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31. The Respondent submitted that the 8th Supplemental Deed of working capital consortium agreement dated 13.06.2016, executed between the UCO Dank Consortium and Corporate Debtor does not affect the rights of the Respondent as first charge holder on movable assets of the Corporate Debtor.

32. The Respondent submitted that the UCO Bank Consortium did not possess any charge over the said movable assets, which were financed by TCFSL, and refinanced by the Respondent and thus there is no question of UCO Bank Consortium's holding pari passu charge over the said movable assets getting crystallized, as alleged by Appellant. This Respondent stated that the Respondent has exclusive charge over the said movable assets.

Comp. App. (AT) (Ins.) No. 555 OF 2024

37. We observe that on 31.12.2019, the Appellant sent an email stating that TCFSL initially financed the movable assets and thereafter on 24.03.2017, the loan was repaid by the Corporate Debtor and a closure letter was issued to the Corporate Debtor by TCFSL, hence, the charge stood crystallised in favour of the UCO Bank Consortium based on hypothecation deed of UCO Bank Consortium with the Corporate Debtor as amended from time to time. The Appellant asked the Respondent to submit the NOC obtained from the UCO Bank Consortium. On 07.10.2020, the Respondent, instead of providing NOC of UCO Bank Consortium and identifying all charged assets, issued a letter stating that there was no requirement to obtain NOC from UCO Consortium Bank. The Appellant vide letter dated 15.10.2020 informed the Respondent that while the Respondent's claims as a creditor have been admitted, the Respondent's charge is subservient to the First Pari-Passu charge of UCO Bank Consortium, especially in the absence of the NOC taken from UCO Bank Consortium while refinancing the movable assets. On 22.02.2021, the Respondent filed I.A. 699 of 2021 before the Adjudicating Authority to realise the assets purportedly charged in favour of the Respondent under Section 52 of the Code.

40. It is significant to note that the UCO Bank Consortium had the first Pari- passu charge over the movable assets based on third schedule of 8th Supplemental Deed of Working Capital Consortium Agreement after the loan stood repaid to TCFSL by the Corporate Debtor. We note that subsequently after 8 months on 30.11.2017, the Respondent refinanced the movable assets of the Corporate Debtor aggregating to Rs 38,96,50,000/-.

41. We have noted that 3rd Schedule of 8th Supplemental Deed of Working Capital Consortium Agreement has four (4) clauses, each creating the first charge in favour of the UCO Bank Consortium. However, paragraph 4.1 of the Impugned Order only reproduces Clauses 1 and 4, i.e., regarding the first pari-passu charge on the fixed assets and by collateral security. It is significant to note that Clause Comp. App. (AT) (Ins.) No. 555 OF 2024 2 directly creates the first pari-passu charge through hypothecation on the movable assets "present as well as the future" assets of the Corporate Debtor. Clause 2 does not contain any exclusions in respect of assets financed by loans from other banks and also encompasses "... all any other charge over the movable and immovable properties of the borrower remained to be mentioned here shall be treated as Member Banks are having first Pari-passu charge over the same."

42. We further note that Clause 3 of 8th Supplemental Deed of Working Capital Consortium Agreement also creates the first pari-passu charge as primary security through hypothecation and states that the UCO Bank Consortium would have first pari-passu charge by way of primary security over the proceeds arising in connection with the other securities. Clause 3 create a first right over the proceeds from the sale of movable properties, which are the subject matter of the present appeal.

43. Thus, it become clear that Clauses 1 and 4, which contain the exclusion clause for assets purchased fixed by financing term loans outside the UCO Bank Consortium of the 8th Supplemental Deed of Working Capital Consortium Agreement can create the first charge over the fixed assets in exclusion to UCO Bank Consortium. In other words the assets need to be new as well as fixed assets to fall under Clause 1 or even Clause 4 of the 8th Supplemental Deed of Working Capital Consortium Agreement. Therefore, it is quite logical to come to conclusion that if existing assets especially, movable assets are re-financed, by Comp. App. (AT) (Ins.) No. 555 OF 2024 any subsequent financer/ lender as against financed for new additional fixed assets for Corporate Debtor, then the re-financer will not have any first charge over existing movable assets which are already stood charged (as first charge) in favour of the UCO Bank Consortium. Therefore, it appears that the Adjudicating Authority ignored Clauses 2 and 3, which creates the first charge by hypothecation in respect of present and future assets, without any exclusions. Thus, we unable to see adequate reasons in the Impugned Order holding that " We find that it has been consistent understanding with the lenders that the assets financed by lenders outside the Consortium lenders shall be charged in favor of such financier and the Consortium shall have only second charge as collateral security".