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Judgment
ORDER
Oral Judgment : Justice Sharad Kumar Sharma, Member (Judicial):
The Appellant is a Corporate Debtor, in the proceedings, as it was held in IA (IBC) / 823 (CHE) / 2022 in CP (IB) / 28 (CHE) / 2022, which was drawn before the Ld. National Company Law Tribunal, Chennai – Bench II.
At present stage, the limited grievance of the Appellant as canvassed before this Appellate Tribunal is, as against the Impugned Order that has been passed on the aforesaid Interlocutory Application on 02.06.2025, by virtue of which, the Assignee, M/s. Phoenix ARC Private Limited had been permitted to be substituted in the proceedings on the basis of the Assignment Deed, which has been said to have been executed in their favour on 29.03.2022.
Primarily, the ground, which has been agitated by the Ld. Counsel for the Appellant is that, there could not have been any substitution of M/s. L & T Finance Limited with M/s. Phoenix ARC Private Limited, the reason being that, the strength on which the new Assignee has sought its substitution was based upon an Assignment Deed which has not been registered as per the provisions contained under Section 17 of the Registration Act, 1908. Ld. Counsel for the Appellant has drawn the attention of this Appellate Tribunal, to the provisions as it is contained under Section 17 and has contended that, the documents which are creating a right by virtue of an ``Assignment’’ as per sub-clause (b) of sub-section (1) of Section 17, are mandatorily required to be registered, which was not done in the instant case and therefore in the absence of there being an effective Registration, as contemplated under Section 17 of the Act, the said document cannot be read in evidence for the purposes of considering substitution, in the light of the restrictions imposed by sub-section (c) of Section 49 of the Registration Act, 1908.
He questions about the admissibility of the said Assignment Deed which is required to be registered, under Section 17 of the Registration Act, 1908. This, in our opinion, is a matter to be considered on merits when the principal proceeding of the Company Petition itself could be a subject matter to be considered on merits when the principal proceeding of the Company Petition itself is considered on its merits as to, what right would be flowing to the Assignee based upon the restrictions which has been mandated by Section 17 of the Registration Act, 1908, to be read with Section 49 of the Registration Act, 1908, so far it relates to the Assignment Deed.
At this point where the Appellant puts a question to the impugned order of 02.06.2025, it is only at a stage where prima facie the said document of Assignment Deed, has been taken into consideration as to be a document for the purposes of substitution of M/s. L & T Finance Limited with M/s. Phoenix ARC Private Limited i.e., to enable them to contest the proceedings on behalf of the Financial Creditor. The substitution itself may not be amounting to an adjudication of a document on its own merit, and its legal sanctity.
Accordingly, the aspect of the order passed on a substitution application on 02.06.2025, would only be confined to allowing M/s. Phoenix ARC Private Limited, the new Assignee to contest the proceedings, in place of M/s. L & T Finance Limited i.e. Respondent No. 1.
Even otherwise, it is the settled principle of law that, even an unregistered document could be read for collateral purposes and the collateral purposes herein would be, in context of permitting the Applicant / Respondent No. 2 to contest the proceedings. Thus, the order of substitution of M/s. L & T Finance Limited with M/s. Phoenix ARC Private Limited, may not itself be amounting to closure of opportunity for the Appellant to challenge the veracity of the document of Assignment Deed made in favour of M/s. Phoenix ARC Private Limited, when the matter revives to be adjudicated on its merit to be contested by the new Assignee, who has been inducted as a party by virtue of substitution.
Thus, it is to be held that, at this stage, the Assignment Deed of 29.03.2022 would only be read for collateral purposes, that is, it would be limited to be read, for the purposes of the substitution itself only.
In a proceedings, which is based upon consideration of a propriety of a document, if the said document is otherwise required to be registered as per the provisions contained under Section 17 of the Registration Act, 1908, then the said document may be read for the collateral purposes, that is, only for the purposes of making out a prima facie case not affecting or speculating upon the determination of the validity of the documents itself. This is because, until and unless, based on the Assignment Deed, a substitution is permitted to be carried, the dispute itself cannot be resolved on merits in the absence of an appropriate party to be substituted. However, this grant of permission will not confer any rights at the first instance; how far the rights would be conferred to the proposed party who is expected to be substituted, would still be a question to be considered when the Company Petition itself is decided.
The aforesaid principle that, even an unregistered document could be read for collateral purposes has been considered by the Hon’ble Apex Court in a Judgment reported in 2008 Vol 8 SCC 564 K.B. Saha And Sons Private Limited V. Development Consultant Limited and particularly the observations which has been made in Para 34 which is extracted hereunder:
``34. From the principles laid down in the various decisions of this Court and the High Courts, as referred to hereinabove, it is evident that:
1.A document required to be registered, if unregistered is not admissible into evidence under Section 49 of the Registration Act.
2.Such unregistered document can however be used as an evidence of collateral purpose as provided in the proviso to Section 49 of the Registration Act.
3.A collateral transaction must be independent of, or divisible from, the transaction to effect which the law required registration.
4.A collateral transaction must be a transaction not itself required to be effected by a registered document, that is, a transaction creating, etc. any right, title or interest in immovable property of the value of one hundred rupees and upwards.
5.If a document is inadmissible in evidence for want of registration, none of its terms can be admitted in evidence and that to use a document for the purpose of proving an important clause would not be using it as a collateral purpose.’’
The arguments raised by the Ld. Counsel for the Appellant, in the instant Appeal, in context of the grounds raised herein, while challenging the order of substitution, in the light of the propriety of the Assignment Deed dated 29.03.2022, being an unregistered deed, in the light of the provisions contained under Section 17 to be read with Section 49 of the Registration Act, will still be a live issue, which has to be considered by the Ld. Adjudicating Authority, when the proceedings of the Company Petition i.e. CP (IB) / 28 (CHE) / 2022, is taken on its merits and it would be at that stage open for the Tribunal, to pass an appropriate order for accepting the deed or for exclusively directing for supplying the sufficient Stamp as per the provisions of the Registration Act, 1908, in accordance with law.
Subject to the aforesaid, without disturbing the Impugned Order dated 02.06.2025, substituting the Assignee, as a party to the proceedings, the instant Company Appeal (AT) (CH) (INS) No. 316 / 2025 would stand closed, leaving all the issues qua the documents i.e. Assignment Deed, to be argued at the stage when the proceedings revive back before the Tribunal.