{"id":333259,"date":"2024-10-17T15:00:15","date_gmt":"2024-10-17T09:30:15","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=333259"},"modified":"2024-11-13T10:14:57","modified_gmt":"2024-11-13T04:44:57","slug":"absence-of-noc-not-invalidate-security-documents-nclt-upholds-axis-bank-and-nkgsb-banks-claims-as-secured-debt-scc-times","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2024\/10\/17\/absence-of-noc-not-invalidate-security-documents-nclt-upholds-axis-bank-and-nkgsb-banks-claims-as-secured-debt-scc-times\/","title":{"rendered":"\u2018Absence of NOC not automatically invalidates Security Documents\u2019; NCLT upholds Axis Bank & NKGSB Bank\u2019s claims as Secured Debt"},"content":{"rendered":"
\n

National Company Law Tribunal, Mumbai:<\/span> In an application filed by the applicant, Bank of Baroda under Section 60(5)<\/a> of the Insolvency and Bankruptcy Code, 2016<\/a> (IBC) challenged the admission of claims of Respondent 2 and 3 (Axis Bank and NKGSB Bank) as secured financial creditor, a Division bench of Anil Raj Chellan* (Technical Member)<\/span> and Kuldip Kumar Kareer (Judicial Member), held that Axis Bank and NKGSB Bank were correctly classified as secured creditors despite the absence of an NOC from Bank of Baroda. The NCLT also acknowledged that Bank of Baroda’s charge had priority, and in the event of asset liquidation, Bank of Baroda’s claim would take precedence.<\/p>\n

Brief Facts<\/h3>\n

In the instant matter, the Omkar Speciality Chemicals Limited (Corporate Debtor) availed credit facilities from the applicant bank in 2009 and 2015, which were exclusively secured by multiple assets. Subsequently, Respondent Nos. 2 and 3 also extended financial assistance to the Corporate Debtor in 2016 and 2017, respectively, and registered their charges with the Registrar of Companies (RoC).<\/p>\n

The Adjudicating Authority, vide order dated 05.12.2022, initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, and appointed an Interim Resolution Professional (IRP). The applicant bank submitted its claims to the IRP, who accepted it as a secured financial creditor for an amount of \u20b9290.05 crore. During the CIRP, claims from respondents 2 and 3 (Axis Bank and NKGSB Co-operative Bank) were also admitted as secured financial creditors by the IRP.<\/p>\n

Parties’ Contentions<\/h3>\n

The applicant bank challenged the admission of claims of Respondent 2 and 3 and argued that the assets claimed by the respondents were exclusively secured in favor of the applicant bank and that no NOC (No Objection Certificate) had been obtained by the Corporate Debtor for creating the security interests in favor of respondent 2 and 3. It was argued that under Section 23 and 24 of the Contract Act, any agreement made without valid consent or containing unlawful consideration is void. The applicant bank cited precedents and claimed that without the NOC, the charges created in favor of Axis Bank and NKGSB Bank were void.<\/p>\n

On the other hand, respondents 2 and 3 argued that their claims were validly secured as the charges were registered under the Companies Act, 2013<\/a>. They contended that the absence of an NOC merely created a subservient charge, which does not invalidate their secured status. The Axis Bank further argued that the Deed of Hypothecation and personal guarantees provided by the Corporate Debtor and its promoters constituted valid security interest under Section 3(31)<\/a> of the IBC<\/a>. The NKGSB Bank stated that their charge was registered, and under Section 48<\/a> of the Transfer of Property Act, 1882<\/a>, subsequent rights created over the same property are valid, though subject to prior rights.<\/p>\n

However, the Resolution Professional (respondent 1) argued that the Resolution Professional is bound by the CIRP regulations and lacks adjudicatory powers. The Resolution Professional considered the claims of Axis Bank and NKGSB Bank as secured based on the registered charges. The Resolution Professional also obtained a legal opinion, which stated that determining the validity of charges was beyond its powers.<\/p>\n

Moot Point<\/h3>\n

Whether Axis Bank and NKGSB Bank can be treated as secured creditors in the absence of a No Objection Certificate (NOC) from Bank of Baroda, which held the first charge over the assets of the Corporate Debtor?<\/p>\n

NCLT’s Analysis<\/h3>\n

The NCLT noted that while the respondents claimed that they held valid secured interests under the Companies Act and IBC, the applicant bank argued that the absence of NOC rendered the charges void. The NCLT examined the validity of charges created in favor of Axis Bank and NKGSB Bank without the NOC from Bank of Baroda.<\/p>\n

The NCLT acknowledged that the charges in favor of the applicant were created earlier (in 2012) and that respondent 2 and 3 registered their charges in 2016 and 2017, respectively. The NCLT held that registration of a charge under the Companies Act, 2013<\/a> is sufficient to classify a creditor as secured in insolvency proceedings, even in the absence of a NOC from an earlier charge-holder. The NCLT noted that a subservient charge does not invalidate the secured status of later creditors but is subject to prior rights created over the assets. The NCLT held that the security documents remain valid as they were not declared void by any competent authority and were duly registered in accordance with the Companies Act, 2013<\/a>.<\/p>\n

The NCLT asserted that while respondent 2 and 3’s claims were admitted as secured based on the documents and the charges registered with the RoC, their security interest would be subordinate to the applicant’s, given that no NOC was obtained. The NCLT held that the absence of an NOC did not invalidate the claims of respondents 2 and 3 as secured creditors, though their charge would be subservient to the applicant’s prior charge.<\/p>\n

The NCLT also emphasised that the Resolution Professional has no adjudicatory powers to determine the validity of charges beyond the documents presented and the registrations made with the RoC.<\/p>\n

NCLT’s Decision<\/h3>\n

The NCLT allowed the claims of respondent 2 and 3 as secured creditors but held that their security interests were subordinate to the applicant’s prior charge.<\/p>\n

[Bank of Baroda<\/span> v. Ajit Kumar<\/span>, 2024 SCC OnLine NCLT 3583<\/a>, Decided on 08-10-2024<\/span>]<\/p>\n

*Judgment by Anil Raj Chellan (Technical Member)<\/span><\/strong><\/p>\n\n

Advocates who appeared in this case:<\/p>\n

Kunal Kanungo and Gaurav Jalendra, Counsel for the Applicant<\/p>\n

Amey Hadwale and Geeta Lundwani, Counsel for the Respondent No. 1\/RP<\/p>\n

Nausher Kohli and Shivani Varade, Counsel for the Respondent No. 2<\/p>\n

Sagar Wagle, Gisa Rasquiulla and Kashyap Sampat, Counsel for the Respondent No. 3<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The NCLT held that the Resolution Professional does not have adjudicatory powers to invalidate or challenge the charges based on an absence of NOC.<\/p>\n","protected":false},"author":67514,"featured_media":315346,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,11],"tags":[74185,52129,74188,33133,22814,25934,74186,3539,12521,74189,74190,74187],"class_list":["post-333259","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-tribunals_commissions_regulatorybodies","tag-absence-of-noc","tag-axis-bank","tag-axis-bank-and-nkgsb-banks-claims-as-secured-debt","tag-bank-of-baroda","tag-corporate-insolvency-resolution-process","tag-financial-creditor","tag-invalidate-security-document","tag-National_Company_Law_Tribunal","tag-nclt","tag-nkgsb-bank","tag-secured-debt","tag-security-document"],"yoast_head":"\n'Absence of NOC not invalidate Security Documents'; 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Ltd.; appoints Interim Resolution Professional","author":"Saba","date":"September 14, 2017","format":false,"excerpt":"National Company Law Tribunal, Principal Bench: Bank of Baroda, the Financial Creditor filed an application to trigger the Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code, 2016 against Amrapali Silicon City Pvt. Ltd., the Corporate Debtor. The financial debt was set out in the form\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/04\/NCLT.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/04\/NCLT.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/04\/NCLT.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/04\/NCLT.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/04\/NCLT.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":316846,"url":"https:\/\/www.scconline.com\/blog\/post\/2024\/03\/13\/secured-creditor-has-right-to-choose-method-of-debt-realisation-not-obligated-to-rely-solely-on-liquidation-proceedings-nclat-scc-times\/","url_meta":{"origin":333259,"position":1},"title":"NCLAT rules on Secured Creditor\u2019s right to choose method of debt realisation","author":"Ritu","date":"March 13, 2024","format":false,"excerpt":"NCLAT stated that since the IBC overrides the SARFAESI Act, the Liquidator ought not to prefer a petition, based on the SARFAESI Act, and therefore Liquidator\u2019s decision to classify the appellant as an unsecured financial creditor was illegal and invalid.","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"National Company Law Appellate Tribunal","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/resolution-plan.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/resolution-plan.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/resolution-plan.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/resolution-plan.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":357155,"url":"https:\/\/www.scconline.com\/blog\/post\/2025\/08\/20\/all-hc-grants-secured-asset-possession-to-axis-bank-u-s-14-sarfaesi-act\/","url_meta":{"origin":333259,"position":2},"title":"\u2018Can\u2019t allow borrowers to wiggle out of liability by using tenancy mechanism\u2019; Allahabad HC directs grant of secured asset\u2019s possession to Axis Bank","author":"Sonali Ahuja","date":"August 20, 2025","format":false,"excerpt":"\u201cOnce an order has been passed under Section 14 of the SARFAESI Act, the authorities are required to act in pursuance of the same and as per the provisions of the Act. The mechanism used by the borrowers to wiggle out of their liability cannot be countenanced by us.\u201d","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"secured assets possession to Axis Bank","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/08\/secured-assets-possession-to-Axis-Bank.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/08\/secured-assets-possession-to-Axis-Bank.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/08\/secured-assets-possession-to-Axis-Bank.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/08\/secured-assets-possession-to-Axis-Bank.webp?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/08\/secured-assets-possession-to-Axis-Bank.webp?resize=1050%2C600&ssl=1 3x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/08\/secured-assets-possession-to-Axis-Bank.webp?resize=1400%2C800&ssl=1 4x"},"classes":[]},{"id":274906,"url":"https:\/\/www.scconline.com\/blog\/post\/2022\/10\/03\/supreme-court-review-petition-axis-bank-section-75-of-insolvency-and-bankruptcy-code-2016-discretionary-national-company-law-tribunal-application-vip-legal-research-legal-news\/","url_meta":{"origin":333259,"position":3},"title":"Supreme Court reaffirms that NCLT under S. 7(5) of Insolvency and Bankruptcy Code has discretionary power to admit or reject an application","author":"Editor","date":"October 3, 2022","format":false,"excerpt":"\u00a0 \u00a0 Supreme Court: In a review petition filed by Axis Bank against Supreme Court's judgment in Vidarbha Industries Power Ltd. v. 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Maheshwari, JJ. has dismissed the review petition and reaffirms that the National Company\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/Supreme-Court-1.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/Supreme-Court-1.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/Supreme-Court-1.png?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/Supreme-Court-1.png?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/Supreme-Court-1.png?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":248324,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/05\/17\/acknowledgment-of-debt\/","url_meta":{"origin":333259,"position":4},"title":"NCLAT | ‘Balance and Security Confirmation Letter’ is sufficient ‘acknowledgement of debt’ so as to extend limitation period for initiating insolvency proceedings under S. 7 IBC","author":"Bhumika Indulia","date":"May 17, 2021","format":false,"excerpt":"National Company Law Appellate Tribunal (NCLAT): A Division Bench of Justice Venugopal M. 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Singh (Technical Member) dismissed an appeal filed against the order of the National Company Law Tribunal, Hyderabad (\"NCLT\"), whereby the NCLT had admitted an application filed by the Financial Creditor\u2212Punjab National Bank under\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":347458,"url":"https:\/\/www.scconline.com\/blog\/post\/2025\/05\/09\/secured-creditor-who-relinquishes-interest-cannot-seek-priority-among-others-based-on-charge-nclt\/","url_meta":{"origin":333259,"position":5},"title":"\u2018Secured Creditor who relinquishes interest cannot seek priority among others based on charge\u2019; NCLT directs distribution of sale proceeds of Monnet Power\u2019s assets","author":"Editor","date":"May 9, 2025","format":false,"excerpt":"\u201cOnce a Secured Creditor relinquishes its security interest to the liquidation estate, it cannot seek priority among other Secured Creditors on the basis of the charge and is only entitled to receive proceeds from the sale of assets in the manner specified under Section 53 of the IBC.\u201d","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"National Company Law Tribunal","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/02\/National-Company-Law-Tribunal.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/02\/National-Company-Law-Tribunal.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/02\/National-Company-Law-Tribunal.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/02\/National-Company-Law-Tribunal.webp?resize=700%2C400&ssl=1 2x"},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/333259","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/67514"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=333259"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/333259\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media\/315346"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=333259"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=333259"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=333259"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}