2. In Naresh Kumar Aggarwal, Shareholder of Nikhil Footwears Private Limited v. CFM Asset Reconstruction Private Limited (Company Appeal (AT) (Insolvency) No.470 of 2023), the NCLAT, while reiterating that Section 7 proceedings can be initiated against both the principal borrower and the corporate guarantor simultaneously, held that a Section 7 application filed by an asset reconstruction company (“ARC”) cannot be questioned on the basis that the instrument pursuant to which the loan was assigned in favour of the ARC, in terms of Section 5 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI”), was unregistered. In our view, treating the registration requirement of an assignment deed pursuant to which a right over immovable property as security is transferred in favour of an ARC as a non-essential compliance only on the basis that the assignment had taken place in terms of Section 5 of SARFAESI may not be free from doubts. This is considering that under Section 5(1A) of SARFAESI, an assignment agreement has been exempted only from the payment of stamp duty in accordance with Section 8F of Indian Stamp Act, 1899 and no similar exemption has been made applicable vis-à-vis the registration requirement.
Source: Barandbench
