NCLAT (2026.08.21) in Gondwana Engineers Ltd. vs Bijay Murmuria (Liquidator) and Ors. [(2026) ibclaw.in 998 NCLAT: Comp. App. (AT) (Ins) No. 1276 of 2026] held that;
Section 60(5)(c) of the Code confers upon the Adjudicating Authority jurisdiction to entertain “any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor.”
The deliberate use of the word “priorities” forecloses the very contention now advanced: a dispute as to the inter se priority of charges over an asset of the Corporate Debtor, arising in the course of its liquidation, is a paradigm instance of the jurisdiction the provision was designed to confer, not a matter excluded from it.
When a prior encumbrance is discharged, a subsisting subsequent encumbrance moves up in priority, there being no fresh, intervening right of a stranger created in between.
Section 48 of the Transfer of Property Act, 1882 applies in its ordinary terms: successive rights created over the same immovable property rank in the order of their creation, and each later-created right is, absent special contract, subject to rights previously created.
The principle that an assignee steps into the shoes of, and can claim no greater right then, the assignor is precisely what the Adjudicating Authority applied at paragraphs holding that Areion Finserve and, in turn, Raj Radhe Finance, could acquire no more than the subordinate charge that BOM itself held.
It is not, however, the mode of creation of the charge; the charge here was created by the underlying contract, the equitable mortgage effected through the NOC dated 10.09.2012 and the Memorandum dated 16.01.2013 and continues to bind the immediate parties to that transaction and those claiming through them with notice of it, regardless of registration.
An order is not per incuriam merely because it does not advert, in terms, to a statutory provision that, on a correct application of law as discussed above, would not in any event have altered the outcome.
It is well settled that mere pendency of a review, revision or appeal does not, without an order of stay, suspend the operation or binding effect of the order under challenge; the order continues to bind the parties until set aside or stayed.
Excerpts of the Order;
Findings
# 49. At the outset, we note that the core controversy concerns the inter se priority of competing charges over an immovable property i.e. the Sigma-9 Property , owned by the Corporate Debtor, as between (a) a second pari-passu equitable mortgage created in 2012–13 in favour of IDBI Bank Limited (“Respondent No. 3”) and Dena Bank, now Bank of Baroda (“Respondent No. 4”/“BOB”), and (b) a Simple Mortgage Deed dated 20.03.2015 executed by the Corporate Debtor as guarantor-mortgagor in favour of Bank of Maharashtra (“Respondent No. 5”/“BOM”) to secure independent credit facilities extended by BOM to the Appellant a security interest subsequently assigned by BOM, first to Areion Finserve Private Limited (“Respondent No. 2”) and thereafter to Raj Radhe Finance Limited (“Respondent No. 8”). The Adjudicating Authority has held that the Sigma-9 Property forms part of the liquidation estate of the Corporate Debtor, and that the mortgage traceable to BOM ranks subordinate to the charge of IDBI Bank and BOB. Aggrieved thereby, the Appellant has preferred the present appeal.
# 50. The facts, as borne out from the paper-book and the impugned order (including the chronology recorded by the Adjudicating Authority at paragraph 31.4 thereof), may be briefly noticed as under:
# 51. The Adjudicating Authority framed four issues for determination, namely:
(i) whether IDBI Bank and BOB acquired first charge over the Sigma-9 Property upon discharge of BOM’s earlier dues, and the nature and effect of the mortgage subsequently created by the Appellant in favour of BOM;
(ii) whether the assignment of debt by BOM to Areion Finserve, and thereafter to Raj Radhe Finance, conferred any rights on the assignees and required adjudication of the validity of those assignments;
(iii) whether BOM and its assignees failed to exercise the option to realise their security interest within the period prescribed under Section 52 of the Code read with Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016, and whether rejection of Areion Finserve’s claim warranted interference under Section 42 of the Code; and
(iv) whether the Sigma-9 Property forms part of the liquidation estate and the Liquidator is entitled to its custody and control, including the original title deeds.
On Issue (i), the Adjudicating Authority held that upon BOM’s No Due Certificate dated 20.03.2015 discharging its 2010 facility, the second pari-passu charge already vested in IDBI Bank and BOB with effect from 16.01.2013 automatically assumed the position of first charge, and that the Simple Mortgage Deed dated 20.03.2015 in favour of BOM, though validly created, ranked subordinate thereto.
On Issue (ii), it declined to adjudicate upon or invalidate the assignment deeds, holding that the assignees merely stepped into the shoes of BOM and could acquire no greater right.
On Issue (iii), it held that BOM and its assignees failed to intimate their election to realise security outside liquidation within thirty days as required by Regulation 21A(1), that the claim filed by Areion Finserve on 06.07.2024 was hopelessly delayed, and that rejection of that claim called for no interference under Section 42.
On Issue (iv), it held that the Sigma-9 Property forms part of the liquidation estate under Section 36 of the Code and that the Liquidator is entitled to custody and control thereof, including the original title deeds, under Section 35.
# 52. In consequence, the Adjudicating Authority
(a) partly allowed I.A. No. 440(AHM)2025, declaring the Sigma-9 Property to be part of the liquidation estate and holding that the security interest of Respondent Nos. 2 and 8 (Areion Finserve and Raj Radhe Finance), being subordinate and having lapsed into the liquidation estate under Regulation 21A(3), would not obstruct the Liquidator, while declining to quash the assignment deeds themselves;
(b) dismissed I.A. No. 1137(AHM)2025 filed by Raj Radhe Finance Limited; and
(c) allowed I.A. No. 525(AHM)2026, directing BOM, Areion Finserve, Raj Radhe Finance, or any person in possession of the original title deeds of the Sigma-9 Property to hand them over to the Liquidator within two weeks, failing which coercive steps under Sections 35(1)(n) and 70 of the Code were left open.
# 53. Having heard the matter and perused the paper-book, including the impugned order in its entirety, the said grounds resolve themselves into the following six Issues, which alone require determination and are dealt with issue-wise below:
ISSUE NO. (1) Whether I.A. No. 440(AHM)2025 involved adjudication of matters beyond the jurisdiction of the Adjudicating Authority under Section 60(5) of the Code.
ISSUE NO. (2) Whether the Adjudicating Authority erred in holding that the second pari-passu charge of IDBI Bank and BOB ranks in priority over the Simple Mortgage Deed dated 20.03.2015 in favour of BOM
ISSUE NO. (3) Whether the absence of registration of the IDBI Bank/BOB charge with the Registrar of Companies (“ROC”)/CERSAI, and the alleged non-consideration of Sections 77 and 79 of the Companies Act, 2013, renders the impugned order perverse or per incuriam.
ISSUE NO. (4) Whether the pendency of Review Application No. 1 of 2020 against the DRT order dated 08.11.2019 detracts from the impugned order.
ISSUE NO. (5) Whether the impugned order suffers from internal inconsistency in simultaneously including the Sigma-9 Property in the liquidation estate and declining to set aside the assignment deeds dated 27.10.2023 and dated 02.05.2025.
ISSUE NO. (6) Whether the dismissal of I.A. No. 1137(AHM)2025 and the directions in I.A. No. 525(AHM)2026 call for interference by this Appellate Tribunal.
Issue wise discussion
ISSUE NO.(1) Whether I.A. No. 440(AHM)2025 involved adjudication of matters beyond the jurisdiction of the Adjudicating Authority under Section 60(5) of the Code.
# 54. The Appellant urged that I.A. No. 440(AHM)2025 was, in essence, an attempt to obtain declarations regarding proprietary rights, mortgage priority and inter se rights of secured creditors — matters said to be governed by the Transfer of Property Act, 1882 and general mortgage law, and therefore not amenable to the summary jurisdiction conferred by Section 60(5) of the Code.
# 55. This contention does not survive a plain reading of the statute. Section 60(5)(c) of the Code confers upon the Adjudicating Authority jurisdiction to entertain “any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor.” The deliberate use of the word “priorities” forecloses the very contention now advanced: a dispute as to the inter se priority of charges over an asset of the Corporate Debtor, arising in the course of its liquidation, is a paradigm instance of the jurisdiction the provision was designed to confer, not a matter excluded from it.
# 56. Nor can the determination be characterised as collateral to liquidation. Unless the Adjudicating Authority determines whether, and subject to what encumbrance, the Sigma-9 Property forms part of the liquidation estate, the Liquidator cannot discharge the statutory duties cast upon him under Sections 35 and 36 of the Code to take custody, verify and realise the assets of the estate. The question “does this asset belong to the estate, and free of what claims” is not incidental to liquidation; it is foundational to it.
# 57. We also take into consideration that the Appellant’s own reply dated 18.07.2025 before the Adjudicating Authority (recorded at paragraphs 8.1 to 8.13 of the impugned order) did not question the Adjudicating Authority’s jurisdiction to decide priority at all; on the contrary, it squarely invited a decision on merits that the charge of IDBI Bank and BOB was never perfected for want of registration and could not prevail over the mortgage traceable to BOM. Having invited an adjudication on the very question of priority and having failed on merits, it is not open to the Appellant to contend for the first time before this Appellate Tribunal that the forum it invoked lacked jurisdiction to decide what it was asked to decide.
# 58. On the issue that the Adjudicating Authority travelled beyond the pleadings, we note that the reliefs sought in I.A. No. 440(AHM)2025 (extracted at paragraph 2 of the impugned order) expressly sought declarations as to the character of the Sigma-9 Property and the legality of the charges created by the assignment deeds qua that property. Determination of the underlying priority of mortgages was a necessary and inseverable incident of granting or refusing those very declarations; it cannot be said that relief was granted beyond the prayers. Issue No. 1 is accordingly answered against the Appellant.
Issue No. (2) Whether the Adjudicating Authority erred in holding that the second pari-passu charge of IDBI Bank and BOB ranks in priority over the Simple Mortgage Deed dated 20.03.2015 in favour of BOM?
# 59. The undisputed sequence is this: BOM acquired a first equitable mortgage on 07.01.2010; IDBI Bank and Dena Bank (BOB) acquired a second pari-passu charge with effect from 16.01.2013, pursuant to BOM’s own No Objection Certificate dated 10.09.2012; and on 20.03.2015, BOM discharged the very facility that constituted its first charge (by issuing a No Due Certificate) while, on the same day, the Appellant executed an entirely fresh and independent Simple Mortgage Deed over the same property in favour of BOM, securing the Appellant’s own, unrelated credit facilities, with the Corporate Debtor furnishing the property merely as guarantor-mortgagor.
# 60. On this sequence, the finding that the second pari-passu charge of IDBI Bank and BOB automatically assumed the position of first charge upon discharge of BOM’s 2010 facility is unexceptionable and follows from elementary mortgage law: when a prior encumbrance is discharged, a subsisting subsequent encumbrance moves up in priority, there being no fresh, intervening right of a stranger created in between. The 2015 Simple Mortgage Deed, on the correct finding of the Adjudicating Authority, was not a renewal or continuation of the discharged 2010 mortgage but a new and independent transaction securing a different borrower (the Appellant) and different facilities; neither the sanction letter nor the mortgage deed reserved to BOM a continuation of its erstwhile firs-tranking priority notwithstanding the intervening, already-vested rights of IDBI Bank and BOB.
# 61. In the absence of such a stipulation, Section 48 of the Transfer of Property Act, 1882 applies in its ordinary terms: successive rights created over the same immovable property rank in the order of their creation, and each later-created right is, absent special contract, subject to rights previously created. We are of considered view that this priority of a first-created charge under Section 48 of the Transfer of Property Act, 1882 is not displaced by provisions of company law governing distribution among secured creditors, and continues to bind unless the earlier charge-holder has itself relinquished its security.
# 62. The “composite transaction” argument of the Appellant is that discharge of the 2010 facility and creation of the 2015 mortgage formed one indivisible restructuring, such that BOM’s priority ought to be treated as unbroken, does not withstand scrutiny of the parties and facilities involved. The 2010 facility was a Loan Against Property extended to the Corporate Debtor; the 2015 facility was an altogether different credit exposure extended to the Appellant, with the Corporate Debtor merely a guarantor. A restructuring that is “composite” only in the loose commercial sense of involving affiliated customers of the same bank does not, without more, operate in law to preserve a priority that depends on continuity of the very right, not continuity of the banking relationship. Indeed, BOM’s own letter dated 19.03.2015 required that the 2010 facility “be closed before implementation” of the fresh sanction — contemplating sequential closure and fresh creation, not seamless continuation. The composite-transaction argument does not, therefore, assist the Appellant.
# 63. The Appellant’s reliance on BOM Pune’s internal communication dated 06.04.2015 to BOM Ahmedabad, asserting that no second charge was to be ceded without approval of competent authority was correctly held immaterial, since that communication post-dates, and could not retrospectively unwind, rights that had already vested in IDBI Bank and BOB with effect from 16.01.2013. A bank’s unilateral, internal and subsequent communication to its own branch cannot extinguish or subordinate rights that third parties had already validly and irrevocably acquired.
# 64. Another Ground of the Appellant insofar as it relies on an alleged “modification of charge for the subject property by BOM, Ahmedabad on 12.07.2011,” stands on a different footing altogether: this assertion appears for the first time in the Appeal. It finds no mention in the Appellant’s own reply dated 18.07.2025 before the Adjudicating Authority, no place in the chronology recorded at paragraph 31.4 of the impugned order, and no corresponding Annexure is traceable in the present paper-book. A plea of fact neither pleaded nor proved below, unsupported by any document on the record of this appeal, cannot be permitted to be raised for the first time in appeal, more so where, if true, it concerns a document that would have been squarely within the possession of the Appellant or BOM and readily producible before the Adjudicating Authority. This limb of Ground is rejected.
# 65. On the issue that an assignee acquires every proprietary and contractual right of the assignor, and that assignment cannot diminish the rights attached to the assigned security does not, on examination, assist the Appellant; if anything, it confirms the correctness of the impugned order. The principle that an assignee steps into the shoes of, and can claim no greater right then, the assignor is precisely what the Adjudicating Authority applied at paragraphs holding that Areion Finserve and, in turn, Raj Radhe Finance, could acquire no more than the subordinate charge that BOM itself held.
Thus, Issue No 2 goes against the Appellant.
Issue No. 3: Whether the absence of registration of the IDBI Bank/BOB charge with the Registrar of Companies (“ROC”)/CERSAI, and the alleged non-consideration of Sections 77 and 79 of the Companies Act, 2013, renders the impugned order perverse or per incuriam?
# 66. The Appellant argued that in the absence of registration of the IDBI Bank/BOB charge with the ROC or CERSAI, that charge could never be perfected and cannot prevail over the mortgage traceable to BOM (which was itself registered with CERSAI on 17.10.2023 and with the ROC by Form CHG-1 dated 06.12.2023, culminating in a certificate of registration of modification of charge dated 15.02.2024), and that the impugned order, by not adverting to Sections 77 and 79 of the Companies Act, 2013, is perverse.
# 67. We find that this conflates two distinct legal consequences. Registration of a charge under Section 77 of the Companies Act, 2013 operates as constructive notice to persons dealing with the company and, under sub-section (3) thereof, renders an unregistered charge liable to be disregarded by the liquidator and by other creditors of the company. It is not, however, the mode of creation of the charge; the charge here was created by the underlying contract, the equitable mortgage effected through the NOC dated 10.09.2012 and the Memorandum dated 16.01.2013 and continues to bind the immediate parties to that transaction and those claiming through them with notice of it, regardless of registration. Sections 77 and 79 of the Companies Act, 2013 exist to protect the liquidator and other creditors dealing with the company without notice of an unregistered charge; they were not enacted to confer, upon a subsequent chargee who otherwise had notice (actual or constructive) of an earlier charge, a priority it could not otherwise claim.
# 68. We observe that it is the Liquidator, the very party for whose protection Section 77(3) exists , who does not invoke non-registration to defeat the priority of IDBI Bank and BOB; to the contrary, the Liquidator treated their charge as the first charge, consistent with which IDBI Bank and BOB duly lodged their claims and relinquished their security to the liquidation estate under Section 52 of the Code . It is only the Appellant, a stranger to the IDBI Bank/BOB charge, aligned with the subsequent mortgagee, who seeks to invoke Section 77(3) for a purpose the provision was not designed to serve, namely to elevate its own subsequently created and, on facts, subordinate mortgage. Independently, as urged by Respondent No. 8 before the Adjudicating Authority, if the true grievance was the correctness or completeness of the entries on the register of charges maintained by the ROC, the remedy lay in an application for rectification of the register of charges under Section 87 of the Companies Act, 2013, and not in resisting, in summary liquidation proceedings under Section 60(5) of the Code, a declaration necessary for administration of the liquidation estate. This finding on this issue is affirmed.
# 69. The allied contention that the impugned order is rendered per incuriam for not expressly citing Sections 77 and 79 of the Companies Act, 2013 is equally misconceived. An order is not per incuriam merely because it does not advert, in terms, to a statutory provision that, on a correct application of law as discussed above, would not in any event have altered the outcome.
In totality the No. 3 is accordingly answered against the Appellant.
Issue No. 4: Whether the pendency of Review Application No. 1 of 2020 against the DRT order dated 08.11.2019 detracts from the impugned order.
# 70. The Appellant argued that the Adjudicating Authority erred in treating the DRT’s order dated 08.11.2019 as conclusive, without regard to the pendency of Review Application No. 1 of 2020 filed by the Appellant against that order.
# 71. It is not disputed and nothing in the Appeal suggests otherwise that no order staying the operation of the DRT order dated 08.11.2019 has been obtained in the Review Application at any point since 2020. It is well settled that mere pendency of a review, revision or appeal does not, without an order of stay, suspend the operation or binding effect of the order under challenge; the order continues to bind the parties until set aside or stayed. The Adjudicating Authority was, therefore, correct to proceed on the footing that the findings in the order dated 08.11.2019 continued to hold the field.
# 72. In any event, the finding on priority does not rest solely, or even principally, on the DRT’s order; it independently follows from the documentary chronology the NOC dated 10.09.2012, the Memorandum dated 16.01.2013, the No Due Certificate dated 20.03.2015 and the contemporaneous Simple Mortgage Deed read with Section 48 of the Transfer of Property Act, 1882, as discussed under Issue No. 2 above. The DRT order was relied upon only as independent corroboration and not as the foundation of the finding. The pendency of the review therefore furnishes no ground to disturb the impugned order.
Issue No. 4 is accordingly answered against the Appellant.
Issue No. 5: Whether the impugned order suffers from internal inconsistency in simultaneously including the Sigma-9 Property in the liquidation estate and declining to set aside the assignment deeds dated 27.10.2023 and dated 02.05.2025?
# 73. It is the case of the Appellant that the impugned order is self-contradictory in simultaneously (a) declaring the Sigma-9 Property part of the liquidation estate and permitting the Liquidator to take custody under Section 35 of the Code, and (b) declining to set aside the Assignment Agreements dated 27.10.2023 and 02.05.2025, which are said to remain subsisting and valid; and that unless the impugned order is set aside, the charges created by those assignment deeds would be rendered infructuous.
# 74. On examination, no such inconsistency exists. The impugned order does two analytically distinct things: first, it declines to invalidate the Assignment Agreements dated 27.10.2023 and 02.05.2025 as transactions inter se between BOM, Areion Finserve and Raj Radhe Finance and second, it separately holds that the security interest which those assignments purported to carry , being, on Issue No 2 above, a mortgage subordinate to the first charge of IDBI Bank and BOB, and, on the findings on Issue (iii) of the impugned order, never realised or even intimated for realisation within the thirty-day window prescribed by Regulation 21A(1) of the IBBI (Liquidation Process) Regulations, 2016 — stood deemed, by operation of the proviso to Regulation 21A(1) read with Regulation 21A(3), to have lapsed into the liquidation estate .
# 75. We observe that these findings can co-exist without any conflict. An assignment may be a perfectly valid transaction as between assignor and assignee, transferring whatever the assignor held, while what was transferred (here, a subordinate charge that its holders never elected, in time, to realise outside liquidation) is, independently and by force of Regulation 21A, treated as part of the estate. The assignees are not left without a valid transaction for that reason; what they are left without is a security interest enforceable outside liquidation. That is a statutory consequence of Regulation 21A, not an inconsistency internal to the impugned order.
# 76. The security assigned under the two deeds was always subordinate and always liable to lapse for want of timely election under Section 52 of the Code. The impugned order does no more than record the legal consequence that necessarily follows from those antecedent findings.
Issue No. 5 is accordingly answered against the Appellant.
Issue No. 6: Whether the dismissal of I.A. No. 1137(AHM)2025 and the directions in I.A. No. 525(AHM)2026 call for interference by this Appellate Tribunal?
# 77. It remains to consider whether the dismissal of I.A. No. 1137(AHM)2025 and the directions in I.A. No. 525(AHM)2026 call for interference, on the Ground that rejection of a claim does not extinguish a mortgage and that no prejudice was caused to the liquidation process by the delay in question.
# 78. We need to appreciate that IA No. 1137(AHM)2025 was preferred by Raj Radhe Finance Limited, as assignee of Areion Finserve, challenging the Liquidator’s rejection of Areion Finserve’s claim under Section 42 of the Code. Raj Radhe Finance, as assignee, could acquire no better title to press that claim than Areion Finserve itself possessed. The delay and non-compliance with Regulation 21A that justified rejection of Areion Finserve’s claim equally infects the claim as pressed by its assignee. The dismissal of I.A. No. 1137(AHM)2025 calls for no interference, and, in any event, it is Respondent No. 8 who is directly bound by that dismissal; the Appellant does not, beyond what is already covered under Issue No 1 to 5 above, make out any independent ground of challenge to this part of the impugned order.
# 79. on the issue that rejection of a claim does not extinguish a mortgage, and that no prejudice was caused to the liquidation process by the delay, misconceives the basis of the finding. While rejection of a proof of claim does not, of itself and for all purposes, extinguish an underlying mortgage as a matter of general property law, the operative consequence here is not extinguishment of the mortgage in the abstract but the statutorily deemed consequence, under Regulation 21A(3) of the IBBI (Liquidation Process) Regulations, 2016, of failure to exercise the Section 52 option within the time prescribed. That consequence — the secured asset being brought into, and treated as part of, the liquidation estate follows by operation of the Regulation itself, and does not depend on demonstrated prejudice to the liquidation process, in the same manner that limitation bars a remedy irrespective of individualised prejudice.
# 80. The direction in I.A. No. 525(AHM)2026 for handing over of the original title deeds of the Sigma-9 Property to the Liquidator is the necessary corollary of the finding, affirmed above, that the property forms part of the liquidation estate and that the Liquidator is obliged, under Section 35(1)(b), (d) and (n) of the Code, to take custody and control of the assets and records of the Corporate Debtor. Custody of an immovable asset without custody of its title documents would render that statutory duty illusory. This direction, too, calls for no interference. The Issue No. 6 is accordingly answered against the Appellant.
Conclusion
# 81. For the reasons recorded above, none of the grounds urged on behalf of the Appellant whether going to the jurisdiction of the Adjudicating Authority, to the priority of mortgages, to the effect of non-registration of charges under the Companies Act, 2013, to the pendency of the DRT review, or to the internal consistency of the impugned order is found to have merit. In the result, the impugned Order doesn’t warrant any interference from this Appellate Tribunal.
# 82. The appeal fails and accordingly, dismissed. No order as to cost. Pending IA, if any stand closed.
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