NCLAT: CERSAI Registration Enough to Prove Secured Creditor Status Under IBC

The National Company Law Appellate Tribunal (NCLAT), New Delhi, has ruled that financial creditors can be considered “Secured Creditors” under the Insolvency and Bankruptcy Code (IBC), 2016 if their security interest is registered with the CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India). The Tribunal clarified that registration under Section 77 of the Companies Act, 2013 with the Registrar of Companies (RoC) is not mandatory for this purpose under Regulation 21 of the IBBI Liquidation Regulations, 2016.

Background of the Case

The appeal was filed by Bizloan Private Limited, a financial creditor, against an order passed by the Adjudicating Authority (NCLT) on December 19, 2023, which had classified the creditor as unsecured, despite its claim to secured status.

Bizloan had provided a total of ₹1 crore in credit facilities to Autocop (India) Pvt. Ltd., the corporate debtor, through Sales Bill Discounting (SBD) and Purchase Bill Discounting (PBD). When CIRP (Corporate Insolvency Resolution Process) was initiated on March 16, 2022, the company was later ordered into liquidation on May 19, 2023.

When Bizloan learned it was listed as an unsecured creditor in the liquidation process, it filed an application seeking recognition as a secured financial creditor. However, the Adjudicating Authority rejected the claim, prompting this appeal.

Appellant’s Argument

Bizloan argued that although the charge was not registered with the RoC, it was duly registered with CERSAI, which is a public and accessible platform. The appellant relied on Section 52(3) of the IBC and Regulation 21 of the Liquidation Regulations, which allow for the proof of security interest through multiple channels, including CERSAI records.

Bizloan also submitted that the respondent themselves referred to it as a secured creditor, showing that the secured status was not in dispute.

Respondent’s Stand

The respondent argued that Section 77(3) of the Companies Act begins with a non-obstante clause (“notwithstanding anything contained in any other law…”), and thus prevails over IBC regulations. According to them, the lack of RoC registration meant that Bizloan’s security interest could not be recognised in liquidation proceedings.

They further claimed that Regulation 21 is not applicable in cases where a secured creditor relinquishes their interest to the liquidation estate. They also argued that the SARFAESI Act provisions on CERSAI registration are in addition to, and not a substitute for, RoC registration under the Companies Act.

Tribunal’s Observations

The NCLAT bench—comprising Justice Rakesh Kumar Jain, Justice Mohammad Faiz Alam Khan, and Mr. Naresh Salecha—observed that CERSAI is a centralised registry maintained by the RBI to record charges created over movable and immovable properties. It is used by banks and financial institutions to record their security interests and prevent multiple lending against the same asset.

The Tribunal acknowledged that Section 77 of the Companies Act does require companies to register charges with the RoC, and failure to do so may carry consequences. However, the purpose of RoC registration is different from that of CERSAI, which is designed to alert other lenders and enforce security interests under SARFAESI.

The Tribunal clarified that when two laws have conflicting provisions, the law enacted later will prevail. The IBC (effective December 1, 2016) came into force after Section 77 of the Companies Act (effective November 15, 2016), and Section 238 of the IBC gives the Code an overriding effect over other laws.

It also referred to the Supreme Court’s judgment in M.V. Polaris Galaxy v. Banque Cantonale De Geneva, which held that when two statutes contain non-obstante clauses, the latter law prevails.

Key Takeaways from the Judgment

The Tribunal noted that Regulation 21 of the Liquidation Regulations permits proof of security interest through:

• Registration with RoC
• Records with Information Utility
• Registration with CERSAI

The use of the word “or” makes it clear that any one of these is sufficient, and creditors are not required to complete all forms of registration to be treated as secured.

Final Decision

The NCLAT held that Bizloan’s security interest, though not registered with the RoC, was validly recorded with CERSAI. Therefore, Bizloan should have been classified as a Secured Financial Creditor under the IBC.

Accordingly, the appeal was allowed, and the impugned NCLT order was set aside.

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