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Charge Was Not Registered u/s 77 Of The CA 2013 In Favour Of Secured Creditor


Court :
NCLAT

Brief :
NCLAT observed from the documentary evidence on record that no 'Charge' has been registered under Section 77(1) of the Companies Act, 2013 and Appellant 'Claim' was notsupported by the provisions under Regulation 21 of Insolvency and Bankruptcy Board of India(IBBI) (Liquidation Process) Regulation, 2016. Further, the contentions of the Appellant thatRegistration with Motor Vehicle Authority under Section 51 of the Motor Vehicles Act, 1988would suffice, cannot be sustained.

Citation :
Volkswagen Finance Private Limited (Appellant) vs.Shree Balaji Printopack Pvt. Ltd & Ors.(Respondents). Dated: 19.10.2020 [NCLAT].

Volkswagen Finance Private Limited (Appellant) vs.Shree Balaji Printopack Pvt. Ltd & Ors.(Respondents)
Dated: 19.10.2020 [NCLAT].

HELD THAT

'Charge' was not registered as per the provisions of Section 77 (1) of the Companies Act,2013 and as envisaged under the Insolvency and Bankruptcy Code, 2016, hence theCreditor cannot be treated as a 'Secured Creditor'.

FACT OF THE CASE

1. The Respondent Company (under Liquidation) namely Shree Balaji Printopack Pvt. Ltd.executed a Loan and Hypothecation Agreement on November 25, 2013, for an amount of Rs. 36,00,000/- payable in 84 monthly instalments of Rs. 61,964/- each from December 15, 2013 toNovember 15, 2020, for the purchase of an AUDI Q3 TDI 2.0 vehicle.

2. The Appellant claimed thatthey have security of the vehicle in terms of Sections 52 and 53 of the Insolvency andBankruptcy Code, 2016 and a demand of Rs. 21,83,819.18/- was made which was not paid byRespondent and hence there was a 'default' giving rise to a legitimate claim.

3. The Appellant filedits claim on 22.07.2019 with the Liquidator and had informed the Liquidator that the 'Charge'was duly registered by way of hypothecation registration with the Regional Transport Office(RTO) in terms of Section 51 of the Motor Vehicles Act, 1988 and there was no requirement ofregistration of 'Charge' with the ROC.

4. The Liquidator, dismissed the Claim made by theAppellant.

5. Being aggrieved with the decision the Appellant approached the NCLT, New DelhiBench, but the appeal was further rejected by NCLT and they upheld the order of Liquidator.

6. The main issue which falls for consideration in this Appeal was:

i) whether the Liquidator was justified in rejecting the Application filed by the Appellant on the ground that the Appellant was not a 'Secured Financial Creditor' in the absenceof the 'Charge' being registered with the ROC under Section 77 (1) of the Companies Act 2013.

ii) that the Registration of Hypothecation by way of 'Charge' under Section 51 of Motor Vehicles Act, 1988 would stand nullified, if the 'Charge' was not registered under theCompanies Act, 1956/2013.

JUDGMENT

NCLAT observed from the documentary evidence on record that no 'Charge' has been registered under Section 77(1) of the Companies Act, 2013 and Appellant 'Claim' was notsupported by the provisions under Regulation 21 of Insolvency and Bankruptcy Board of India(IBBI) (Liquidation Process) Regulation, 2016. Further, the contentions of the Appellant thatRegistration with Motor Vehicle Authority under Section 51 of the Motor Vehicles Act, 1988would suffice, cannot be sustained.

Hence, it is held that when 'Charge' was not registered as per the provisions of Section 77 (1)of the Companies Act, 2013 and as envisaged under the Insolvency and Bankruptcy Code, 2016,the Creditor cannot be treated as a 'Secured Creditor'. Thus, this Appeal is accordingly dismissed.

DISCLAIMER: The case law presented here is only for sharing information with the readers. The views are personal ,shall not be considered as professional advice. In case of necessity do call professionals.

 

FCS Deepak Pratap Singh
on 02 December 2022
Published in Corporate Law
Views : 56
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