2021 (12) TMI 1329 - Tri - Insolvency and Bankruptcy

Seeking restraint on Corporate Debtor and applicant from selling, alienating and creating any 3rd party rights on the assets of the Corporate Debtor till the adjudication of main IB petition - seeking injunction on operation of possession notice issued by applicant under Section 13 (4) of SARFAESI Act - seeking injunction on the operation of possession notice till the pendency of the present application - HELD THAT - Admittedly, vide order dated 30th September 2021, this Tribunal directed the parties to maintain status-quo, although, no detailed order was passed on that day, but it is a matter of fact that the proceedings before the IBC are in nature that assets of the Corporate Debtor should be protected, so that it could not have been siphoned off during this period - while passing the order at 09 30 p.m. pertaining to maintain the status qua, the object of this Tribunal was only to protect the assets of the Corporate Debtor. Hence, the said order was in consonance with the objective of the IBC and falls in the line of inherent power exercised by this Tribunal. In the present matter in hand, it is to be noted that the notice under Section 13(2) of the SARFAESI Act was issued by the Financial Creditor i.e. Yes Bank on 29th July 2021 to the Corporate Debtor, accordingly, the statutory period of 60 days was to expire on 28th September 2021, but the notice of symbolic possession was given on 10th September 2021, and the symbolic possession was taken merely within 42 days without completing the statutory period of 60 days as laid down under the 13(2) SARFAESI Act. Thus, the above said hurry up acts/omissions on the part of Yes Bank and Corporate Debtor indicates that there might be some collusion between them, in order to help the Corporate Debtor to redeem the property. Further, in the present matter, the present petitioner is one of the Financial Creditor and the charge was also duly created in its favour also by the Corporate Debtor. It is settled principal of law, while creating charge on a property, only an intention is required to be seen. Once, the said intention is reflected from the act conduct of the Corporate Debtor, it is to be presumed that the charge has been duly created in the favour of the Financial Creditor/petitioner herein also. Moreover, merely that the charge has not been entered under the CERSAI, that does not mean that the preferential right has been created in the favour of the Yes Bank. Hence, in the present matter, where the petitioner herein being a Financial Creditor have a prime facie case in its favour although, the Yes Bank has also extended credit facility to the Corporate Debtor, therefore, until the petition is being heard finally, it is appropriate to protect preserve the property of the Corporate Debtor not only for the benefit of all the creditors, but also for the Corporate Debtor. Thus, the affirmed view is that the injunction order of maintaining status qua must continue till the next date of hearing.

Issues Involved:

1. Application to vacate interim stay order dated 30.09.2021.
2. Alleged violation of natural justice and statutory rights under SARFAESI Act.
3. Validity of possession notice and symbolic possession taken by Yes Bank.
4. Inherent powers of NCLT and overriding effect of IBC over SARFAESI Act.
5. Collusion between Corporate Debtor and Yes Bank.
6. Protection of Corporate Debtor’s assets during insolvency proceedings.

Issue-wise Detailed Analysis:

1. Application to vacate interim stay order dated 30.09.2021:
The applicant, Yes Bank Limited, filed an application under Rule 11 of the NCLT Rules, 2016, seeking to vacate the interim stay order dated 30.09.2021. The stay order restrained the Corporate Debtor and Yes Bank from alienating or creating third-party rights on the assets of the Corporate Debtor until the adjudication of the main IB petition.

2. Alleged violation of natural justice and statutory rights under SARFAESI Act:
Yes Bank contended that the stay was granted without giving them a reasonable opportunity to be heard, violating the principles of natural justice. They argued that the stay order infringed their statutory rights under the SARFAESI Act, as the possession notice under Section 13(4) had already been issued, and physical possession had been taken.

3. Validity of possession notice and symbolic possession taken by Yes Bank:
Yes Bank issued a possession notice under Section 13(4) of the SARFAESI Act on 10.09.2021, and symbolic possession was taken within 42 days, which was before the statutory period of 60 days expired. This action was challenged by the respondent, Dewan Housing Finance Corporation Limited (DHFL), as being in violation of the SARFAESI Act.

4. Inherent powers of NCLT and overriding effect of IBC over SARFAESI Act:
DHFL argued that the NCLT has inherent powers under Rule 11 of the NCLT Rules to restrain the alienation of assets to ensure the proper resolution of the Corporate Debtor. They cited the overriding effect of the IBC over the SARFAESI Act under Section 238 of the Code. The NCLT referenced the case of NUI Pulp and Paper Industries Pvt. Ltd. Vs. Roxcel Trading GmbH, where the NCLT’s inherent power to pass orders for substantial justice was upheld.

5. Collusion between Corporate Debtor and Yes Bank:
DHFL alleged collusion between the Corporate Debtor and Yes Bank, arguing that the possession notice was issued and symbolic possession was taken in haste to undermine the insolvency proceedings. The Corporate Debtor’s directors’ statement that they were in possession of the assets was disputed by Yes Bank, which claimed to have taken physical possession.

6. Protection of Corporate Debtor’s assets during insolvency proceedings:
The NCLT emphasized the need to protect the assets of the Corporate Debtor to prevent them from being siphoned off during the insolvency proceedings. The Tribunal maintained that the status quo order was in line with the objective of the IBC to ensure that the Corporate Debtor remains a going concern.

Conclusion:
The NCLT concluded that the injunction order of maintaining status quo must continue until the next hearing date to protect the assets of the Corporate Debtor for the benefit of all creditors and the Corporate Debtor itself. The Tribunal clarified that maintaining the status quo would not affect the merits of the main application, which was scheduled for hearing on 19.01.2022. The order was to be served to the concerned parties.

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