2022 (12) TMI 148 - HC - Insolvency and Bankruptcy

Recovery proceedings of debts - attachment of movable/immovable property of the petitioners - section 19 of the Recovery of Debts and Bankruptcy Act, 1993 - HELD THAT - It appears that the petition filed by the petitioners is nothing but adopting delay tactics for not permitting the respondent banks to recover the outstanding dues or to give effect to the sale confirmation made by the Recovery Officer by impugned order dated 28.11.2019. It is not in dispute that the petitioners have not challenged the judgment and award dated 13.12.2018 passed by the DRT in OA No. 184/2017 before the Debts Recovery Appellate Tribunal as per the provisions of section 20 of the RDB Act and therefore, judgment and award dated 13.12.2018 has achieved finality - This contention of the petitioners cannot be accepted in view of facts emerging from the record to the effect that there is no order on record to show that moratorium period was extended by NCLT after passing of the order on 21.12.2017. The DRT passed order on 13.12.2018 and as per section 14 of the IBC, moratorium period is only for 180 days which would have been over in month of June 2018. In such circumstances, contention of the petitioners that judgment and award passed by DRT is contrary to the provisions of IBC is required to be rejected in absence of challenge to such judgment and award by the petitioners. Consequential recovery proceedings before the recovery officer therefore, cannot be said to be without jurisdiction. If the petitioners are aggrieved by the impugned order dated 28.11.2019 and consequential notice for possession dated 3.12.2019, are required to challenge the same before the presiding officer of the DRT as per the aforesaid provision of section 30 of the RDB Act. In the facts of the case as per the settled legal position, it cannot be said that the orders passed by the DRT as well as Recovery Officer are in any manner contrary to the provisions of IBC more particularly when judgment and award passed by the DRT has achieved finality in absence of any challenge thereto. The petition is not entertained and is accordingly dismissed.

Summary

Issues Involved:
1. Jurisdiction of the Recovery Officer and DRT during the moratorium period under IBC.
2. Validity of the auction process and valuation of properties.
3. Availability of alternative remedies under the RDB Act.

Detailed Analysis:

1. Jurisdiction of the Recovery Officer and DRT during the moratorium period under IBC:
The petitioners challenged the order of the Recovery Officer and the entire recovery process, arguing that the DRT's judgment and award were passed during the moratorium period under the Insolvency and Bankruptcy Code (IBC). The petitioners contended that the DRT's order on 13.12.2018 was invalid as the NCLT had already ordered a moratorium on 21.12.2017. However, the court noted that the moratorium period, as per Section 14 of the IBC, lasts only 180 days and would have ended in June 2018. There was no extension of the moratorium by the NCLT. Therefore, the DRT's order was valid, and the subsequent recovery proceedings were not without jurisdiction. The court emphasized that the petitioners did not challenge the DRT's judgment, which had achieved finality.

2. Validity of the auction process and valuation of properties:
The petitioners argued that the properties were sold at undervalued prices and that the auction process was flawed. They presented valuation reports from 2014 to support their claim that the properties were worth more than the auction prices. The court, however, found that the valuation reports from 2014 were outdated and not relevant for the 2019 auction. The court also noted that the petitioners did not participate in the DRT proceedings or the recovery process and failed to exercise their right of redemption. The court concluded that the auction process followed the prescribed procedures, and the properties were sold at fair market value based on the 2019 valuation report.

3. Availability of alternative remedies under the RDB Act:
The court highlighted that the petitioners had an alternative remedy under Section 30 of the RDB Act to appeal against the Recovery Officer's order. The court emphasized that the petitioners should have challenged the impugned order before the DRT within 30 days as per the statutory provisions. The court referred to various judgments, including the Supreme Court's decision in Embassy Property Developments Pvt. Ltd. v. State of Karnataka, which clarified that the High Court should not interfere under Articles 226 and 227 when an effective alternative remedy is available. The court dismissed the petition, directing the petitioners to avail the alternative remedy and clarified that the DRT should consider the appeal on merits without being influenced by the High Court's observations.

Conclusion:
The petition was dismissed, and the petitioners were directed to challenge the impugned order before the DRT under Section 30 of the RDB Act. The court clarified that the DRT should consider the appeal on merits and account for the time spent by the petitioners in pursuing the petition before the High Court.