'No Charge, No Security': NCLAT Dismisses BEST's Appeal, Upholds ₹30 Crore Claim As Unsecured

Mumbai: The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal filed by the Brihanmumbai Electric Supply and Transport Undertaking (BEST) against Ashok Kumar Golecha, the Liquidator of Spark Green Energy (Satara) Ltd., upholding the order passed by the National Company Law Tribunal (NCLT), Mumbai Bench, which treated BEST as an unsecured creditor and limited its admitted claim to Rs 30 crore instead of the Rs 156.23 crore claimed by BEST.

The Appellate Tribunal, in its verdict, held: “The Liquidator (appointed in the case) did not receive any proof regarding the creation of a security—neither from an information utility, nor through a Certificate of Registration of Charge issued by the ROC, nor via registration with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India. Even if the requirement of registering the charge is side-stepped for the purpose of determining the Appellant’s status as a secured financial creditor, the need to possess documentation evidencing the creation of such a charge cannot be waived. …In the absence of a charge document, the creditor could not have been treated as a secured financial creditor of the corporate debtor. It is not for the Liquidator to examine who was at fault for not creating the security charge. All that the Liquidator was required to determine was whether the charge had been created,” the Tribunal stated in its order

The Tribunal further maintained that the BEST’s argument regarding a “floating charge,” calling it a “unilateral creation” without any contractual foundation. “Only if there is a charge document can a security interest be created,” the order noted, affirming the Liquidator’s decision to treat BEST as an unsecured creditor.

The appeal arose from an October 2024 order passed by the NCLT. BEST had claimed Rs 156.23 crore, including Rs 126.23 crore as interest, classifying itself as a secured financial creditor of the corporate debtor, Spark Green Energy. The Liquidator, however, admitted only Rs 30 crore as principal and rejected the claim to interest and secured status.

BEST argued that its investment in Spark Green Energy was made under an Investment Agreement (IA) and an Energy Purchase Agreement (EPA), which, although labeled “interest-free,” provided for compensation in the form of power discounts in the event of project delays. BEST contended that this discount effectively represented the time value of money and that Spark had promised to create a second charge over its assets—thus making BEST a secured creditor.

However, the NCLAT Bench, comprising Chairperson Justice Ashok Bhushan and Technical Members Barun Mitra and Arun Baroka, found no merit in these arguments. The Tribunal observed that neither the IA nor the EPA expressly provided for interest. It also emphasized that no charge had been created or registered in accordance with Section 77 of the Companies Act, 2013, nor had any supporting documentation been produced to substantiate the existence of a valid security interest.

“We find no good reason to interfere with the impugned order,” the Appellate Tribunal concluded while dismissing BEST’s appeal.