Home Kraft Avenues Vs Jayesh Sanghrajka (NCLAT Delhi)
National Company Law Appellate Tribunal (NCLAT) Delhi has ruled that the non-registration of a charge under Section 77 of the Companies Act, 2013, does not preclude an applicant from being treated as a secured creditor under the Insolvency and Bankruptcy Code (IBC). This decision came in the case of Home Kraft Avenues vs. Jayesh Sanghrajka, where the appellant challenged a decision that categorized them as an unsecured creditor despite a loan agreement securing four flats as collateral.
The NCLAT clarified that Section 77(3) of the Companies Act, which pertains to the non-recognition of unregistered charges, specifically applies to liquidators and the liquidation process, not to resolution professionals (RPs) during the Corporate Insolvency Resolution Process (CIRP). The tribunal emphasized the distinct treatments of secured creditors and security interests in liquidation versus CIRP. During CIRP, the RP is mandated to take control of all assets, regardless of encumbrances, and secured creditors cannot realize their security interests.
The NCLAT highlighted that the IBC’s definitions of “charge” and “security interest” are broader than those in the Companies Act. Section 3(31) of the IBC defines “security interest” as any right, title, or interest created in favor of a secured creditor by a transaction, which includes any agreement or arrangement securing payment. This broader definition allows for the recognition of security interests even without formal charge registration under Section 77.
Citing precedents like Canara Bank vs. Mr. S. Rajendran, the NCLAT reiterated that the rights of a mortgagee under the Transfer of Property Act, 1882, cannot be negated solely due to non-registration of a charge. The tribunal also noted that the Supreme Court, in Pashchimanchal Vidyut, acknowledged the wider scope of Section 3(31) of the IBC compared to the Companies Act.
The NCLAT concluded that the appellant, having a loan agreement securing specific flats, qualifies as a secured financial creditor. The tribunal set aside the impugned order and directed necessary corrections in the records. Additionally, the NCLAT addressed a direction in the impugned order to initiate proceedings under Section 66 of the IBC, stating that it was premature to make any findings on this issue and kept it open. This ruling reinforces the distinction between liquidation and CIRP, and clarifies that non-registration of charges does not automatically disqualify a creditor from secured status during CIRP.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
