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2019 (8) TMI 1594 - Tri - Insolvency and BankruptcySettlement of dues by invoking the security created in full and final settlement of the debt and return the balance amount to him - direction to Applicant to register the secured asset in favour of Respondent to facilitate the settlement - HELD THAT - The mortgage created under the MoD is one under Section 58 (f) of the Transfer of Property Act. Enforcement or otherwise of the rights and liabilities of the parties arising out of the transaction of mortgage would come within the exclusive domain of the Civil Court. This Tribunal would not be competent to adjudicate upon the rights and liabilities of the parties arising out of mortgage, despite the same being connected to the debt in relation to which an application under the Code has been made. That would amount to resurping upon the jurisdiction not vested in it. The Mortgagor or the Mortgagee in order to establish/enforce their rights arising out of the transaction may have to take recourse to a forum other than the extant one. Whether the debt in question was a Financial Debt or an Operational one cannot be decided under the present application. The issue touching upon the maintainability of the Company Petition would be dealt while considering its merits. Application not maintainable and is dismissed.
Issues Involved:
1. Maintainability of the application seeking directions to settle a debt under the Insolvency and Bankruptcy Code. 2. Nature of the debt - whether financial or operational. 3. Jurisdiction of the National Company Law Tribunal in adjudicating rights and liabilities arising from a mortgage. Analysis: Issue 1: Maintainability of the Application The Applicant sought directions to settle a debt under the Insolvency and Bankruptcy Code, claiming that the debt was part of a loan transaction and not an operational debt. The Respondent challenged the maintainability of the application, arguing that it was an attempt to stall proceedings under the Code. The Tribunal noted that the debt's nature, whether financial or operational, would be decided while considering the merits of the Company Petition. The Tribunal found the application not maintainable and dismissed it. Issue 2: Nature of the Debt The Applicant contended that the debt was a financial debt, evidenced by a loan agreement and secured by a mortgage. The Respondent argued that the debt was operational, arising from unpaid supplies in the usual course of business. The Tribunal observed that the debt's classification as financial or operational could not be determined in the present application. It highlighted that the Applicant's status as a Corporate Debtor did not automatically bind it to personal transactions of its Managing Director. The Tribunal emphasized that the rights and liabilities arising from the mortgage fell under the jurisdiction of the Civil Court, not the Tribunal. Issue 3: Jurisdiction of the Tribunal The Tribunal clarified that despite the mortgage being connected to the debt subject to the application under the Code, the Tribunal lacked jurisdiction to adjudicate on the rights and liabilities arising from the mortgage. It emphasized that such matters should be addressed in a forum other than the Tribunal. The Tribunal underscored that the relationship established through the mortgage could not be addressed under the Insolvency and Bankruptcy Code or the NCLT Rules, as it pertained to the domain of the Civil Court. In conclusion, the Tribunal dismissed the application, emphasizing that the nature of the debt and the rights and liabilities arising from the mortgage were outside its purview. The judgment highlighted the importance of distinguishing between financial and operational debts and reiterated the Tribunal's limited jurisdiction in matters related to mortgages and personal transactions of corporate entities.
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