INDIA Law and Practice Contributed by: Shardul Shroff, Misha, Kritika Poddar and Aishwarya Satija, Shardul Amarchand Mangaldas & Co
1.3 Statutory Officers See 1.2 Types of Insolvency .
• lien (where the possession of the movable goods is handed over to the lender until the discharge of certain obligations without the right to appropriate or sell the goods). Immovable Property Security over immovable property is generally created by way of a mortgage. The Transfer of Property Act, 1882 contemplates six different types of mortgages. The two most common forms of mortgage used in financing transactions are an English mortgage or a legal mortgage and a mortgage by way of deposit of title deeds or an equitable mortgage. With respect to intangible assets and intellectual prop - erty rights, assignment is the principal form of secu - rity. The enforcement of security primarily depends on the terms of the security. Certain types of security can be enforced without court intervention. For example, in the case of a pledge, the pledgor may exercise its right to sell the assets by giving the pledgor reasonable notice with - out any prior court intervention. In the case of an Eng - lish mortgage, the mortgagee may appoint a receiver in respect of the property and exercise the right to sell the mortgaged property without court intervention subject to certain conditions. A deed of hypotheca - tion usually contains provisions entitling the creditor to sell the hypothecated assets without requiring court intervention. On the other hand, an equitable mortgage does not provide the mortgagee with a right to sell without court intervention except for the rights available to certain financial institutions and banks under specialised leg - islation such as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Inter - The SARFAESI Act provides for enforcement of a security interest (including hypothecation) in favour of a secured creditor, without intervention of the court or tribunal, by such creditor itself, provided consent of secured creditors representing not less than 60% in value outstanding, having pari passu charge is obtained. The remedies available under the SARFAESI est Act, 2002 (the “SARFAESI Act”). Recovery Under the SARFAESI Act
2. Creditors 2.1 Types of Creditors See 1.2 Types of Insolvency (Liquidation upon failure of the CIRP or PPIRP). 2.2 Priority Claims in Restructuring and Insolvency Proceedings Under a resolution plan, new money claims and administration expenses including fees of the RP, and expenses incurred by the RP to keep the CD running covering post-CIRP rental dues are paid in priority to the payment of other debts of the CD. The plan must provide for a minimum amount not less than the liquidation value to the dissenting CoC members (secured or unsecured) and for operational debts such as tax claims, employee claims and rent arising from lease agreements until the insolvency commencement date. For assenting secured CoC members, the CoC may devise a distribution mechanism of resolution proceeds that may take into account the value and priority of security interest held by them. During liquidation see 1.2 Types of Insolvency (Liqui - dation upon failure of the CIRP or PPIRP), rent arising from a lease agreement is treated as operational debt and ranks sixth in priority under “any remaining debts and dues”. Pension claims of the employees are not considered as CD assets and are therefore released in full to the employees. 2.3 Secured Creditors Movable Property Security over movable assets is generally created in the form of: • a pledge (where the possession of the movable property is transferred to the creditor with the intention of creating security over such movable property); • hypothecation (where the possession of the mov - able property is retained by the borrower but the creditor has the right to take possession and own - ership of the property in case of default); and
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