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2021 (2) TMI 1096 - AT - Insolvency and BankruptcyStay on various action such as sale of mortgaged property till completion of Liquidation proceedings - Scope of Liquidation estate - Appellant is aggrieved by the order of Adjudicating Authority as they have directed the Appellant Bank not to take any coercive steps such as sale of the properties mortgaged to the bank by the Respondent Companies till the completion of the Liquidation proceedings of the corporate debtor - HELD THAT - The assets of the subsidiaries are outside the purview of liquidation estate and as such cannot form part of the liquidation estate as per section 36 (4) of IBC - The Adjudicating Authority and Appellate Authority being the creation of statute will have to ensure generally all the statutory compliances, unless it goes against the principle of natural justice and the intention of the legislature. Since, these exclusive securities were not forming part of liquidation estate, correctly done by Liquidator to comply with the provisions of Section 36 of the Code and precedence of this Appellate Tribunal already exists the Code vide Section 36(4)(d) prohibits inclusion of assets of Indian or Foreign subsidiary of the Corporate Debtor in the liquidation estate, we have to set aside the impugned order of the Adjudicating Authority and allow the present appeal. Appeal allowed.
Issues:
1. Appellant's appeal against the order of the Adjudicating Authority. 2. Validity of the direction to the bank not to take coercive steps regarding properties mortgaged by the appellant companies. 3. Dispute over the possession and sale of properties in liquidation proceedings. 4. Authorization for filing the appeal post-bank merger. 5. Inclusion of subsidiary assets in the liquidation estate. Issue 1: Appellant's appeal against the order of the Adjudicating Authority The Appellant, Union Bank of India, filed an appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016, against the order dated 20.08.2020 passed by the Adjudicating Authority. The order directed the Appellant not to take coercive steps regarding properties mortgaged by the Appellant companies until the completion of the liquidation proceedings of the corporate debtor IVRCL Limited. Issue 2: Validity of the direction regarding properties mortgaged by the appellant companies The Appellant argued that the properties mortgaged by Respondents 1 to 4 were exclusive securities not forming part of the liquidation estate. The Adjudicating Authority's order prevented the Appellant from taking coercive steps, such as the sale of these properties, which the Appellant contested as it believed the assets were not part of the liquidation estate. Issue 3: Dispute over possession and sale of properties in liquidation proceedings The Respondents objected to the Appellant's Demand Notice and Possession Notice issued under the SARFAESI Act. They argued that allowing the Appellant to proceed with these actions would negatively impact the sale of the corporate debtor as a going concern. The Adjudicating Authority considered the bid for the corporate debtor as a going concern and set aside the Possession Notice, emphasizing the importance of maintaining the value of the liquidation estate. Issue 4: Authorization for filing the appeal post-bank merger The Respondents challenged the appeal's authorization due to the merger of Corporation Bank into Union Bank of India. However, the Appellant's authorization to file the appeal was found to be in accordance with the Scheme of Amalgamation of the Banks, ensuring the enforceability of contracts and agreements post-merger. Issue 5: Inclusion of subsidiary assets in the liquidation estate The Adjudicating Authority clarified that subsidiary assets, including the exclusive securities provided by Respondents 1 to 4, were not part of the liquidation estate as per Section 36(4)(d) of the Code. Precedence from previous judgments highlighted that assets of subsidiaries were excluded from the liquidation estate, leading to the setting aside of the Adjudicating Authority's order. In conclusion, the Appellate Tribunal allowed the appeal, emphasizing that exclusive securities not forming part of the liquidation estate should be excluded from coercive actions, in line with statutory provisions and previous judgments.
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