NCLT: Existence of Security Interest may be Proved by a Secured Creditor Based on Records Available in an Information Utility

NCLT: Existence of Security Interest may be Proved by a Secured Creditor Based on Records Available in an Information Utility

The National Company Law Tribunal (NCLT), Ahemadabad bench comprising Mr. Dr. Madan B. Gosavi (Judicial Member) and Kaushalendra Kumar Singh (Technical Member), has observed that as per Regulation 21 of IBBI (Liquidation Process) Regulations, 2016, the existence of security interest may be proved by a Secured Creditor on the basis of records available in an information utility, certificate or registration of charge issued by the Registrar of Companies, proof of charge with the Central Registry of Securitization Asset Reconstruction and Security Interest of India.

In the present case, the applicant- Intec Capital Ltd, a Non-Banking Financial Institution (NBFC) duly registered with the Reserve Bank of India (RBI), claimed that the Corporate Debtor provided Corporate Guarantee in favor of the Applicant in relation to finance provided by the Applicant to two entities namely Gokul Ceramics Private Limited and Umiya Ceramics Private Limited in the year 2013.

The application was filed by the applicant under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) for seeking necessary orders and directions to the Respondent who is the Resolution Professional (RP) of M/s. Vrundavan Ceramic Private Limited to verify and accept the claim of the Applicant without any further delay and to consider the Applicant as Secured Financial Creditor of the Corporate Debtor.

On the other hand, the Respondent submitted that upon verification of MCA records, it was found that the Corporate Guarantee given by the Applicant was not secured by the Corporate Debtor. Therefore, the Applicant was required to be treated as Unsecured Financial Creditor. It was also submitted that based on the documentary evidence available, it was clear that no charge was created or was registered by the Applicant as required under section 125 of the Companies Act, 1956 or under section 77(1) of the Companies Act, 2013.

The NCLT highlighted that it is duty of every company within or outside India to create charge on its property, assets, or any of its undertakings whether tangible or otherwise with the Registrar of Companies within 30 days of its creation. In this particular case at hand, no charge was created by the Corporate Debtor for the Corporate Guarantee for the loan facilities availed by the Principal Borrower as required under section 125 of the Companies Act, 1956 or under section 77(1) of the Companies Act, 2013.

Moreover, the bench was of the considered view that the applicant was unable to satisfy any of the conditions given under Regulation 21 of the IBBI (Liquidation Process) Regulations, 2016. The bench referred the decision passed by National Company Appellate Tribunal (NCLAT) in Indiabulls Housing Finance Ltd. vs Mr. Samir Kumar Bhattacharya (2019), wherein the Tribunal had ruled that in absence of charge being registered, the Appellant could not be treated as Secured Financial Creditor.

The NCLT while referring to the facts of the present case, noted that no such charge had been created by Intec Capital Limited as per the records available on the Ministry of Corporate Affairs website.

In addition, the NCLT asserted that the RP had already considered the claim of the Applicant in the category of an ‘unsecured loan.’ The decision of the RP was thus upheld as the tribunal concluded that the Applicant was an ‘unsecured financial creditor’ as he did not fulfil the conditions of being a secured ‘financial creditor.’

Consequently, the NCLT disposed the application.