Suraksha Realty Limited vs Mr. Vithal M. Dahake (Rp) & Ors & Ors

(Arising against the impugned order dated 10.10.2025 passed by the National Company Law Tribunal, Mumbai Bench in IA No. 4504 of 2024 in C.P. (IB) No. 380 of 2021].

IN THE MATTER OF:

Suraksha Realty Limited having registered address at 3, Narayan Building 23, L.N. Road, Dadar (E), Mumbai 400 014 Email: legal.compliance0802@gmail.com ...Appellant

Versus

1. MR. VITHAL M. DAHAKE (RP), The Resolution Professional of Radius Estate Projects Private Limited, having address at: Flat No. 2C/22, Bella Building, C Wing, Aditya Garden City Phase 1, Near RMD Sinhgad College, Warje, Pune, Maharashtra - 411058 Email:cirp.reppl@gmail.com

2. Sanjay R Chhabria The promoter and ex-director of Corporate Debtor, having address at: Flat No. 13/14, 1st Floor, New Solitaries CHS, Central Avenue Rd, Santacruz West, Opp. Rose Manor High School, Mumbai - 400054 Email:sanjay@radiusdevelopers.com

3. Ritu S Chhabria The promoter and ex-director of Corporate Debtor, having address at: Flat No. 13/14, 1st Floor, New Solitaries CHS, Central Avenue Rd,Santacruz West, Opp. Rose Manor High School, Mumbai - 400054 Email: sanjay@radiusdevelopers.com

4. Anil Chhabria The promoter and ex-director of Corporate Debtor, having address at: C-103, Guruprasad CHS, 2nd Cross Road, Lokhandwala Complex, Azad Nagar, Andheri (West) Mumbai, Maharashtra - 400053 Email: anilc@radiusdevelopers.com; anilnchhabria@rediffmail.com

5. SukantMangal The promoter and ex-director of Corporate Debtor, having address at: C-147, SushantLok-II, Gurgaon Sector 56 S.O., Gurgaon, Haryana - 122011 Email: sukantm@radiusdevelopers.com

...Respondents

Present: For Appellant: Mr. Arun Kathpalia, Sr. Advocate with Mr. Gaurav Mitra, Ms. Ruby Singh Ahuja, Mr. Sagar Bansal, Mr. Dhruv Parwal, Ms. Varsha Himat Singka, Mr. Tribhuvan N. Singh, Ms. Diksha Gupta and Mr. Aditya Dhupar, Advocates.

For Respondent: Mr. Amir Arsiwala, Mr. Dhaval Deshpande and Ms. Neha Arya, Advocates for R1/RP. Mr. Dharav Shah, Mr. Suyash Goverdhan, Mr. Pranay Goyal and Ms. Namki Grewal, Advocates for R2. Mr. Darshan Naik, Advocate for R3, R4 & R5.

Page 2 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 JUDGMENT

(19th May, 2026)

INDEVAR PANDEY, MEMBER (T)

1. The present Appeal has been filed by Suraksha Realty Limited/

Appellant under Section 61 of the Insolvency and Bankruptcy Code, 2016

(hereinafter referred to as the 'Code') assailing the Order dated 10.10.2025

passed by the Ld. National Company Law Tribunal, Mumbai Bench

('Adjudicating Authority') in I.A. No. 4504 of 2024 in C.P. (IB) No. 380 of

2021, whereby the application filed by Mr. Vithal M. Dahake, Resolution

Professional of Radius Estate Projects Private Limited/ Respondent

No.1 under Sections 43, 45 and 49 of the Code came to be allowed. By the

said Impugned Order, the Adjudicating Authority held that the Deed of

Mortgage dated 29.07.2021 executed between Radius Estate Projects

Private Limited/ Corporate Debtor, and the Suraksha Realty Limited/

Appellant constituted a preferential transaction, and consequently directed

that the security interest created in favour of the Appellant be released and

discharged. Respondent Nos. 2-5 are the promoters and ex-Directors of

the Corporate Debtor. Being aggrieved by the said findings of Ld.

Adjudicating Authority in particular the treatment of the mortgage as a

preferential transaction, despite it being a perfection of security arising from

the Debenture Subscription Agreement dated 18.12.2014, the present

Appeal has been preferred before this Appellate Tribunal.

Page 3 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 Facts of the Case

2. The brief facts of the case relevant for deciding the same are

reproduced below: -

i. The Corporate Debtor/Radius Estate Projects Private Limited, had

entered into a Memorandum of Understanding with Sumer Buildcorp

Private Limited in or about December 2014 for joint development of a

real estate project known as "Avenue 54" situated at Willingdon

Catholic Colony, Bandra, Mumbai, envisaging development of

approximately 10,00,000 square feet of saleable area, for which

substantial financial assistance was required.

ii. In order to meet its financial requirements for acquisition of

development rights and execution of the project, the Corporate

Debtor approached the Appellant; pursuant to which a Debenture

Subscription Agreement (DSA) dated 18.12.2014 came to be

executed, under which the Appellant subscribed to 225 secured

redeemable non-convertible debentures of face value Rs.50,00,000

each, thereby investing a total sum of Rs.1,12,50,00,000/- in the

Corporate Debtor.

iii. The said Debenture Subscription Agreement, had a provision for

creating a first charge by the Corporate Debtor in favour of the

Appellant over approximately 50,000 square feet of saleable area in

the project. The Corporate Debtor had further undertaken to execute

necessary documents including mortgage deeds to perfect such

security.

Page 4 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 iv. The Corporate Debtor did not perfect the security in favour of the

Appellant and, instead, subsequently availed financial assistance

from Yes Bank Limited in or about December 2014 without obtaining

any prior consent or No Objection Certificate from the Appellant. The

Corporate Debtor created mortgage charges in favour of Yes Bank

through registered deeds executed in December 2015 and May 2016

(read with a supplementary deed dated 06.02.2018), thereby creating

a first charge over the project in favour of Yes Bank.

v. Thereafter, additional financial assistance was availed through a

joint venture entity, Sumer Radius Realty Private Limited, which

obtained funding of approximately Rs.350,00,00,000/- from Yes

Bank in January 2016, further strengthening the encumbrances over

the project assets and affecting the priority structure of charges.

vi. In July 2018, the Corporate Debtor and its joint venture entity

approached DHFL for further funding, which was agreed to by DHFL

subject to creation of a first charge over the entire project. A mortgage

deed dated 30.07.2018 was executed in favour of DHFL creating a

first charge over the project. Yes Bank had issued a conditional NOC

for the creation of such charge on 31.07.2018, subject to the

Corporate Debtor fulfilling the repayment conditions as prescribed in

the aforesaid conditional NOC. As Corporate Debtor failed to fulfil its

repayment obligations, the conditional NOC stood revoked. The DHFL

charge was thereafter converted to second charge on the property of

CD.

Page 5 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 vii. Subsequently, due to the subsisting charges and lack of discharge

of Yes Bank's dues, the Corporate Debtor and the Appellant agreed

upon a commercial arrangement, whereby a second charge would be

created in favour of the Appellant over the identified 61,803 square

feet area, with a provision for its upgradation to a first charge upon

satisfaction of prior charges. In furtherance of the aforesaid

arrangement a registered Deed of Mortgage dated 29.07.2021 came

to be executed, creating a second charge in favour of the Appellant

over 29 identified units aggregating to 61,803 square feet carpet area,

with an express stipulation that the said charge would be upgraded

upon repayment of Yes Bank facilities, thereby formalizing and

perfecting the pre-existing contractual security.

viii. The Corporate Insolvency Resolution Process of the Corporate

Debtor was initiated by the order of Adjudicating Authority on

06.09.2021 and the Respondent No.1 was appointed as Interim

Resolution Professional and subsequently confirmed as Resolution

Professional.

ix. The Appellant submitted its claim in Form 'C' on 28.10.2021 for

an amount aggregating to Rs.430,08,00,000/-, supported by relevant

documents, asserting its status as a secured financial creditor on the

basis of the Debenture Subscription Agreement and the registered

mortgage. The Resolution Professional, by email dated 01.12.2021,

provisionally admitted a part of the claim amounting to

Rs.98,35,38,914/- as secured, while keeping the remaining amount Page 6 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 under verification. The Committee of Creditors was constituted and

the Appellant was inducted as a secured financial creditor holding

3.74% voting share. The Resolution Professional included the

Appellant in the list of secured creditors published on 07.03.2023

and again on 19.04.2023 on the IBBI website, thereby acknowledging

its secured status at that stage.

x. The RP initiated a Transaction audit of the CD in April 2023 by an

audit firm M/s Bagchi & Gupta, who ultimately classified the

mortgage transaction in favour of the Appellant as a preferential

transaction.

xi. Consequent to the findings of the Transaction audit, Resolution

Professional revised the claim of the Appellant admitting

Rs.1,02,05,26,027/- as unsecured debt and rejected a substantial

portion of claim amounting to Rs.3,28,02,73,973/-.

xii. further, the Resolution Professional filed an avoidance application

being I.A. No. 4504 of 2024 on 11.04.2024 seeking, inter alia,

declaration of the mortgage as void and release of the security interest

created in favour of the Appellant. Adjudicating Authority after

hearing the parties passed the Impugned Order on 10.10.2025. The

Adjudicating Authority held the Appellant to be an unsecured

creditor prior to execution of the mortgage, and further held that the

mortgage was executed within the look-back period and not in the

ordinary course of business, and consequently treated the same as a

Page 7 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 preferential transaction under Section 43 of the Code, thereby

directing release of the security interest, which has led to the filing of

the present Appeal.

Submission of the Appellant

3. Mr. Arun Kathpalia, Ld. Senior Counsel for the Appellant submits

that the Learned NCLT has gravely erred in mechanically relying upon the

judgment rendered by Hon'ble Supreme Court in "Anuj Jain, Interim

Resolution Professional for Jaypee Infratech Limited vs. Axis Bank

Limited & Ors. (2020) 8 SCC 401" without appreciating the completely

distinguishable factual background involved in the present case. The

factual matrix in Anuj Jain (supra) was fundamentally different and the ratio

laid down therein cannot be applied in a blanket manner to every

transaction involving creation or perfection of security interest within the

look-back period.

4. He submitted that in Anuj Jain, the Corporate Debtor namely Jaypee

Infratech Limited had created mortgage transactions solely for the benefit

of its related party namely Jaypee Associates Limited ("JAL") in respect of

antecedent debts owed by JAL to its own lenders. The mortgages were

created not for securing any direct financial assistance availed by the

Corporate Debtor itself but to indirectly secure obligations of a related

entity. Consequently, the Hon'ble Supreme Court held that the transaction

had the effect of placing JAL and its lenders in a more beneficial position to

the detriment of other creditors of the Corporate Debtor.

Page 8 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025

5. Ld. Counsel submits that the present case stands on an entirely

different footing. Here, the Appellant itself had directly advanced financial

assistance of Rs.112.50 Crores to the Corporate Debtor under the DSA

dated 18.12.2014. The security interest was not created for any third party

or related entity. Rather, the Mortgage Deed dated 29.07.2021 was executed

solely to perfect and formalise the security arrangement already

contemplated under the DSA executed in 2014. Therefore, the basic

foundation on which the judgment in Anuj Jain proceeded is wholly absent

in the present matter.

6. He submits that the Learned NCLT erroneously held that since the

Mortgage Deed was executed after a gap of seven years from the DSA, the

same could not be regarded as a transaction in the ordinary course of

business. In doing so, the Learned NCLT relied upon the maxim

"Vigilantibus non dormientibus jura subveniunt", meaning that the law

assists those who are vigilant and not those who sleep over their rights.

However, the Learned NCLT completely failed to appreciate that under the

DSA, the obligation to execute and perfect the Mortgage Deed was cast upon

the Corporate Debtor itself and not upon the Appellant.

7. Ld. Counsel submits that a party cannot be permitted to take

advantage of its own wrong. The Corporate Debtor having itself failed to

perform its contractual obligations under the DSA cannot now derive

benefit from such delay by contending that the security interest stood

extinguished or that the perfection of such security constituted a

preferential transaction. Reliance in this regard is placed upon the Page 9 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 judgment of the Hon'ble Supreme Court in "Mrutunjay Pani & Anr. vs.

Narmada Bala Sasmal & Anr., AIR 1961 SC 1353", wherein the Hon'ble

Court recognised the principle embodied in the maxim "Commodum ex

injuria sua nemo habere debet", namely that no person can derive advantage

from his own wrong. Similar principles have also been reiterated in "Indore

Development Authority vs. Shailendra, (2018) 3 SCC 412" and "Indore

Development Authority vs. Manoharlal & Ors., (2020) 8 SCC 129".

8. It is further submitted that the principle relating to delay and laches

could never have been invoked against the Appellant in the present case.

The Appellant never approached any court or tribunal seeking delayed

enforcement of the Mortgage Deed after seven years. The Appellant

consistently relied upon the assurances extended by the Corporate Debtor

and the continuing recognition of the Appellant's security interest through

subsequent documents and transactions. Therefore, the maxim relied upon

by the Learned NCLT was wholly inapplicable.

9. The Appellant further submits that the documents placed on record

conclusively establish continuous recognition of the Appellant's security

interest much prior to the look-back period. The DHFL Sanction Letter

dated 27.07.2018 specifically recorded that 61,803 sq. ft. area comprising

29 units stood earmarked for securing the Appellant's interest. Likewise,

29 allotment letters dated 01.08.2018 were issued in favour of the

Appellant. These documents formed part of the official MCA records and

were always within the knowledge and possession of the Resolution

Professional.

Page 10 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025

10. It is submitted that these documents clearly demonstrate that the

Appellant's security was already identified, earmarked and recognised by

other lenders including DHFL much prior to the execution of the Mortgage

Deed in 2021. Therefore, the Mortgage Deed merely formalised an already

existing arrangement and cannot by any stretch be treated as a fresh

transfer intended to prefer the Appellant over other creditors.

11. The Appellant submits that even in Anuj Jain, the Hon'ble Supreme

Court itself recognised that every transaction falling within Section 43(2)

does not automatically become preferential since Section 43(3) carves out

specific exceptions including transactions entered into in the ordinary

course of business or financial affairs of the Corporate Debtor. The Hon'ble

Supreme Court specifically observed in paragraphs 21.2 to 21.4 and 25.4

that such exclusions remain available depending upon the factual

circumstances of each case.

12. The Appellant submits that in the present case, the Mortgage Deed

dated 29.07.2021 squarely falls within the exception carved out under

Section 43(3) since the same merely perfected a pre-existing contractual

security arrangement forming part of an ordinary commercial financing

transaction originating in 2014. The transaction was bona fide,

commercially documented, consistently recognised and supported by

contemporaneous records. Hence, the same could never have been

categorised as preferential.

Page 11 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025

13. The Learned Counsel submits that the conduct of Respondent No.1,

namely the Resolution Professional, has been wholly unfair, arbitrary and

contrary to the statutory obligations cast upon him under the Insolvency

and Bankruptcy Code. Despite repeated opportunities and express

directions issued by this Hon'ble Tribunal, Respondent No.1 deliberately

failed to respond to the additional documents and contentions raised by the

Appellant.

14. It is submitted that the Appellant had filed an Additional Affidavit

dated 18.11.2025 placing on record several crucial documents including

the DHFL Sanction Letter dated 27.07.2018, the allotment letters dated

01.08.2018 and the relevant Form CHG-1 documents evidencing

earmarking and recognition of the Appellant's security interest. These

documents clearly demolished the entire basis of the allegation that the

Appellant's security was created for the first time in 2021. However, despite

the significance of these documents, Respondent No.1 maintained complete

silence and failed to file any meaningful response for several months even

after directions dated 27.11.2025, 15.01.2026 and 25.02.2026 passed by

this Hon'ble Tribunal. Such conduct, according to the Appellant, is not

accidental or inadvertent, but deliberate and calculated.

15. It is submitted that the Resolution Professional was fully aware that

the documents relied upon by the Appellant formed part of the MCA records

and directly established prior recognition of the Appellant's security

interest. Yet, the Resolution Professional consciously chose not to deal with

these materials as the same completely undermined the theory of Page 12 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 preferential transfer advanced by him in the PUFE proceedings. The

Appellant submits that the silence maintained by the Resolution

Professional becomes even more significant considering that after vacation

of the stay order in Vistra ITCL (India) Ltd. vs. Vithal Madhukar

Dahake, Company Appeal (AT) (Insolvency) No. 1110 of 2024 the CoC

was proceeding towards voting on the Resolution Plans. In such

circumstances, the exclusion of the Appellant from the category of secured

creditors and denial of voting rights had serious and irreversible

consequences upon the Appellant's participation in the CIRP process.

16. The Appellant further submits that the Resolution Professional is

duty bound to act fairly, transparently and in a balanced manner while

conducting the CIRP. Suppression of material documents and strategic

non-response to crucial factual assertions vitiates the entire process and

erodes confidence in the fairness of the CIRP mechanism. The conduct of

Respondent No.1 in deliberately ignoring the additional documents and

avoiding adjudication on their effect raises serious doubts regarding the

bona fides of the Resolution Professional and materially prejudices the

rights of the Appellant.

17. The Ld. Counsel submits that Clause 13 of the DSA expressly

classified the transaction documents, including the Deed of Mortgage, as

"Critical Covenants", while Clause 16 clarified that no waiver could be

effected in respect of such Critical Covenants. Therefore, the obligation to

execute and perfect the security documents remained binding upon the

Page 13 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 parties at all times and could not be treated as abandoned merely due to

passage of time.

18. It is submitted that the Mortgage Deed dated 29.07.2021 merely

perfected and formalised the pre-existing security arrangement already

contemplated under the DSA dated 18.12.2014 and subsequently

recognised through the DHFL Sanction Letter dated 27.07.2018 and the

allotment letters dated 01.08.2018 earmarking 29 units in favour of the

Appellant. Accordingly, the Mortgage Deed did not create any fresh or

preferential right in favour of the Appellant, but only perfected an existing

contractual security interest arising from a bona fide commercial

transaction in the ordinary course of business and therefore falls within the

protection under Section 43(3) of the Code.

19. Ld. Counsel submits that the Impugned Order proceeds on a

fundamental jurisdictional error inasmuch as the Adjudicating Authority

has assumed powers which are not vested in it under the Code. It is

submitted that Section 60(5)(c) does not confer upon the Adjudicating

Authority the power to adjudicate upon the validity, legality, or

enforceability of contractual instruments such as the Deed of Mortgage

dated 29.07.2021. The Adjudicating Authority has erroneously undertaken

an exercise of examining the "veracity" and legitimacy of the mortgage

transaction, which squarely falls outside its statutory domain. It is further

submitted that the Hon'ble Supreme Court has consistently held that the

NCLT, being a creature of statute, is confined strictly to the jurisdiction

Page 14 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 conferred under the Code and cannot exercise powers akin to a civil court

in adjudicating contractual disputes or title.

20. He submits that the Impugned Order erroneously concludes that the

Mortgage Deed, executed seven years after the Debenture Subscription

Agreement dated 18.12.2014, altered the position of the Appellant from an

unsecured to a secured creditor within the look-back period and therefore

could not be said to be in the ordinary course of business.

21. Ld. Counsel further submits that the Adjudicating Authority has

failed to consider that the Resolution Professional has, in excess of its

statutory powers, reclassified the Appellant from a secured to an unsecured

creditor. Such reclassification amounts to an adjudicatory exercise, which

is impermissible under the scheme of the Code. The Appellant was always

a secured creditor in equity from the date of the DSA. The execution of the

Mortgage Deed was merely an act of perfection and not creation of security.

Therefore, the assumption underlying the Impugned Order is contrary to

the express terms of the DSA and the contemporaneous record.

22. Ld. Counsel also submits that the reliance placed upon the

Transaction Audit Report dated 26.03.2024 is wholly misconceived, as the

said report proceeds in ignorance of settled legal principles governing priority

of charges. It is submitted that under Section 48 of the Transfer of Property

Act, subsequent charges are not rendered void merely due to absence of an

NOC from the prior charge holder. Therefore, the entire foundation of the

findings recorded in the Impugned Order is legally unsustainable.

Page 15 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025

23. He further submits that the Impugned Order proceeds on a complete

misappreciation of the nature and origin of the transaction. It is submitted

that the Mortgage Deed dated 29.07.2021 was not an independent or fresh

transaction, but was a direct consequence of and envisaged under the

Debenture Subscription Agreement dated 18.12.2014. The substantive

rights of the Appellant, including the creation of security, arose at the time

of execution of the DSA itself, when a sum of Rs.1,12,50,00,000/- was

advanced to the Corporate Debtor. The mortgage merely perfected and

formalised a pre-existing contractual security arrangement. The DSA

clearly provided for creation of security, including first charge over specified

project area and execution of mortgage and other security documents.

24. Ld. Counsel submits that it is a settled principle of law that where

the underlying obligation and security arise prior to the look-back period,

the subsequent perfection of such security does not attract Section 43. The

Adjudicating Authority has failed to apply this principle and has instead

mechanically treated the date of mortgage as the relevant date, which is

legally untenable.

25. He submits that the finding of the Adjudicating Authority that the

transaction was not in the ordinary course of business is wholly erroneous.

It is submitted that the delay in execution of the mortgage was not due to

any inaction or neglect on the part of the Appellant, but was occasioned by

commercial realities, including subsistence of prior charges in favour of Yes

Bank and conditional NOCs governing the financing structure of the

project.

Page 16 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025

26. Ld. Counsel further submits that the Appellant is not a related party

of the Corporate Debtor, and there is no material to suggest that the

transaction was anything other than a bona fide commercial arrangement.

The Impugned Order fails to demonstrate how the transfer of 29 units under

the Mortgage Deed falls outside the ordinary course of business,

particularly when the DSA itself does not prescribe any specific timeline for

execution of securities.

27. Ld. Counsel states that the mortgage created only a second charge,

which was expressly subordinate to the first charge of Yes Bank and

conditional upon repayment of such facilities. Consequently, the Appellant

did not derive any immediate or preferential benefit over other creditors.

The conclusion of the Adjudicating Authority that the Appellant was placed

in a beneficial position is therefore untenable and contrary to the structure

of the transaction itself.

28. Ld. Counsel submits that the Impugned Order suffers from

arbitrariness and discrimination inasmuch as it treats similarly placed

creditors differently. It is submitted that the Adjudicating Authority has

placed undue reliance on the Transaction Audit Report dated 26.03.2024,

which itself is flawed and ignores material facts, including the absence of a

valid NOC in favour of DHFL.

29. He submits that the Appellant stands on the same footing as DHFL,

both having security interests in the project. Therefore, the Appellant ought

to have been classified as a secured financial creditor and treated at par

with DHFL. The failure to do so results in discriminatory treatment and is Page 17 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 contrary to the principles of equality embedded in the insolvency

framework.

30. Ld. Counsel for the Appellant states that the Adjudicating Authority

has failed to appreciate the chronological priority of the Appellant's rights.

The Debenture Subscription Agreement dated 18.12.2014 was executed

prior to the mortgage deeds created in favour of Yes Bank, including those

dated 23.12.2015 and 12.05.2016. Therefore, the Appellant's rights are

prior in time and cannot be subordinated to subsequent charges.

31. Ld. Counsel submits that in such circumstances, the obligation lay

upon Yes Bank to obtain a valid No Objection Certificate from the Appellant

before creating any subsequent charge. The failure to obtain such consent

renders subsequent encumbrances legally untenable and incapable of

overriding the Appellant's prior rights. He submits that the Adjudicating

Authority has failed to recognise that the Appellant's security interest stood

crystallised under the DSA prior to creation of subsequent encumbrances.

Any subsequent mortgage without the Appellant's consent cannot dilute or

override its existing security interest. The impugned finding effectively

subordinates a prior secured creditor to a subsequent one, which is

contrary to settled legal principles and commercial equity.

32. Ld. Counsel further submits that the misclassification of the

Appellant as an unsecured creditor is in direct contravention of Sections

30(2) and 53 of the Code, which mandate equitable treatment of similarly

placed creditors. The Impugned Order, by disregarding the Appellant's valid

Page 18 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 security interest, distorts the priority of claims and undermines the scheme

of the Code.

33. Ld. Counsel finally submits that the Impugned Order suffers from

non-application of mind, as it fails to consider material documentary

evidence including the DSA, the Mortgage Deed, the conditional NOC, and

correspondence between the parties evidencing continuous efforts by the

Appellant to perfect its security. The findings are contrary to the record and

settled law on perfection of security, and have resulted in wrongful

discharge of the Appellant's lawful security interest. Therefore, the

Impugned Order is liable to be set aside as it suffers from errors apparent

on the face of the record and proceeds on a complete misappreciation of

facts and law.

Submission of the Respondent No.1/ RP

34. Mr. Amir Arsiwala Ld. Counsel on behalf of Respondent No. 1/ RP

submits that the present appeal has been preferred by the Appellant

assailing the order dated 10.10.2025 passed by the Hon'ble National

Company Law Tribunal, Mumbai Bench in I.A. No. 4504 of 2024 in C.P. (IB)

No. 380 of 2021. It is submitted that the said application had been filed by

the Respondent No. 1, being the Resolution Professional of Radius Estate

Projects Private Limited, under Sections 43, 45 and 49 of the Insolvency

and Bankruptcy Code, 2016.

35. Ld. Counsel submitted that by way of the Impugned Order, the

Learned Adjudicating Authority has rightly allowed the said application,

Page 19 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 inter-alia holding that the Mortgage Deed dated 29.07.2021 executed

between the Corporate Debtor and the Appellant, nearly seven years after

the Debenture Subscription Agreement dated 18.12.2014, altered the

status of the Appellant from an unsecured financial creditor to a secured

financial creditor within the look-back period under Section 43(4) of the

Code. It is submitted that the said transaction was correctly held to be

preferential in nature and, accordingly, the security interest created in

favour of the Appellant was directed to be released and discharged.

36. Ld. Counsel submits at the outset that the Mortgage Deed in question

satisfies each and every statutory requirement of a preferential transaction

as contemplated under Section 43 of the Insolvency and Bankruptcy Code.

He submits that Section 43(1) clearly provides that a transaction shall

qualify as a preferential transaction, if it satisfies the conditions laid down

under Section 43(2) of the Code. It is submitted that Section 43(2)(a) lays

down two essential requirements viz. that there must be a transfer of

property or any interest therein of the Corporate Debtor in favour of a

creditor, surety or guarantor, and that such transfer must be for or on

account of an antecedent financial debt, operational debt or other liability

owed by the Corporate Debtor prior to such transfer.

37. Ld. Counsel submits that in the facts of the present case, the first

limb of Section 43(2)(a) stands fully satisfied inasmuch as the execution of

the Mortgage Deed constitutes a transfer of an interest in property. It is

submitted that a mortgage, by definition, involves transfer of an interest in

specific immovable property for securing repayment of a debt. Therefore, Page 20 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 the Mortgage Deed squarely falls within the ambit of "transfer of an interest"

as contemplated under the Code.

38. It is his submission that the second limb of Section 43(2)(a) is also

satisfied, as the Mortgage Deed was executed for securing an antecedent

financial debt. The Corporate Debtor had entered into the Debenture

Subscription Agreement dated 18.12.2014 with the Appellant, however, no

security interest was created for nearly seven years. It is only on 29.07.2021

that the Mortgage Deed was executed, and notably, no fresh disbursement

was made at that stage. It is thus submitted that the Mortgage Deed was

executed solely to secure pre-existing liabilities arising from the said

agreement, thereby clearly satisfying the requirement of antecedent debt.

39. Ld. Counsel submits that Section 43(2)(b) is also clearly attracted in

the present case, as the transaction had the effect of placing the Appellant

in a more beneficial position than it would have occupied in the event of

distribution of assets under Section 53 of the Code. It is submitted that

prior to the execution of the Mortgage Deed, the Appellant was an

unsecured financial creditor. It is further submitted that during the period

2015-16, the Corporate Debtor had already created a first charge in favour

of Yes Bank over the entire project. In such circumstances, in the absence

of the Mortgage Deed, the Appellant would have continued as an unsecured

creditor. However, by virtue of the Mortgage Deed, the Appellant became a

secured creditor, albeit a second charge holder, thereby improving its

position in the statutory waterfall mechanism. This elevation clearly

satisfies the requirement of "beneficial position". Page 21 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025

40. It is his submission that the Mortgage Deed does not fall within the

exception provided under Section 43(3) of the Code, which pertains to

transactions undertaken in the ordinary course of business. It is submitted

that the transaction in question cannot be regarded as a routine

commercial transaction.

41. Ld. Counsel submits that although the Debenture Subscription

Agreement was executed in 2014 and contemplated creation of security, no

steps were taken for nearly seven years to create or perfect such security.

It is submitted that the Mortgage Deed was executed only two months prior

to the commencement of CIRP, which clearly demonstrates that the

transaction was not in the ordinary course of business, but was a belated

attempt to secure the Appellant's position.

42. He submits that the Mortgage Deed created a second charge over a

property already encumbered by a first charge in favour of Yes Bank, and

no prior consent of the first charge holder was obtained. It is submitted that

such non-compliance renders the transaction irregular and not in the

ordinary course of business.

43. Ld. Counsel states that the Mortgage Deed cannot be said to be in

furtherance of the Debenture Subscription Agreement, as the said

agreement contemplated creation of a first charge, whereas the Mortgage

Deed resulted in creation of a second charge, which was not envisaged

therein. He further submits that the Mortgage Deed did not secure any fresh

disbursement and merely secured an existing loan, which had already

Page 22 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 become a non-performing asset. It is submitted that there was no

commercial rationale for such a transaction except to improve the

Appellant's position in the insolvency waterfall.

44. Ld. Counsel further submits that the creation of the Mortgage Deed

was in violation of Section 186(5) of the Companies Act, 2013, as no

resolution was passed at a duly convened Board meeting and no requisite

approvals were obtained. It is submitted that such statutory non-

compliance further establishes that the transaction was not undertaken in

the ordinary course of business.

45. It is the submission of Ld. Counsel that the Mortgage Deed squarely

falls within the look-back period prescribed under Section 43(4) of the Code,

as it was executed merely two months prior to the commencement of CIRP.

It is reiterated that despite the Debenture Subscription Agreement being

executed in 2014, no security was created for seven years, and only

immediately prior to initiation of insolvency proceedings was the Mortgage

Deed executed. Therefore, the requirement under Section 43(4) stands fully

satisfied.

46. Ld. Counsel places reliance upon the judgment of the Hon'ble

Supreme Court in Anuj Jain (supra) wherein the Hon'ble Supreme Court

has laid down the essential conditions to determine whether a transaction

is preferential. It is submitted that the Hon'ble Court has held that the

Tribunal must examine whether the transfer is for the benefit of a creditor,

whether it is for an antecedent debt, whether it places the creditor in a

Page 23 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 beneficial position, whether it falls within the look-back period, and

whether it is excluded under Section 43(3).

47. Ld. Counsel submits that applying the aforesaid principles to the

facts of the present case, all conditions are clearly satisfied. It is submitted

that the Mortgage Deed was executed for the benefit of the Appellant, it

secured an antecedent debt, it improved the Appellant's position in the

waterfall mechanism, it was executed within the look-back period, and it

does not fall within any exception.

48. Summing up his arguments Ld. Counsel states that in view of the

aforesaid facts and settled legal position, the Mortgage Deed squarely falls

within the ambit of a preferential transaction under Section 43 of the

Insolvency and Bankruptcy Code and cannot be said to have been executed

in the ordinary course of business. It is thus submitted that the Impugned

Order passed by the Learned Adjudicating Authority is correct in law and

deserves to be upheld.

ANALYSIS AND FINDINGS

49. We have heard both the parties at length and perused the documents

on record. The appellant and Respondent No. 1 have also submitted their

written submission. Respondent Nos. 2-5 are treated as Performa

Respondents.

50. The only issue which arises for consideration in the present Appeal

is:

Page 24 of 43

Company Appeal (AT) (Ins.) No. 1754 of 2025 Whether the registered Deed of Mortgage dated 29.07.2021 executed by the Corporate Debtor in favour of the Appellant amounts to a "preferential transaction" under Section 43 of the Insolvency and Bankruptcy Code, 2016?

51. The Appellant has argued that the Mortgage Deed merely perfected a

pre-existing security which was already contemplated under the DSA and

that no new benefit was created in its favour. According to the Appellant,

the DSA itself contemplated creation of security over approximately 50,000

square feet of saleable area and, therefore, the subsequent Mortgage Deed

was only a formal crystallisation of an already existing arrangement. The

Appellant has further submitted that the mortgage was executed in the

ordinary course of business, that it created only a second charge

subordinate to Yes Bank, and that no preferential benefit was granted to

the Appellant. It has also been argued that the Adjudicating Authority

exceeded its jurisdiction while examining the transaction as a preferential

transaction.

52. Per contra, the Resolution Professional/Respondent 1 has contended

that for nearly seven years after execution of the DSA, no perfected security

interest existed in favour of the Appellant. According to the Respondent,

until execution of the Mortgage Deed dated 29.07.2021, the Appellant

admittedly remained only an unsecured financial creditor. It has been

submitted that the mortgage was executed merely two months prior to

commencement of CIRP and solely for securing liabilities arising out of the

Page 25 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 DSA of 2014. Therefore, according to the Resolution Professional, every

ingredient of Section 43 of the Code stands fully satisfied.

53. The factual chronology in the present case assumes considerable

importance. The DSA was executed on 18.12.2014 and accordingly a sum

of Rs.112.50 crores was disbursed to the Corporate Debtor by the Appellant

in consideration of Debentures issued by the Corporate Debtor. The

Appellant itself has stated that the DSA contemplated further steps were

required for perfection of the security, including execution of formal

mortgage documents. The relevant clauses of Debenture Security

Agreement (DSA) are extracted below:

"1.1.20 "Deed of Mortgage" shall mean the deed of mortgage to be entered into among the issuer, Corporate Promoters, the Promoters and the Investor under the terms of this DSA;

8. Securities For the consideration of the said Amount as aforesaid and as security for the repayment of the principal amount of the NCDs, payment of all interest, prepayment charges, liquidated damages, costs, charges and expenses and all other monies as may be payable under this DSA and all costs, charges and expenses, including but not limited to the costs, legal expenses, if any, of preserving the Securities and/ or enforcement thereof, incurred by the Investor in the performance of its duties and obligations under this DSA, the Issuer shall within a period of 30 days from the date of this Agreement create the following Securities:

8.2 Primary Charge 8.2.1 The Issuer hereby grants, conveys, assigns, assures, charges and transfer unto and in favour of the Investor, by way of a First charge in favour of the Investor, flats/premises consisting of Issuer

Page 26 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 Premises in aggregate admeasuring approx. 50,000 sq. ft. saleable area and hypothecation of all the receivables accruing there from being constructed on the Project Security -1 and written TOGETHER WITH all the amenities and facilities attached and associated with the Issuer Premises, to subsist & continue until repayment by the Issuer to the Investor of the principal amounts of the NCDs in full and also payment of all interest and all other monies as may be payable under this DSA with a provision for redemption by way of re-transfer and release or otherwise upon conversion of NCDs in to Equity Shares at the conversion price as agreed between the Parties.

8.2.2 First Charge on the Security Premises 50% of the total development rights /F.S.I. and any saleable area -unsold units relating to following land parcels located at Santacruz, Mumbai comprising of approximately 5.38 acres of plot area."

(Emphasis supplied)

54. Two things clearly arise from the aforesaid clauses of the DSA. Firstly,

the security, thereby meaning mortgage of the property was to be done

within 30 days from the date of DSA which was 18.12.2014. Accordingly,

the Deed of Mortgage should have been executed by 17.01.2015. Secondly

the security was to be the first charge on the property.

55. However, no registered mortgage, charge, or perfected security

interest was created in favour of the Appellant for almost seven years

thereafter. During this period, the Corporate Debtor created substantial

first charges in favour of Yes Bank in the years 2015 and 2016 and

thereafter further encumbrances in favour of DHFL in 2018. Despite all

these developments, the Appellant did not take steps to ensure perfection

of its alleged security. This prolonged delay cannot be ignored while

Page 27 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 examining whether the later Mortgage Deed was merely a formal act or

whether it materially changed the legal position of the Appellant.

56. The Appellant in its reply to IA No. 4304 of 2024 in Ld. NCLT had

made the following averments:

"e. Pursuant to the execution of the DSA, the Corporate Debtor was in need of additional funds for the Project. Accordingly, the Corporate Debtor had approached Yes Bank Limited for the purpose of raising the additional funds. Yes Bank Limited was amenable to advance the additional funds to the Corporate Debtor. However, Yes Bank Limited had sought a first charge on the entire entitlement of the Corporate Debtor in the Project to secure the facilities to be availed by the Corporate Debtor. As the Corporate Debtor required the funds for the Project, the Corporate Debtor executed a Deed of Mortgage dated 23rd December 2015 as well as Deed of Mortgage dated 12th May 2016 read with Supplementary Deed dated 6th February 2018, in favour of Yes Bank Limited, thereby creating a first charge on its entitlement in the Project.

f. Pertinently, as per Clause 13 (f) of Schedule 7 of the DSA, the Corporate Debtor had undertaken that it shall not create any charge, lien or encumbrance (which included mortgages) whatsoever over the Securities or any part thereof in favour of any person/bank/financial institution other than Respondent No. 1. Furthermore, as per Clause 13 (h) of Schedule 7 of the DSA, the Corporate Debtor had undertaken that it shall not sell, transfer, assign, mortgage, alienate or otherwise dispose off any of the assets of Corporate Debtor which are charged in favour of Respondent No. I without its approval. Accordingly, upon learning about the execution of the said deed of mortgage in favour of Yes Bank Limited, Respondent No. 1 had approached the Corporate Debtor and sought its explanation for the same. Respondent No. 1 had further raised the issue that the said deed of mortgage was executed in favour of Yes Bank Limited without obtaining its

Page 28 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 NOC/consent/prior approval. At the said time, the Corporate Debtor informed Respondent No. I that it was in urgent need of additional funds for the Project. The Corporate Debtor further represented and assured to Respondent No. 1 that the Corporate Debtor was committed in complying with its obligations under the DSA and that the Corporate Debtor would soon satisfy the facilities obtained from Yes Bank Limited and execute requisite deed of mortgage in favour of Respondent No. 1. The Corporate Debtor also represented to Respondent No. 1 that the Project had a lot of potential and that the Corporate Debtor would soon be in a position to satisfy the facilities availed from Yes Bank Limited as well as to comply with the Secured Obligations under the DSA. Relying upon the representations of the Corporate Debtor and believing it to be true, Respondent No. 1 waited for the Corporate Debtor to comply with its obligations under the DSA and to take steps for perfection of security interest (already created under the DSA) in favour of Respondent No. 1.

g. Post the execution of DSA, Respondent No. 1 was regularly following up with the Corporate Debtor. As a result, Respondent No. 1 was able to realize a sum of Rs.99,00,00,000/- (Rupees Ninety- Nine Crores Only) from the Corporate Debtor. However, the Corporate Debtor failed to honour the Secured Obligations under the DSA. Accordingly, Respondent No. 1 approached the Corporate Debtor and sought its explanation for the same. At the said time, the Corporate Debtor represented to Respondent No. 1 that the Project was slightly delayed due to factors beyond its control. At the said time, the Corporate Debtor reiterated its commitment to honour its obligations under the DSA, however, the Corporate Debtor requested Respondent No. 1 to be patient and to grant some additional time to the Corporate Debtor to comply with its obligations under the DSA. Being from the real estate industry, Respondent No. 1 was conscious that projects of such magnitude can get delayed. Respondent No.1 was further mindful of the fact that the Project had a lot of potential to enable the Corporate Debtor to meet its

Page 29 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 obligations under the DSA. Accordingly, Respondent No.1 waited for the Corporate Debtor to comply with its obligations under the DSA."

(Emphasis Supplied)

57. It comes out very clearly from the above averments of Appellant before

the Ld. Adjudicating Authority that it was aware of the fact that the

Corporate Debtor has created the first charge on its entire entitlements of

the project in favour of Yes Bank and in spite of awareness about its rights

and obligations of Corporate Debtor in terms of the DSA, the Appellant did

not take any legal action to perfect its security. The security is executed by

the Corporate Debtor in July 2021 as second charge on the portion of the

property, which has been held by Yes Bank as first charge from December

2015 onwards i.e. after a lapse of five and half years from the creation of

first charge in favour of Yes Bank. More importantly such a security interest

was created by the Corporate Debtor without NOC from the Yes Bank the

first charge holder.

58. In this context of the factual matrix, and the relevant section 43 of

the code, we now examine whether the execution of the Deed of Mortgage

as second charge on a portion of the property of the Corporate Debtor on

29.07.2021 can be classified as preferential transaction. To answer this

issue, it becomes necessary for us to examine: (i) the nature and timing of

the Mortgage Deed; (ii) whether the mortgage was created for an antecedent

debt; (iii) whether the transaction placed the Appellant in a more beneficial

position in terms of Section 53 of the Code; (iv) whether the transaction falls

within the statutory look-back period under Section 43(4); and (v) whether

Page 30 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 the transaction can still be protected as one entered into in the ordinary

course of business under Section 43(3) of the Code.

59. It is the submission of the Appellant that the genesis of the Deed of

Mortgage dated 29.07.2021 is the Debenture Subscription Agreement dated

18.12.2014 ("DSA"). The execution of deed of Mortgage is also not disputed.

The dispute before us is limited to the Mortgage Deed's effect under the

avoidance provisions of the Code. Therefore, while examining the impugned

transaction, we are required to assess it not merely from the perspective of

contractual rights between the parties, but from the broader object of

insolvency law, namely preservation of the assets of the Corporate Debtor

and equitable treatment of all creditors.

60. Section 43 of the Code deals with Preferential Transactions and the

same is extracted below: -

"Section 43. Preferential transactions and relevant time

(1) Where the liquidator or the resolution professional, as the case may be, is of the opinion that the corporate debtor has at a relevant time given a preference in such transactions and in such manner as laid down in sub-section (2) to any persons as referred to in sub-

section (4), he shall apply to the Adjudicating Authority for avoidance of preferential transactions and for, one or more of the orders referred to in section 44.

(2) A corporate debtor shall be deemed to have given a preference, if-

(a) there is a transfer of property or an interest thereof of the corporate debtor for the benefit of a creditor or a surety or a guarantor for or on account of an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor; and

(b) the transfer under clause (a) has the effect of putting such creditor or a surety or a guarantor in a beneficial position than it Page 31 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 would have been in the event of a distribution of assets being made in accordance with section 53.

(3) For the purposes of sub-section (2), a preference shall not include the following transfers-

(a) transfer made in the ordinary course of the business or financial affairs of the corporate debtor or the transferee;

(b) any transfer creating a security interest in property acquired by the corporate debtor to the extent that-

(i) such security interest secures new value and was given at the time of or after the signing of a security agreement that contains a description of such property as security interest, and was used by corporate debtor to acquire such property

and

(ii) .......

(4) A preference shall be deemed to be given at a relevant time, if-

(a) .......

(b) a preference is given to a person other than a related party during the period of one year preceding the insolvency commencement date.

(Emphasis supplied)

61. Section 43(1) of the Code provides that a transaction shall be treated

as preferential if it has been given by the Corporate Debtor in the manner

prescribed in Section 43(2). As provided by Section 43(2)(a) it involves

transfer of a property or interest thereof for the benefit of a creditor. In this

case it involves execution of Deed of Mortgage in favour of Appellant who is

a financial creditor, which is the transfer of interest and the same has been

done for the benefit of a creditor to the Corporate Debtor. The second

element of Section 43(2)(a) provides that such transfer of interest should be

on account of antecedent debt, which is admittedly the case here. Appellant

Page 32 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 had given a loan of Rs112.50 Crores under the DSA. Section 43(2)(b)

provides that such a transfer has the effect of putting the said creditor in a

beneficial position in case of distribution of assets under Section 53 of the

code. In this case, the Appellant's status would change to secured creditor

consequent to creation of security interest, instead of unsecured creditor

which is the case at present and its share of liquidation estate would go up

in priority u/s 53 of the code.

62. We note that prior to execution of the Mortgage Deed, the Appellant

was admittedly an unsecured financial creditor. By virtue of the Mortgage

Deed, the Appellant acquired the status of a secured creditor, though as a

second charge holder. Under the waterfall mechanism provided under

Section 53 of the Code, even a second charge holder occupies a significantly

better position than an unsecured financial creditor. Therefore, the

transaction undoubtedly improved the position of the Appellant in the event

of distribution of assets under Section 53. This improvement itself is

sufficient to satisfy the requirement of Section 43(2)(b).

63. Section 43(3) of the Code provides that the transfers made in ordinary

course of business would not be treated as preferential transaction. And

lastly Section 43(4) provides a look back period of one year for such

transactions. It is an admitted fact that the alleged transaction took place

just 2 months prior to initiation of CIRP proceedings, well within one year

period provided in the section 43(4) and so it's covered by it. The only point

of dispute in this case relates to whether the execution of aforesaid deed of

Page 33 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 mortgage is in ordinary course of business and consequently covered by

exception as provided u/s 43(3)(a).

64. In this case the conduct of the Appellant becomes relevant while

examining the true nature of the impugned transaction. From the material

placed on record, it is evident that although the DSA dated 18.12.2014

contemplated creation and perfection of security interest as first charge in

favour of the Appellant was to be completed within 30 days, but it was not

done. We further note that no effective steps were taken by the Appellant

for more than six years seven months to ensure creation of a perfected first

charge in its favour. During this prolonged period, the Corporate Debtor

proceeded to create first charges in favour of Yes Bank in the years 2015

and 2016 and thereafter further encumbrances in favour of DHFL in 2018.

Despite being aware of these subsequent transactions and despite claiming

that the DSA contained restrictive covenants against creation of further

encumbrances, the Appellant admittedly did not initiate timely proceedings

for enforcement of its alleged contractual rights or for securing registration

and perfection of its charge. Had the Appellant acted diligently and ensured

creation of a perfected first charge at the relevant time, its position in law

may have stood on a different footing. However, having remained unsecured

for nearly seven years and having permitted subsequent lenders to acquire

registered security interests over the project assets, the Appellant cannot

now contend that the Mortgage Deed dated 29.07.2021 was merely a

continuation of an already perfected security. It is also to be noted that the

DSA provided for creation of First Charge on the property, but a second

Page 34 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 charge was created on the same, without even a NOC from the first charge

holder Yes Bank. The delayed creation of the mortgage immediately

preceding commencement of CIRP materially altered the Appellant's

position from that of an unsecured creditor to a secured creditor and

therefore squarely attracts the mischief sought to be prevented under

Section 43 of the Code.

65. In insolvency law, there is a clear distinction between a contractual

promise to create security and an actually perfected security interest

enforceable against third parties. The DSA may have contemplated future

creation of security; however, until the Mortgage Deed dated 29.07.2021

was executed and registered, the Appellant did not possess a perfected

secured interest capable of enforcement against the insolvency estate. As

noted above the Mortgage Deed dated 29.07.2021 is also not in consonance

with the DSA in view of execution beyond the time frame prescribed in the

DSA and creation of second charge instead of first charge as contemplated

by DSA. We are therefore unable to accept the submission of the Appellant

that the mortgage merely "related back" to the year 2014. This aspect

becomes clear from the Clause 3 of the Deed of Mortgage dated

29.07.2021:

"3. In terms of the Debenture Subscription Agreement ("DSA") dated December 18, 2014 executed, Inter alia, between the Mortgagor and the Mortgagee, the Mortgagor had created a first ranking and exclusive charge in favour of the Mortgagee on certain area/flats/premises part of the Mortgagor's Share of Santacruz Project to secure the payment of the Secured Obligations (as. defined hereinafter) to the Mortgagee ("Preliminary Mortgage in favour of Mortgagee") and the Parties had agreed to execute a separate deed of mortgage to capture the detailed terms and conditions of the Page 35 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 mortgage and the register the same. However, till date, the said separate deed of mortgage is yet not executed.

(Emphasis supplied)

66. We further find substance in the submission of the Resolution

Professional that the Mortgage Deed was executed solely for securing

antecedent debt, as no fresh loan or financial assistance was granted by

the Appellant at the time of execution of the Mortgage Deed in July 2021.

The mortgage was admittedly created only to secure liabilities arising under

the DSA executed nearly seven years earlier.

67. The Appellant has repeatedly argued that the mortgage created only

a second charge subordinate to Yes Bank and therefore no real benefit was

conferred upon it. We are unable to accept this submission. Even a second

charge constitutes a secured interest in law. The test under Section 43 is

not whether the creditor became the highest-ranking secured creditor, but

whether the creditor was placed in a more beneficial position, than it would

otherwise have occupied under Section 53. In the present case, the answer

to this question is clearly in the affirmative.

68. The timing of the transaction is also extremely significant. The

Mortgage Deed was executed on 29.07.2021, whereas CIRP commenced on

06.09.2021. We have also verified the records of Ld. NCLT from its portal

which shows that the Application for initiating CIRP against the Corporate

Debtor was filed by a Financial Creditor SBICAP Trustee Co. Ltd. on

20/03/2021 and the same was registered on 22/04/2021. Thus, the

impugned transaction which was entered into by the CD, 3 months after

Page 36 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 the Sec. 7 Application against the Corporate Debtor was registered in NCLT

and barely two months prior to commencement of CIRP and squarely falls

within the statutory look-back period prescribed under Section 43(4) of the

Code. The fact that the debt itself was nearly seven years old, but the

mortgage securing the said debt was created just 3 months after the

application under Sec. 7 is filed by a financial creditor against the CD and

before commencement of insolvency proceedings, strongly supports the

conclusion that the transaction was entered with the intention to secure

the Appellant's interest and had the effect of improving the Appellant's

position at the cost of other creditors.

69. We also do not find merit in the submission of the Appellant that the

transaction falls within the exception of "ordinary course of business" under

Section 43(3). The object of Section 43(3) is to protect routine and ordinary

commercial transactions undertaken in the normal course of business. A

mortgage executed seven years after disbursement of funds, securing an

old debt, and executed after application under Sec. 7 of the Code is

registered against the Corporate Debtor and only weeks before

commencement of CIRP, cannot be treated as an ordinary commercial

transaction. Such delayed creation of security is clearly distinguishable

from ordinary financing transactions where security is created

contemporaneously with the lending itself.

70. Further, as we have noted from the records that the DSA originally

contemplated creation of a first charge. However, the Mortgage Deed

ultimately created only a second charge arrangement over certain identified Page 37 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 units. This itself demonstrates that the Mortgage Deed was not merely a

ministerial or mechanical continuation of the DSA, but was a fresh and

substantially altered arrangement entered into under changed financial

circumstances.

71. We also cannot ignore the broader purpose behind the avoidance

provisions under the IBC. Sections 43 to 51 of the Code are intended to

ensure that, during the twilight period preceding insolvency, the assets of

the Corporate Debtor are not used to selectively improve the position of

certain creditors at the expense of others. If creditors are permitted to

obtain security for old unsecured debts immediately before commencement

of CIRP merely on the basis of earlier contractual promises, the entire object

of Section 43 would stand defeated.

72. The reliance placed by the Resolution Professional on the judgment

of the Hon'ble Supreme Court in "Anuj Jain, Interim Resolution Professional

for Jaypee Infratech Ltd. Interim Resolution Professional vs. Axis Bank Ltd.

& Ors." [(2020) 8 SCC 401] is also well founded. The Hon'ble Supreme Court

in this case laid down that while determining whether a transaction is

preferential, the Court must examine five questions: whether the transfer

was for the benefit of a creditor; whether it related to antecedent debt;

whether it improved the creditor's position under Section 53; whether it was

within the statutory look-back period; and whether it was excluded under

Section 43(3). Applying the above principles to the facts of the present case,

we find that all the ingredients of Section 43 stand fully satisfied.

Page 38 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025

73. The Hon'ble Supreme Court in Anuj Jain (Supra) while analysing

Section 43 of the Code has laid down 5 questions which have to be answered

in order to arrive at the conclusion, whether a transaction is be classified

as preferential under Section 43 of the Code or not. The facts of the present

case have been analysed through the 5 questions of the aforesaid

judgement:

a) whether such transfer is for the benefit of a creditor or a surety or a guarantor - It is an admitted fact that the Appellant is a creditor of the CD and creation of security interest is for the benefit of the creditor.

b) whether such transfer is for or on account of an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor -It is an admitted fact that such transfer is on account of an antecedent financial debt provided by the Appellant.

c) whether such transfer has the effect of putting such creditor surety or guarantor in a beneficial position than it would have been in the event of distribution of assets being made in accordance with section 53 -

Considering the fact that the creation of security interest in favour of the Appellant has changed the status of the Appellant from unsecured creditor to secured creditor thereby placing it on a much beneficial position in case of distribution of assets under Section 53 of the code.

d) if such transfer had been for the benefit of a related party (other than an employee), whether the same was made during the period of two years preceding the insolvency commencement date; and if such transfer had been for the benefit of an unrelated party, as to whether the same was made during the period of one year preceding the insolvency commencement date - It is admitted that the aforesaid security interest has been created within a period one year preceding the insolvency commencement date and therefore is deemed be preferential.

e) whether such transfer is not an excluded transaction in terms of sub- section (3) of section 43 -a transaction is excluded from being ruled

Page 39 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 as preferential if the same is being carried out in the ordinary course of business of the Corporate Debtor as well the creditor. In this case, the transaction is being carried out 7 years from the date of underlying transaction, wherein the time period provided in the Debenture Security Agreement (DSA) was only 30 days. Such a transaction, by no stretch of imagination could be termed as being conducted in ordinary course of business.

74. It is clear from the discussion above that the Appellant is the financial

creditor who is the beneficiary of such transaction; the transaction was

executed in respect of antecedent debt; it materially improved the position

of the Appellant under Section 53 of the Code; it was executed within the

statutory look-back period; and it does not fall within the ordinary course

of business exception under Section 43(3). It is therefore squarely covered

by the ratio laid down in Anuj Jain (Supra). Accordingly, we are satisfied

that the Mortgage Deed dated 29.07.2021 constituted a preferential

transaction within the meaning of Section 43 of the Insolvency and

Bankruptcy Code, 2016.

75. The respondent has relied upon several cases which are discussed

below:

(i) In "Mrutunjay Pani & Anr. vs. Narmada Bala Sasmal & Anr.",

the Hon'ble Supreme Court discussed the principle that no person

should be allowed to take advantage of his own wrong. The Appellant

has relied upon this principle by arguing that since the Corporate

Debtor was required under the DSA to perfect the security, the

Respondents cannot now rely upon absence of perfected security. Page 40 of 43

Company Appeal (AT) (Ins.) No. 1754 of 2025 However, the issue before us is not limited to contractual obligations

between the parties. The issue is whether the Mortgage Deed dated

29.07.2021 amounts to a preferential transaction under Section 43 of

the IBC. Even if the Corporate Debtor had originally agreed to create

security, the admitted position is that no perfected mortgage or

enforceable charge existed in favour of the Appellant for nearly seven

years, even though the agreement provided a period of 30 days only.

The avoidance provisions under the IBC are concerned with the effect

and timing of the transaction on the insolvency process and on other

creditors. Therefore, the equitable principle discussed in Mrutunjay

Pani (Supra) cannot override the statutory provisions of Section 43.

Accordingly, the said judgment is not applicable to the facts of the

present case.

(ii) Similarly, Indore Development Authority vs. Shailendra (supra)

and Indore Development Authority vs. Manoharlal & Ors. (supra) were

rendered in the context of land acquisition matters and interpretation

of rights under the Land Acquisition Act. The observations made

therein regarding a party not being permitted to take advantage of its

own wrong were made in a completely different statutory context. In

the present case, the matter is governed by the special provisions of

the Insolvency and Bankruptcy Code, particularly Sections 43 and 53.

The question before us is whether the impugned transaction improved

the position of the Appellant during the look-back period immediately

preceding commencement of CIRP. Once the ingredients of Section 43 Page 41 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025 stand satisfied, general equitable principles cannot dilute the

operation of the statutory provisions under the IBC. Therefore, the

aforesaid judgments are clearly distinguishable and do not assist the

Appellant.

(iii) The appellants reliance placed upon Vistra ITCL (India) Limited

(supra) also misplaced. The proceedings in the said case related to

interim arrangements concerning voting rights and participation

during CIRP. The Adjudicating Authority did not decide the validity of

the Mortgage Deed dated 29.07.2021, it did not question the

authenticity of the same. The issue before us is whether the Mortgage

Deed constitutes a preferential transaction under Section 43 of the

code and whether the same is liable to be avoided under the Code.

Merely because interim directions may have been passed regarding

voting rights or participation in CoC meetings cannot amount to a final

finding that the Appellant was a secured creditor for all purposes

under the IBC. Further, the Appellant's argument that its participation

as a secured financial creditor is necessary for ensuring fairness in

CIRP cannot override the statutory provisions of Sections 43 and 53 of

the Code. Once the transaction itself is found to be preferential and

avoidable in law, the Appellant cannot claim continuation of secured

status merely on the basis of participation in CoC proceedings.

Therefore, the said judgment does not help the case of the Appellant.

Page 42 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025

76. In view of findings above, we do not find any infirmity in the

Impugned Order. The Appeal, being devoid of merit, stands dismissed. No

order as to costs. Pending IA's if any, are closed.

[Justice Ashok Bhushan) Chairperson

[Mr. Indevar Pandey] Member (Technical) Place: New Delhi

Harleen/ Pragya (LRA)

Page 43 of 43 Company Appeal (AT) (Ins.) No. 1754 of 2025