In Absence Of A Charge Being Registered For Corporate Guarantee, The Appellant Could Not Be Treated As A Secured Financial Creditor; NCLT Ahemadabad

Background Facts:

The Applicant, a Non-Banking Financial Institution (NBFC) duly registered with the RBI, claimed that the Corporate Debtor provided Corporate Guarantee in favour of the Applicant in relation to finance provided by the Applicant to two entities namely Gokul Ceramics Private Limited and Umiya Ceramics Private Limited in the year 2013. After a lot of technical backdrops, this application was filed by the Applicant under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) for seeking necessary orders and directions to the Respondent who is the Resolution Professional (RP) of Vrundavan Ceramic Private Limited to verify and accept the claim of the Applicant without any further delay and to consider the Applicant as ‘Secured Financial Creditor’ of the Corporate Debtor.

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

Observations of the Tribunal:

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

Further, the tribunal held that the applicant was unable to satisfy any of the conditions given under Regulation 21 of the IBBI (Liquidation Process) Regulations, 2016. Reliance was placed on the NCLAT judgment in Indiabulls Housing Finance Ltd. vs Mr. Samir Kumar Bhattacharya [Company Appeal (AT) (Insolvency) No. 830 of 2019] wherein the tribunal held that in absence of charge being registered, the Appellant could not be treated as Secured Financial Creditor. In the present case, no such charge had been created by Intec Capital Limited as per the records available on the Ministry of Corporate Affairs website.

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

Case:Intec Capital Ltd. vs Arvind Gaudana IRP of Varundavan Ceramic Pvt Ltd

Counsel for the Applicant:Mr. Lalit M Patel

Counsel for the Respondent:Mr. Ravi Pahwa

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