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2025 (4) TMI 519 - AT - IBCReversal of sale transactions of the properties - Section 60(5) of the Insolvency and Bankruptcy Code 2016 - whether the relationship in respect of first property between the CD and the R1 came to end on the day when the notice for e-auction was issued in terms of amended provision of Section 13(8) of the Act? - HELD THAT - Hon ble Supreme Court in the case of Celir LLP 2023 (10) TMI 48 - SUPREME COURT has held that in view of the aforesaid discussion we hold that as per the amended section 13(8) of the Act once the borrower fails to tender the entire amount of dues with all costs and charges to the secured creditor before the publication of auction notice his right of redemption of mortgage shall stand extinguished / waived on the date of publication of the auction notice in the newspaper in accordance with Rule 8 of the 2002 Rules. In the presence of direct decision of the Hon ble Supreme Court interpreting Section 13(8) of the Act the decision relied upon by the Appellant in the case of Indian Overseas Bank 2022 (5) TMI 926 - SUPREME COURT which has only interpreted Section 14(1) of the Code does not apply because Section 13(8) was not brought to the notice of the Hon ble Court. In respect of the second property the first public notice was issued on 03.01.2019. By that time the Appellant did not move to redeem the property by making the payment of the Bank. However the first sale could not take place therefore the public notice was again published scheduling the sale of the properties on 28.01.2019. In that sale the Bank itself purchased the property which is permitted under Section 13(5A) 13(5B) of the Act and adjusted the amount which it had to recover from the CD. The jural relationship between the parties in respect of second property also came to an end on 03.01.2019 or 28.01.2019 which was much earlier than the date of commencement of CIRP on 01.02.2019. In this case even the letter of confirmation was issued on 28.01.2019 and sale certificate was issued on 30.01.2019 much before the date of commencement of the CIRP on 01.02.2019. The Hon ble Supreme Court has held in the case if Celir LLP while interpreting Section 13(8) that the relationship between the parties i.e. mortgager and mortgagee for the purpose of redemption exists till the date of issuance of notice of sale if the property is being sold under Section 13(8) of the Act then in that situation also the Appellant has no right to the property for the purpose of raising the dispute. The contention of the Appellant that non-deposit of the sale consideration in the estate of the CD effects the right of the secured creditor is of no avail. Conclusion - The right of redemption is extinguished upon the issuance of the e-auction notice as per the amended Section 13(8) of the SARFAESI Act. The validity of the sales conducted under the SARFAESI Act upheld. Appeal dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS 1. Validity of Sale Transactions under the Moratorium of IBC Relevant Legal Framework and Precedents: The Appellant argued that the sale of properties after the commencement of the Corporate Insolvency Resolution Process (CIRP) on 01.02.2019 violated Section 14(1)(c) of the IBC, which imposes a moratorium prohibiting the enforcement of security interests. Court's Interpretation and Reasoning: The Tribunal considered the timing of the issuance of the e-auction notice and the subsequent sale transactions. It referenced the decision in Indian Overseas Bank v. M/s RCM Infrastructure Ltd., which interpreted Section 14(1)(c) but found it not applicable as Section 13(8) of the SARFAESI Act was not considered in that case. Application of Law to Facts: The Tribunal noted that the first e-auction sale notice was issued on 30.11.2018, and the sale was confirmed on 28.01.2019, before the CIRP commenced on 01.02.2019. Thus, the moratorium did not apply to these transactions. Treatment of Competing Arguments: The Appellant's reliance on the moratorium under IBC was countered by Respondents' argument that the right of redemption was extinguished with the e-auction notice, as per amended Section 13(8) of the SARFAESI Act. Conclusions: The Tribunal concluded that the sale transactions were not in violation of the IBC moratorium, as the critical actions occurred before the CIRP commencement date. 2. Right of Redemption and the Impact of Section 13(8) of the SARFAESI Act Relevant Legal Framework and Precedents: Section 13(8) of the SARFAESI Act, as amended, was central to determining the extinguishment of the borrower's right of redemption. The Tribunal referenced the Supreme Court's decision in CELIR LLP v. Bafna Motors, which discussed the impact of this amendment. Court's Interpretation and Reasoning: The Tribunal interpreted that the borrower's right of redemption is extinguished upon the publication of the e-auction sale notice, per the amended Section 13(8). Key Evidence and Findings: The Tribunal found that the e-auction notice for the first property was issued on 30.11.2018, and for the second property on 03.01.2019, both before the CIRP commencement. Application of Law to Facts: The Tribunal applied the amended Section 13(8) to conclude that the right of redemption was extinguished before the CIRP, thus validating the sales. Treatment of Competing Arguments: The Appellant's argument that the right of redemption persisted until the sale was concluded was rejected based on the Supreme Court's interpretation of Section 13(8). Conclusions: The Tribunal upheld that the right of redemption was extinguished with the e-auction notice, validating the sales under the SARFAESI Act. 3. Validity of Sale to Respondents and Preferential Transactions under IBC Relevant Legal Framework and Precedents: The Appellant contended that the sales constituted preferential transactions under Section 43(2) of the IBC. Court's Interpretation and Reasoning: The Tribunal found that the sales were conducted in accordance with the SARFAESI Act, specifically under Sections 13(5A) and 13(5B), allowing the secured creditor to purchase the property. Key Evidence and Findings: The Tribunal noted that the sale of the second property was conducted after the first e-auction failed, with the Bank purchasing it under the SARFAESI Act provisions. Application of Law to Facts: The Tribunal concluded that the sales were not preferential transactions as they were conducted under the SARFAESI Act, which permits such sales. Treatment of Competing Arguments: The Appellant's argument about preferential treatment was countered by the Respondents' reliance on the SARFAESI Act provisions, which the Tribunal upheld. Conclusions: The Tribunal concluded that the sales did not constitute preferential transactions under the IBC. SIGNIFICANT HOLDINGS Core Principles Established: The Tribunal reaffirmed the principle that the right of redemption is extinguished upon the issuance of the e-auction notice as per the amended Section 13(8) of the SARFAESI Act. Final Determinations on Each Issue: The Tribunal dismissed the appeal, upholding the validity of the sales conducted under the SARFAESI Act and confirming that they were not in violation of the IBC moratorium or preferential transaction provisions. Verbatim Quotes of Crucial Legal Reasoning: The Tribunal quoted the Supreme Court's decision in CELIR LLP v. Bafna Motors: "as per the amended section 13(8) of the Act, once the borrower fails to tender the entire amount of dues with all costs and charges to the secured creditor before the publication of auction notice, his right of redemption of mortgage shall stand extinguished."
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