Regulation 21 of Liquidation Process Regulations, 2016 provides three documents to prove security interest are alternate in nature, and such security interest can be proved by either of said evidence, and if proved by either of said evidence, would it over-ride the provisions of Section 77(3) of the Companies Act, 2013 – IDBI Bank Ltd. – NCLT Mumbai Bench
NCLT Mumbai Bench held that:
(i) Though on the strict interpretation of provisions of section 77(b) of the Companies Act, 2013, registration of modification was mandatory, the term ‘modification’ should be liberally construed in favor of lenders in a manner that such construction does not prejudice the security interest of existing lenders where security interest came to be acquired by other lenders with knowledge of existence of such security interest.
(ii) The legislature has consciously provided for three evidences for proving the security interest, as against the only evidence provided whether the provisions of Regulation 21 of the Liquidation Process Regulations, 2016 providing for three documents to prove security interest are alternate in nature, and such security interest can be proved by either of said evidence, and if proved by either of said evidence, would it over-ride the provisions of Section 77(3) of the Companies Act, 2013.
(iii) All the three clauses contain evidence with different authorities in relation to lending by the Institutions/Banks. The clause (b) and (c) are disjoined by the word ‘or’, implying that clause (a) and clause (b) are also to be read in alternate to one another.
