If a co. XYZ ltd. issued fully secured debentures of Rs. 100 crores by creating fixed charge on property of same amount. At redemption on the failure of co. property is auctioned by debenture trustee for Rs. 50 crores (value at that time ).
Here what will be the circumstances?
If the remaining amount will stand forfeited
or
became unsecured loans of Rs. 50 crores
or
it will become floating charge of remaining amount on the company?
5 Replies
Lovepreet Singh
(Army of Final War)
(359 Points)
Replied 08 October 2017
Fixed Charges are created against collateral securities and these are freely identifiable but when it does not realize full amount the balance is treated as unsecured provided what was agreed in the mortgage agreement. also in the era of liquidation floating charges are crystallized ( Converted to fixed) .
Further u asked that if "Debenture holders Realize" the amount from security, less than the dues then Bankruptcy Code say the balance will be paid to them even after the unsecured creditors are settled . otherwise if the company liquidator realize the assets then they would treated as unsecured provided what is agreed as per the mortgage agreement.
Further u asked that if "Debenture holders Realize" the amount from security, less than the dues then Bankruptcy Code say the balance will be paid to them even after the unsecured creditors are settled . otherwise if the company liquidator realize the assets then they would treated as unsecured provided what is agreed as per the mortgage agreement.
Karan Mittal
(54 Points)
Replied 08 October 2017
the answer to this can be obtained by referring to contract of pledge where if the amount of deficit does not stand forfeited and the creditor becomes an unsecured creditor.
moreover we see in liquidation of companies while preparing statement of affairs the deficit in creditors secured by fixed charge is moved to list E of unsecured creditors.
so I think the deficit of 50 Cr will be treated as unsecured creditors
moreover we see in liquidation of companies while preparing statement of affairs the deficit in creditors secured by fixed charge is moved to list E of unsecured creditors.
so I think the deficit of 50 Cr will be treated as unsecured creditors
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