‘CERSAI Registration Enough to Claim Secured Creditor Status Under IBC; RoC Non-Registration Not Fatal’: NCLAT [Read Order]

The Delhi bench of the National Company Law Appellate Tribunal (NCLAT) held that CERSAI registration was enough to claim secured creditor status under IBC and noted that RoC non-registration was not fatal.

In this case, Bizloan Private Limited appealed against the order passed by the National Company Law Tribunal, Mumbai bench, which classified the appellant as an unsecured creditor instead of a secured financial creditor.

The appellant is a financial creditor for providing credit facilities in the form of sales bill discounting (SBD) and purchase bill discounting (PBD) of Rs. 1 Crore in aggregate to Autocop (India) Private Limited, which is the corporate debtor.

Coming to the facts of the case, the Corporate Insolvency Resolution Process (‘CIRP’) was initiated against the Corporate Debtor by the Adjudicating Authority. On April 4, 2022, the appellant submitted the claims in Form C with IRP, and the Resolution Professional fully admitted them without specifying whether they were secured or unsecured.

On December 20, 2022, the Appellant received the final Resolution Plan and learnt that he had been classed as an Unsecured Creditor rather than a Secured Financial Creditor. He filed an IA, but by that time, the corporate debtor had entered liquidation under an order dated May 19, 2023.

 Law Simplified with Tables, Charts & Illustrations – Easy to Understand - Click here 

It was alleged by the appellant that the Adjudicating Authority failed to appreciate

Section 52(3) of the Code r/w Regulation 21 of the IBBI (Liquidation Process) Regulations, 2016, which recognizes other modes of registration of charge/proving security interest, including registration of charge with CERSAI.

The question for determination before the bench was whether a financial creditor automatically becomes a "Secured Financial Creditor" solely by having its "Charge" (security interest)

registered with CERSAI, or if it is also mandatory to register that charge, and the

instrument creating it with the RoC under Section 77 of the Companies Act, 2013. The tribunal observed that the Code defines a financial creditor as someone who owes a financial debt, including interest, and a secured financial creditor is someone whose debt is secured by a charge on the corporate debtor's assets. In the case of a corporate debtor's insolvency or liquidation, secured creditors receive priority over unsecured creditors.

The NCLAT held that a security interest by the creditors can also be proved if the same is available in CERSAI and is not completely and exclusively dependent on a charge registered with RoC under Section 77 of the Companies Act, 2013.

The bench concluded that the appellant should have been treated as a secured financial creditor based on the registered charge with CERSAI under Regulation 21 of the IBBI (Liquidation Process) Regulations, 2016.

The NCLAT, comprising Justice Rakesh Kumar Jain (Judicial Member), Justice Mohammad Faiz Alam Khan (Judicial Member), and Mr. Naresh Salecha (Technical Member), allowed the appeal and set aside the impugned order.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates