V. Jaisankar Vs Mahalingam Suresh Kumar (NCLAT)
In this Company Appeal, the Appellant, V. Jaisankar, challenged the common order dated 27 September 2024 passed by the National Company Law Tribunal (NCLT), Chennai, in proceedings concerning M/s. Ganga Foundations Pvt. Ltd., the Corporate Debtor under liquidation. The appeal specifically contested the NCLT’s decision in IA(IBC)/1701(CHE)/2023, through which the Tribunal directed the Appellant to hand over the original title deeds of a property belonging to the Corporate Debtor to the Liquidator.
The Corporate Insolvency Resolution Process (CIRP) against M/s. Ganga Foundations Pvt. Ltd. had commenced on 10 January 2022 upon the application of the State Bank of India under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). When no resolution plan was received within the prescribed period, the company was ordered into liquidation on 15 March 2023, and Mr. Mahalingam Suresh Kumar was appointed as the Liquidator. The Liquidator announced the commencement of liquidation on 19 March 2023, invited claims, and later constituted the Stakeholders Consultation Committee (SCC). Acting on the SCC’s recommendation, the Liquidator decided to sell the Corporate Debtor as a going concern. After four unsuccessful e-auctions, the property was finally sold in the fifth e-auction on 11 January 2024 to a successful bidder.
During verification of documents, the Liquidator discovered that the original title deeds of one property—Plot No. 4, Beulah Nagar, Pallikaranai Village, Chennai—were in the possession of the Appellant. The Liquidator issued a notice on 23 August 2023 directing the Appellant to return the documents. In response, the Appellant claimed ownership based on a registered Agreement for Sale dated 30 November 2020 and asserted that he had already paid ₹34,00,000 of the agreed sale price of ₹45,60,000. He further claimed to have advanced a loan of ₹50,00,000 to the Corporate Debtor on 30 December 2020, secured by deposit of the title deeds and supported by an unregistered Memorandum of Deposit of Title Deeds (MoDT) and a promissory note dated 18 February 2021.
The Appellant contended that the combination of the registered Agreement for Sale and the MoDT gave him ownership rights or, alternatively, made him a secured creditor. He argued that since the transaction occurred before commencement of the CIRP, the Liquidator had no authority to demand the title deeds under Section 19(2) of the IBC.
The NCLT rejected these arguments and ordered the Appellant to surrender the title deeds. The Tribunal held that a registered Agreement for Sale does not confer ownership of property. As no sale deed had been executed within the stipulated two-year period in the agreement, ownership remained with the Corporate Debtor. Clause 4 of the Agreement, which recorded delivery of title deeds to the purchaser, did not transfer title but merely provided for completion of sale upon satisfaction of the purchaser regarding the vendor’s title.
On the claim of the ₹50,00,000 loan, the NCLT examined the Corporate Debtor’s books of accounts and found no record of such a transaction. Only ₹34,00,000—corresponding to part payment under the Agreement for Sale—was reflected in the accounts. The Tribunal held that the alleged MoDT of 30 December 2020, which purported to create an equitable mortgage, was unregistered and, therefore, invalid to establish any security or ownership right. It also observed that the Appellant had produced no proof of having disbursed the claimed ₹50,00,000 to the Corporate Debtor.
The NCLT concluded that the property continued to form part of the liquidation estate and that the Appellant could not be treated as a secured creditor. The MoDT was not only unregistered but also failed to comply with Section 77 of the Companies Act, 2013, which requires registration of any charge created by a company on its assets. Under Section 77(3), a charge cannot be recognized by the liquidator or any creditor unless it is duly registered and a certificate of registration is issued by the Registrar of Companies. The Tribunal found that no such registration existed in this case.
Referring to Section 2(16) of the Companies Act, which defines “charge” as including a mortgage or lien created on a company’s assets, the NCLT reasoned that even if the MoDT intended to create an equitable mortgage, such a charge required registration to be valid. Without registration, no right could arise in favour of the Appellant.
Further, the Tribunal examined the Registration Act, 1908, particularly Section 17, which mandates registration of documents creating or assigning rights or interests in immovable property. It held that the MoDT fell within this category and required mandatory registration. The Tribunal also noted the Tamil Nadu Amendment of 2012 to Section 17, which specifically includes within the list of documents requiring registration:
