Indiabulls Housing Finance Ltd vs Samir Kumar Bhattacharya & Anr

Indiabulls Housing Finance Ltd. ...Appellant M-62 & 63, First Floor, Connaught Place, New Delhi-110 001

Vs

1. Mr. Samir Kumar Bhattacharya ....Respondents Resolution Professional Network Industries Ltd. 104, S.P. Mukherjee Road Kolkata -700 026

2. Gloster Ltd. 21, Strand Road Kolkata-700 001

Present: For Appellant: Mr. Sumesh Dhawan, Ms. Vatsala Kak, Advocates For Respondents: Mr. Kanwal Chaudhary, Advocate for Respondent No. 1. Mr. Anil Agarwalla, Ms. Neha Sharma and Mr. Mahesh agarwalla, Advocates for Respondent No. 2.

ORDER

18.12.2019 Heard learned Counsel for the Appellant as well as for the

Respondents.

2. It is stated that Corporate Insolvency Resolution Process (in short CIRP)

was initiated against Network Industries Ltd situated at Kolkata in which

Resolution Plan was submitted by the Respondent No. 2- Gloster Ltd which came

up for approval before the Adjudicating Authority (National Company Law

Tribunal) Kolkata Bench, Kolkata and it was approved by Impugned Order dated

Company Appeal (AT)(Insolvency) No. 830 of 2019 Page 1 of 10 04.07.2019. The present appeal has been filed by the Appellant against the

acceptance of the Resolution Plan.

3. It is the case of the Appellant that the Appellant was treated as Unsecured

Financial Creditor in the Resolution Plan although according to the Appellant,

the Appellant should have been treated as a Secured Financial Creditor. Learned

Counsel for the Appellant has argued that the Appellant had given loan to the

Corporate Debtor sometime in 2012 and against the loan provided, Title Deed of

Anuj Chambers belonging to the Corporate Debtor were handed over to the

Appellant and thus it is stated that the equitable mortgage had been created.

Learned Counsel states that when CIRP started, the Appellant filed the claim

before the Resolution Professional-Respondent No. 1 but the Resolution

Professional treated the Appellant as Unsecured Claimant on the basis that the

Charge was not created under Section 77 of the Companies Act, 2013. Learned

Counsel referred to the Minutes of Third Meeting of the Committee of Creditors

(in short CoC) (Annexure-A4 page-55) to submit that although the Resolution

Professional placed the matter before the CoC and the claim was discussed the

Appellant was accepted as a Financial Creditor, but, only on the basis that the

Charge was not registered, CoC did not accept the Appellant as a Secured

Financial Creditor. Reference is also made to the 9th Meeting of the CoC

(Annexure-A7, page-81) which was dated 29.05.2019 to state that even in that

meeting where the Resolution Plan came to be approved, the Appellant had

raised the same objection that it should be treated as Secured Financial Creditor

but the CoC did not accept the demand of the Appellant and the Appellant was

treated as Unsecured Financial Creditor. Learned Counsel for the Appellant

Company Appeal (AT)(Insolvency) No. 830 of 2019 Page 2 of 10 submits that as per Section 77 of the Companies Act, 2013, it was the

responsibility of the Corporate Debtor to get the Charge registered and thus the

Appellant could not be made to suffer. It is argued that in spite of this, the

Appellant applied to ROC on 05.12.2018 for registering its charge and when ROC

pointed out that Delay Condonation Application was required, the same was filed

on 19.07.2019 and the Charge has now been registered on 03.10.2019.

Submission of the learned Counsel for the Appellant is that the Appellant should

be treated as Secured Financial Creditor.

4. Learned Counsel for the Resolution Professional states that the

deliberation as noted in the above two meetings of CoC show that the CoC

consciously considered the claim which was being made by the Appellant but

going by the provisions it was not found that the Charge was registered and so

the Appellant was not treated as Secured Financial Creditor and was treated as

Unsecured Financial Creditor and this should not be distributed. It is stated that

the Resolution Plan was approved by the Adjudicating Authority on 04.07.2019

and not only it has been approved but it has also been implemented. The learned

Counsel submits that the Appellant participated in the 3rd Meeting as well as in

the 9th Meeting of the CoC and in spite of that did not move the Adjudicating

Authority. If the Appellant had a grievance, even when the Resolution Plan was

under consideration of the Adjudicating Authority, even at that time, the

Appellant did not file any Application or raise any grievance that the Appellant

should be treated as a Secured Financial Creditor. Learned Counsel states that

the Appeal has been filed directly in this Tribunal without getting adjudication

on the subject from the Adjudicating Authority. Learned Counsel states that the

Company Appeal (AT)(Insolvency) No. 830 of 2019 Page 3 of 10 Resolution Plan has already been executed and any interference at this stage

would create difficulties in the process and the resolution which has already

been implemented.

5. Learned Counsel for the Respondent No. 2 referred to Sections 77 and 78

of the Companies Act, 2013 to submit that when a Charge is created, the

Company creating Charge and Charge holder both are required to get the Charge

registered and if the concerned Company fails to register the Charge within given

period of 30 days from the date of creation of Charge, (referring Section 78 of

Companies Act, 2013) there is an option even for the Charge Holder to move ROC

and get the Charge registered. It is the submission that no such steps had been

taken till CIRP started. The benefit cannot be taken by such Creditor. Learned

Counsel refers to the Judgment in the matter of "Oil and Natural Gas

Corportio9n Ltd. Vs. Official Liquidator of Ambica Mills Co. Ltd. and Ors."

-MANU/SC/0319/2014. She referred to paragraph-20 of the Judgment where

the Hon'ble Supreme Court referred to its judgment in the matter of "Indian

Bank Vs. Official Liquidator, Chemmeens Exports(P) ltd. and Ors." It is

argued that Hon'ble Supreme Court referred to Section 125 of the Old Companies

Act which was discussed in the judgment of "Indian Bank Vs. Official

Liquidator, Chemmeens Exports(P) ltd. and Ors." and paragraph-7 of that

judgment was reproduced by the Hon'ble Supreme Court which reads as under:

....

"7. On a plain reading of Sub-section (1) it becomes clear

that if a company creates a charge of the nature enumerated

in sub-section (4), after 1-4-1914 on its properties, and fails

Company Appeal (AT)(Insolvency) No. 830 of 2019 Page 4 of 10 to have the charge together with instrument, if any, by

which the charge is created, registered with the Registrar of

the Companies within thirty days, it shall be void against

the liquidator and any creditor of the company. This,

however, is subject to the provisions of Part V of the Act. The

proviso enables the Registrar to relax the period of limitation

of thirty days on payment of specified additional fees, on

being satisfied that there has been sufficient cause for not

filing the particulars and instrument or a copy thereof within

the specified period. Sub-sections (2) and (3) deal with

repayment of money secured by the charge. Sub-section (2)

provides that the provision of Sub-section (1) shall not

prejudice the contract or obligation for repayment of money

secured by the charge and Sub-section (3) says that when

a charge becomes void under that section, the money

secured shall become payable immediately. Though as a

consequence of no-registration of charge under Part V of the

Act, a creditor may not be able to enforce the charge against

the properties of the company as a secured creditor in the

event of liquidation of the company as the charge becomes

void against the liquidator and the creditor, yet he will be

entitled to recover the debt due by the company on a par

with other unsecured creditors. It is also evident that

Section 125 applies to every charge created by the company

on or after 1-4-1914. But where the charge is by operation

Company Appeal (AT)(Insolvency) No. 830 of 2019 Page 5 of 10 of law or is created by an order or decree of the court,

Section 125 has no application."

...

6. On the basis of this, learned Counsel submits that if under the general law

the Creditor could not take benefit then under the IBC, it could not be taken.

7. Having heard learned Counsel from both the sides, who made submissions

as above, it would be appropriate to reproduce the discussion which took place

in CoC in the 3rd Meeting (Annexure-A4 Agenda-5- page-61) which portions are

as under:

...

"The RP updated the COC members that none of the

factories of CD are running as on date and CD had initially

not disclosed their office property at Anuj Chambers to RP

and his team. It was only when India Bulls filed their claim

of Loan against property of Anuj Chambers, that RP was

able to identify Anuj chambers as property of CD. CD had

not mentioned the loan from India bulls neither their asset

at Anuj Chambers in their books of account. However, India

Bulls finance Ltd has not yet created any charge on the

assets funded by them and a charge needs to be created by

India Bulls as per process."

...

"RP asked India bulls representative why they have not

created charge on funding of CD against their property to

which India Bulls representative replied that they have a

Company Appeal (AT)(Insolvency) No. 830 of 2019 Page 6 of 10 separate team at their head office and they are looking into

the matter. RP and his team said that as per law, RP is

supposed to take cognizance of only those assets which are

included in the financial statements, but this was only with

investigative process followed by RP, that the existence of

this asset as financed by India Bulls came into cognizance

of RP. RP said that basis the recasting of financials of CD,

the acknowledged claims and assets are being taken into

consideration, however, until and unless the creditors come

up with their claims with the stipulated timeframe, taking

cognizance of unknown claims remains a challenge.

RP and his team also read to the COC the provisions of

section 71 of IBC pertaining to fines on CD for falsifying the

books of the corporate debtor to which the COC members

said that similar provision is there u/s 65 of IBC for

concealment of property to which RP and his team said that

the same can be challenged at NCLT and NCLAT if so

required."

...

8. Reference also needs to be made to the portion of the discussion which

was placed in the 9th Meeting (Annexure-A7-Agenda-4, page-81) which reads as

under:

.....

" AGENDA-4

....

Company Appeal (AT)(Insolvency) No. 830 of 2019 Page 7 of 10 India Bulls Housing Finance Ltd representative queried why

their claim was being considered as unsecured, though they

have equitable mortgage on the assets (Office at Part Street-

Anuj Chambers) of the Corporate Debtor (CD) and was thus

a secured creditor, to which RP replied that their charge was

not registered with ROC (Registrar of Companies), and this

was well communicated to India Bulls representatives in the

-3rd CoC meeting dated 03.01.2019, that the claim of India

Bulls Housing Finance will be considered as Unsecured,

until and unless they get their charge registered with ROC.

RP read out the extracts of the minutes of 03rd CoC meeting

highlighting Agenda -5 of the 03rd CoC minutes, wherein the

reasons of considering the exposure of India bulls Housing

Finance on CD as unsecured was clearly mentioned

highlighting the fact that "India Bulls Housing Finance had

not created any charge on the assets of CD founded by

them, and a charge needs to be created by India Bulls as

per process. Moreover, CD had not mentioned the loan from

India Bulls neither their asset at Park Street (Anuj

Chambers), in their Books of accounts. It was also

mentioned in the 03rd CoC meeting minutes dated

03.01.2019, that as per law, RP is supposed to take

cognizance of only those assets which are included

financial statements of the CD, and it was only with the

investigative process followed by RP, that the existence of

Company Appeal (AT)(Insolvency) No. 830 of 2019 Page 8 of 10 the office of CD (Anuj Chambers) as financed by India Bulls

came into Cognizance of RP". India Bulls representative

conveyed that since they have an equitable mortgage on the

assets of the CD, registering their charge with ROC is not

required for consideration as Secured Creditor as per IBC.

SIDBI representative conveyed that as CD had not

mentioned the assets as founded by India Bulls in their

Balance sheet, and also since the debt of India Bulls was

not appearing in the Balance sheet of the CD and India bulls

also had not registered their charge with ROC despite given

such a long period since 3rd CoC meeting to regularize the

creation of charge, the liability thereby itself is not

acknowledge as per companies Act."

...

9. It is thus clear that the CoC had made it clear that in absence of Charge

being registered, the Appellant could not be treated as Secured Financial

Creditor. Although the transaction is stated to be of 2012, it is clear that the

Charge was not got registered either by the Corporate Debtor or the Appellant

till now on 03.10.2019 which is after the Resolution Plan was approved on

04.07.2019. Section 77 of the Companies Act, 2013 required the Charge to be

registered and the Appellant had an option to resort to even Section 78 of

Companies Act, 2013, if there were any grievances. Not having done so, when

CIRP started trying to rely on the equitable mortgage without a charge created,

we do not find there was any error in the CoC meetings which in its wisdom did

not recognize creation of security. The transaction did not even reflect in the

Company Appeal (AT)(Insolvency) No. 830 of 2019 Page 9 of 10 Books of Account of the Corporate Debtor. Appellant should be happy that it has

been at least treated as Financial Creditor. Appellant took no actions since 2012

and till late stage of CIRP. Charge registered after Resolution Plan is approved

cannot be considered.

10. We do not find any reason to interfere now in the Appeal directly filed

before us without subject having been taken up with the Adjudicating Authority

at any earlier time nor when the Resolution Plan was being discussed. In the

circumstances, we do not find any substance in the appeal. The appeal is

dismissed. No costs.

[Justice A.I.S. Cheema] Member (Judicial)

(Kanthi Narahari) Member(Technical)

Akc/Md.

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