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TMI Blog2021 (4) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... There is a prohibition with respect to the assets of Corporate Applicant including transfer, encumbered, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein. Further, the order prohibits in respect of the Corporate Applicant s property including any action under SARFAESI Act, 2002. Therefore, the Appellant is aware of the order and filed its claim in Form-C dated 21.01.2019 claiming an amount of ₹ 78,92,50,634/-. When the Appellant is having the knowledge of imposition of moratorium, the sale of assets of the Corporate Debtor cannot be proceeded and concluded and they strictly abide by Section 14 of IBC. There is a prohibition with respect to the assets of Corporate Applicant including transfer, encumbered, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein. Further, the order prohibits in respect of the Corporate Applicant s property including any action under SARFAESI Act, 2002. Therefore, the Appellant is aware of the order and filed its claim in Form-C dated 21.01.2019 claiming an amount of ₹ 78,92,50,634/- - When the Appellant is h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Appellant submitted that the Appellant- Bank extended certain credit facilities to the Corporate Debtor- Respondent No. 1 herein. However, the Corporate Debtor failed to repay the dues and the loan account of the Corporate Debtor became irregular and was classified as NPA on 13.06.2016 as per the RBI guidelines. 4. The Appellant issued a Demand Notice under Section 13(2) of the SARFAESI Act, 2002 on 12.01.2018 calling upon the Corporate Debtor and its guarantors to repay the outstanding amount due to the Appellant-Bank. Failing to repay the outstanding debt, the Appellant Bank was constrained to take possession of two Secured assets which were mortgaged exclusively with the Appellant Bank in exercise of powers under Section 13(4) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (in short SARFAESI Act, 2002). Thereafter, e-auction Notice was issued on 27.09.2018 to auction the said property. However, auction failed as no bids were received. However, on 27.11.2018, second eauction notice was issued with reserve price of ₹ 16.34 crores each. Upon auction notice, three persons became successful bidders jointly by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is well settled that when an Auction Purchaser derives title on confirmation of sale in his favour and a sale certificate issued evidencing such sale and titled, no further deed of transfer is contemplated or required. Therefore, the sale has to stand completely on the date the sale certificate is issued in favour of Auction Purchaser. 12. Learned Counsel for the Appellant further submitted that the Appellant Bank received 25% of the sale consideration on 13.12.2018 and the balance sale consideration and issuance of sale certificate was only in continuation of sale confirmed, vide their letter dated 13.12.2018 and the same cannot be hit by the moratorium period as sale stood confirmed before the Insolvency Petition. Having confirmed the sale, the Corporate Debtor had a remedy under Section 17 of the SARFAESI Act, 2002 to challenge the sale auction conducted on 12.12.2018. The Corporate Debtor/Respondent No. 1 without availing the remedy available under the SARFAESI Act, 2002, filed the Application before the Hon ble Adjudicating Authority which is illegal. The Hon ble Adjudicating Authority ought not to have considered the Application filed by the Corporate Debtor and the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or under Section 10 of IBC and initiated CIRP by an order dated 03.01.2019 and appointed IRP. After appointment of IRP, the Committee of Creditor (in short CoC) ratified IRP as Resolution Professional (in sort RP). The Appellant Bank submitted claim to the tune of ₹ 79,94,50,634/- on 21.01.2019 and the said claim was duly admitted by the IRP and based on which CoC has been constituted and the Appellant Bank s claim amount is representing 39.83% of voting share in the CoC of the Corporate Debtor. The claim Form of the Appellant was no reference with regard to sale of assets of the Corporate Debtor or the Corporate Guarantor prior to CIRP. Subsequently, the Appellant filed revised claim in Form- C for an amount of ₹ 46,35,42,634/- on 11.03.2019 by disclosing the fact that the collateral security provided by the Corporate Debtor and Corporate Guarantor namely Ravi Crane and Movers were sold and realised an amount of ₹ 24.69 Crores through e-Auction process and thereby reducing total dues owed by the Corporate Debtor to the Appellant. Learned Counsel for the RP submitted that the RP raised objection with regard to the revised claim stating that during CIRP period no s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14(1)(d) of IBC, no transaction shall take place including any action under SARFAESI Act, 2002. He further submitted that moratorium prohibits actions for realising security interest under SARFAESI Act, 2002. Learned Counsel further submitted that it can be said that the sale of an asset is only complete after complete payment is made and the certificate of sale is issued. However, in the present case the Appellant Bank receives only 25% of the bid amount prior to CIRP and no sale certificate was issued since the Appellant Bank did not receive the full amount. Therefore, in view of moratorium, Appellant is prohibited further transaction with regard to issue of sale certificate since the asset belongs to Corporate Applicant. The Hon ble Adjudicating Authority rightly set aside the sale by order dated 15.07.2020 and he prayed the Tribunal to dismiss the Appeal. 18. Learned Counsel for the Respondent No. 2 further submitted that in terms of Section 52 of the Indian Contract Act, 1872 demands that full payment is made and certificate of sale is issued for the sale to be completed. As stated supra, in the present case, full payment was not received before the commencement of CIRP/imposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd Anr. Vs. Union of India Ors reported in 2019(4) SCC 17 and also referred to the judgment in the matter of Innoventive Industries Ltd. Vs. ICICI Bank Anr. reported in 2018(1) SCC 407. Hon ble Supreme Court also referred to the judgement in the matter of ArcelorMittal (India) Ltd. Vs. Satish Kumar Gupta reported in (2019) 2 SCC 1. 21. Further, learned Counsel for the Respondent No. 2 relied upon judgment of this Tribunal in the matter of Encore Asset Reconstruction Company Pvt. Ltd. Vs. Charu Sandeep Desai and Others reported in 2019 SCC OnLine NCLAT 284. This Tribunal in paragraph -15 16 is of the view that SARFAESI Act 2002 being an existing law, Section 238 of IBC will prevail over any of the provisions of the SARFAESI Act 2002 if it is inconsistent with any of the provision of IBC. 22. Heard learned Counsel appearing for the respective parties. Perused the pleadings, documents and citations filed/relied upon by them. The issues felt for consideration is (a) whether after imposition of moratorium any transaction done with respect to the assets of the Corporate Debtor/Corporate Applicant deemed to be valid or not, (b) whether provisions of IBC prevail over other laws? 23. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed Application before the Adjudicating Authority by invoking Section 60(5) of IBC. 25. Other contention of the Appellant is that the sale of the assets of the Corporate Applicant sold through e-auction on 12.12.2019 and the sale was confirmed on 13.12.2018 and 25% of the sale proceeds was paid by the Auction Purchaser. Therefore, the sale was initiated and was in continuation prior to commencement of CIRP i.e., on 03.01.2019. We are of the view that mere receiving of 25% of the sale proceeds does not conclude the sale unless the full amount is paid prior to imposition of moratorium. It is on record that balance 75% of the amount was paid on 08.03.2019 i.e., after imposition of moratorium. Further, it is on record that assets are still in the name of the Corporate Debtor in the revenue records. Therefore, it is evident that as on the date of moratorium, the assets belong to the Corporate Debtor. We are not inclined to accept the submission of the learned Counsel for the Appellant that 25% of the sale proceeds were received thereby the sale was confirmed prior to imposition of moratorium. Admittedly, as on the date of commencement of CIRP, the sale was not complete and the total s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein. Further, the order prohibits in respect of the Corporate Applicant s property including any action under SARFAESI Act, 2002. Therefore, the Appellant is aware of the order and filed its claim in Form-C dated 21.01.2019 claiming an amount of ₹ 78,92,50,634/-. When the Appellant is having the knowledge of imposition of moratorium, the sale of assets of the Corporate Debtor cannot be proceeded and concluded and they strictly abide by Section 14 of IBC. For beneficial reference, Section 14 of IBC is extracted hereunder: 14. Moratorium. -(1) Subject to provisions of subsections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: - (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the Corporate debtor, including execution of any judgment, decree or order in any Court of law, tribunal, arbitration panel, or any other authority. Further, the Hon ble Supreme held that Section 238 IBC give an overriding effect to the IBC over all other laws. 32. The Hon ble Supreme Court at paragraph 14 of the aforesaid judgement in - Anand Rao Korada, Resolution Professional Vs. Varsha Fabrics (P) Ltd. and Others clearly held that once the proceeding under IBC had commenced and an order declaring moratorium was passed by NCLT, on 04.06.2019, the High Court was not justified in passing the order dated 14.08.2019 and 05.09.2019 for carrying out auction of the assets of the Respondent i.e., Corporate Debtor before the NCLT. 33. We are of the view that imposition of moratorium as per Section 14 of IBC is to protect the interest of the Corporate Debtor by protecting the assets of the Corporate Debtor for the sole objective to maximisation the value of assets. This Tribunal in the matter of Encore Asset Reconstruction Company Pvt. Ltd. Vs. Charu Sandeep Desai and Others reported in 2019 SCC OnLine NCLAT 284 also held that Section 238 of IBC will prevail over any of the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Code is thus a beneficial legislation which puts the corporate debtor back on its facts, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promotors/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor, itself thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protects the corporate debtor s assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends. 37. Learned Counsel for the Appellant relied upon the judgment of the Hon ble Supreme Court in the matter of B. Anand Kumar Vrs. Govt. of India and Others reported in (2007)5 SCC 745 whereby the Hon ble Supreme Court held that the sale certificat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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