge this aspect at this stage, because of the concurrent findings of the NCLT and NCLAT that Pvvnl is a secured creditor. 61. The record further shows that after the NCLT passed its order, the appellant preferred its claim on 10-4-2018. Based on that application, the liquidator had filed an application before the NCLT for modification of its order dated 21-8-2018 [Raman Ispat (P) Ltd. v. Paschimanchal Vidyut Vitran Nigam Ltd., 2018 SCC OnLine NCLT 25732] , and contended that Pvvnl also came under the definition of secured operational creditor in realisation of its dues in the liquidation proceedings as per law. The application sought amendment of the list of stakeholders. The application was allowed. In view of these factual developments, this Court does not consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set out hereinbelow for convenience: 48. Tax to be first charge on property. Notwithstanding anything to the contrary contained in any law for the time being in force, any amount payable by a dealer or any other person on account of tax, interest or penalty for which he is liable to pay to the Government shall be a first charge on the property of such dealer, or as the case may be, such person. 22. The Hon ble Supreme Court relying on the aforesaid provision held the State as secured creditor . In paragraph-57, following was held: 57. As observed above, the State is a secured creditor under the GVAT Act. Section 3(30) IBC defines secured creditor to mean a creditor in favour of whom security interest is credited. Such security interest could be created by operation of law. The definition of secured creditor in IBC does not exclude any Government or Governmental Authority . 23. The judgment in the State Tax Officer, does not come to any aid to the Appellant. 24. The learned Counsel for the Appellant has also referred to a recent judgment of the Hon ble Supreme Court in Greater Noida Industrial Development Authority vs. Prabhjit Singh Soni and Anr. (2024) SCC OnLine SC 122. The Hon b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue RV1 INR 272 crores RV2 INR 294 crores Average INR 283 crores 19 Liquidation value RV1 INR 205 crores RV2 INR 220 crores Average INR 213 crores 20 Number of Meetings of CoC held 7 CoC meetings held on the following dates 1st Coc March 20, 2023; 2nd CoC May 5, 2023; 3rd CoC May 30, 2023; 4th CoC June 26, 2023 5th CoC July 27, 2023; 6th CoC August 7, 2023; 7th CoC August 22, 2023; 26. The Adjudicating Authority, thus, was very well aware that Application has been filed for extension on 11.08.2023 and the Plan was approved on 23.08.2023. The mere fact that no formal orders were passed on that Application are not sufficient to set aside the impugned order on this ground. It is to be noted that 13.08.2023 was a date when 180 days was expiring. Present is not a case that there was any other extension claimed for. The Adjudicating Authority after noticing the aforesaid fact, approved the Resolution Plan, which makes it clear that Adjudicating Authority did not find any infirmity in approval of the Resolution Plan on 23.08.2023. In any view of the matter, exclusion having been prayed for and no order having been passed by the Adjudicating Authority on the said extension, no infirmity ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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