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Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025

101. We further note that the security proposed in favour of the Appellant under Clause 7.2(a)(ii) and 7.2(a)(iii) was clearly subject to obtaining valid No Objection Certificates from the existing lenders, and the existing lenders ceding first pari-passu charge for creating first pari-passu charge by the Appellant (STCI here). The relevant clauses of the agreement are extracted below:

7.2 (a) (ii) the Borrowers shall furnish to the Lender No Objection Certificate from the Consortium Lenders for creation of first pari passu charge in favour of the Lender by way mortgage of the Fixed Assets; or 7.2 (a) (iii) the Borrowers shall furnish to the Lender Letter ceding first pari passu charge from the Consortium Lenders for creation of pari passu charge in favour of the Lender by way of mortgage of the Fixed Assets;

102. We now take a look at the No Objection Certificate and letter ceding first pari passu charge issued by the SBI and by Karnataka Bank. The letters of NOC and ceding of first pari passu charge of all consortium lenders were identical in nature to Karnataka Bank.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025

103. We note from the letter of the SBI ceding pari-passu Charge that it involved the following:

104. The most important condition in the letter related to reciprocal ceding of pari-passu charge by the STCI. We note from the records that based on the aforesaid authorisation, the Company created 1st pari passu charge on fixed assets of the company in favour of STCI also. Secondly STCI registered the 1st pari-passu charge on fixed assets of the company with Registrar of Companies. Most importantly, we note that no letter was issued by STCI ceding the 1st Charge on pari-passu basis in favour of SBI nor was the inter- se agreement executed between SBI, STCI and the company/CD. In view of non-compliance with the conditions viz. the absence of a valid inter se agreement, and reciprocal ceding of 1st pari-passu charge by the STCI, the alleged pari passu charge never became operative in law. Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025

121. Respondents have also relied on various judgments which are discussed in subsequent paragraphs.

122. In "Andhra Pradesh State Financial Corporation vs. Kotak Mahindra Bank & Ors., Writ Petition No. 43027 of 2019" the Hon'ble High Court of Telangana examined whether a valid pari passu charge could be said to exist merely on the basis of issuance of a No Objection Certificate and registration of charge. The Court held that unless there exists a binding contractual arrangement between the lenders, such as an inter se agreement, the mere issuance of an NOC or filing of charge with the Registrar of Companies does not result in creation of a legally enforceable pari passu charge. It was further held that registration of charge is only a Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 procedural requirement and cannot substitute the substantive act of creation of charge. In the present case, we find that although conditional NOCs were issued, the essential conditions, namely execution of an inter se agreement and issuance of reciprocal Ceding of the charge by the Appellant, were never fulfilled. Thus, applying the ratio of the above judgment, the alleged pari passu charge in favour of the Appellant never came into existence in law, and the Appellant cannot claim the status of a secured creditor on that basis.