2022 (9) TMI 805 - AT - Insolvency and Bankruptcy

Auction of the barge which was hypothecated with the bank - initiation of proceedings under SARFAESI Act - HELD THAT - The Adjudicating Authority committed error in rejecting the application only on the ground that appellant has no locus. The order impugned is set aside and the application filed by the appellant is revived before the Adjudicating Authority which may be considered and decided in accordance with law - Appeal allowed.

Summary

Issues:
1. Jurisdiction of Managing Director to challenge SARFAESI proceedings.
2. Locus standi of the Managing Director to file an application under Section 60 (5) before the Adjudicating Authority.

Jurisdiction of Managing Director to challenge SARFAESI proceedings:
The appeal was filed against an order passed by the National Company Law Tribunal, Mumbai Bench, regarding the sale of a barge under SARFAESI proceedings initiated by a bank. The Managing Director of the Suspended Board of the Corporate Debtor filed an application requesting to halt the sale of the barge and set aside the SARFAESI sale. The Adjudicating Authority rejected the application on the grounds that the Managing Director, as a member of the Suspended Board, did not have the right to file such an application as the affairs of the company were managed by the Interim Resolution Professional post-admission of the Company Petition.

Locus standi of the Managing Director to file an application under Section 60 (5) before the Adjudicating Authority:
The appeal challenged the rejection of the application based on the Managing Director's locus standi. The Appellant argued that the Managing Director had the jurisdiction to challenge the SARFAESI proceedings initiated by the bank for the sale of the barge belonging to the Corporate Debtor. The Appellant relied on a judgment of the National Company Law Appellate Tribunal and a Supreme Court judgment to support the claim that the Managing Director was entitled to file an application under Section 60 (5) before the Adjudicating Authority. The Appellate Tribunal, after reviewing the judgments cited, concluded that the Adjudicating Authority erred in rejecting the application solely based on the lack of locus of the appellant. The impugned order was set aside, and the application was revived before the Adjudicating Authority for further consideration and decision in accordance with the law.

In conclusion, the National Company Law Appellate Tribunal, in a detailed analysis, overturned the Adjudicating Authority's decision regarding the Managing Director's jurisdiction to challenge SARFAESI proceedings and the locus standi to file an application under Section 60 (5). The Tribunal found that the Managing Director was entitled to challenge the proceedings and that the Adjudicating Authority erred in rejecting the application solely on the grounds of locus. The appeal was allowed, the impugned order was set aside, and the application was remitted back to the Adjudicating Authority for reconsideration.