Back
DEBT RECOVERY APPELLATE TRIBUNAL, ALLAHABAD
R.K. GUPTA, J. (CHAIRPERSON)
IJM Financial and Management Services Pvt. Ltd. - Appellant
Versus
State Bank of Mysore and Anr. - Respondent
Appeal No. R-05 of 12
Decided On : 27-08-2012
SARFAESI Act - Priority of Charge - Companies Act, 1956, Section 125
Fact of the Case:
The appellant, a Financial Institution, challenged the dismissal of its Securitisation Application under Section 17 of the SARFAESI Act, 2002, claiming first charge over a property mortgaged by the respondent No. 2. The respondent No. 1, a Bank, also claimed a charge over the same property. The Tribunal rejected the appellant's claim based on a prior Recovery Certificate issued in favor of the respondent No. 1.
Finding of the Court:
The court analyzed the provisions of Section 125 of the Companies Act, 1956, which voids unregistered charges against liquidators or creditors. It held that the charge created by the appellant, which was registered, would have priority over the unregistered charge of the respondent No. 1. The court also noted that the appellant's intervention in the original application did not preclude it from asserting its valid charge.
Issues: Priority of charge between the appellant and respondent No. 1, applicability of Section 125 of the Companies Act, 1956, and the effect of the prior Recovery Certificate on the appellant's claim.
Ratio Decidendi: The court relied on Section 125 of the Companies Act, 1956 to determine the validity and priority of the charges. It emphasized that the registered charge of the appellant would prevail over the unregistered charge of the respondent No. 1, despite the prior Recovery Certificate.
Final Decision: The court set aside the Tribunal's order and held that the appellant had the first charge to enforce its security for the recovery of its amount.
R.K. GUPTA, J. (CHAIRPERSON)
1. No one appears for the appellant. On behalf of the respondent, Mr. Sandeep Arora appears. The aforesaid appeal was directed to be listed for final arguments on 27th August, 2012. The said order was passed on 13th July, 2012 and on the said date the Counsel for the appellant Mr. K. Rohan, brief holder of Mr. P. Shankaran was present. The adjournment was accepted subject to the cost of Rs. 25,000/- and thereafter, the date was fixed for final argument on 27th August, 2012, Today, no one is present on behalf of the appellant, therefore, the Counsel for the respondent is heard.
2. The present appeal is preferred by one of the Financial Institutions under Section 18 of the SARFAESI Act, 2002 challenging the order passed by the Tribunal on 25th November, 2011 by which the Securitisation Application preferred by the appellant has been dismissed.
3. The relevant facts for adjudication of the present case are that the appellant being-Financial Institution filed the Securitisation Application under Section 17 of the SARFAESI Act, 2002 challenging the sale proclamation with regard to the property belonging to the respondent No. 2. The challenge was made on the ground that the property was mortgaged by the respondent No. 2 being borrower, therefore, there is a charge of the appellant.
4. There is no dispute in the present case that the respondent No. 1 is also having the charge over the property by way of mortgage and the said mortgage was created on 7th November, 1998. The said mortgage was not registered in terms to Section 125 of the Companies Act, 1956. So far as the mortgage created by the respondent No. 2 being the borrower with regard to the same property was created on 20th March, 2001 in favour of the appellant. The same was registered with the Registrar of the Companies by virtue of Section 125 of the Companies Act, 1956, therefore, it was the claim of the appellant that the mortgage/charge which was created by the respondent No. 2-borrower being a Company and the same is also registered with the Registrar of the Companies, therefore, there would be the first charge of the appellant. Since the charge of respondent No. 1-Bank which was even though created by mortgage on 7th November, 1998 was not registered by virtue of Section 125 of the Companies Act, 1956, therefore, the appellant will have the first charge over the property and not the respondent No. 1-Bank.
5. The Tribunal did not accept the contention of the present appellant on the ground that there had already been the Recovery Certificate issued in favour of the respondent No. 1 -Bank while adjudicating upon the Original Application preferred by the respondent No. 1-Bank, which was registered as Original Application No. 71/2000 decided on 9th September, 2002, therefore on the basis of the same, there would be the first charge of the respondent No. 1-Bank and thus, no merit was found in the Securitisation Application so preferred by the appellant. As a consequence of the same, the Securitisation Application was rejected and against the same the present appeal has been preferred.
6. This is to be seen that Section 125 of the Companies Act, 1956 provides for certain charges to be void against liquidator or creditor unless registered. According to Sub-section (4) of Section 125, it also applies to the charges in relation to the charge on immovable property, wherever situated, or any interest therein.
7. There is no dispute in the present case that the property is an immovable property which was mortgaged with respondent No. 1 and as a consequence of the mortgage, a charge was created on such property without getting the same registered with the Registrar of the Companies and according to the Section 125 of the Companies Act, 1956, such charge would be void.
8. The ground in the appeal which has been raised is that by virtue of Section 125 of the Companies Act, 1956, if the charge itself is void in the absence of its registration, then such
AI
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
