The NCLT ruled that a Yes Bank loan secured on promoters’ property is to be reclassified as unsecured debt in the context of Roofco Trading's insolvency. This ruling clarifies the definition of secured debt under the IBC.
NCLT Reclassifies Yes Bank Loan in Roofco Trading Case
The National Company Law Tribunal (NCLT) has determined that a loan from Yes Bank, previously secured by property belonging to the promoters, is to be treated as unsecured debt in the ongoing insolvency proceedings against Roofco Trading. This ruling underscores a key interpretation of the definition of secured debt under the Insolvency and Bankruptcy Code (IBC).
The Tribunal pointed out that for a loan to be classified as secured, the security interest must originate from the corporate debtor itself, highlighting the necessity for clarity in the documentation concerning security interests.
This decision carries substantial implications for creditors who rely on personal assets of promoters as collateral. Legal practitioners must guide their clients on the importance of ensuring that security arrangements are compliant with the statutory framework to avoid ambiguity and potential reclassification of debt in insolvency proceedings.
Citations
- Roofco Trading (2026) NCLT Order
