Loan Financers As Secured Creditors Vis-À-Vis NCLAT's Ruling

This article addresses the question of whether a financier can claim the status of 'financial creditor' under the Insolvency and Bankruptcy Code (IB Code) if the hypothecation charge in respect of a vehicle is not registered as per Section 77 of the Companies Act, 2013 ("the Companies Act"). The NCLAT, in the case of Volkswagen Finance Pvt. Ltd. v. Sree Balaji Printopack Pvt. Ltd.¹ (Volkswagen Finance) addressed the issue of whether the Liquidator was correct to deny the Appellant's application on the grounds that the Appellant was not a "Secured Financial Creditor" since the "Charge" had not been registered with the ROC in accordance with Section 77 (1) of the Companies Act. That if the "Charge" was not registered under the Companies Act, 1956/2013, the Registration of Hypothecation by Way of "Charge" under Section 51 of the Motor Vehicles Act, 1988, would be void.