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TMI Blog2024 (4) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... n the management of the corporate debtor etc. The condition on sale of liquidated assets is the same. In the instant case, neither resolution plan has been approved nor there exist element of sale of liquidated assets under chapter III of the part II of the Code of 2016 - it is not found that application under section 32 A would be maintainable at this stage, rather that application may be pre-mature. The settlement of the property, if confiscated is provided under section 8 (8) of the Act of 2002. If the prayer of the financial institution for protection of their right and for that to lift the attachment or quash it is accepted that it may be in ignorance of section 8 (8) of the Act of 2002 - When the bank pursued the matter for recovery of the amount and for that even to auction the property by invoking the SARFAESI Act, 2002, it was found that the same property was earlier mortgaged to another bank and therein also the same accused committed default in making the payment. In fact, subsequent loan with mortgage of property was by creation of forged documents. In that case, claim for the property was made by two different financial institutions based on the mortgage of the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal as well as application have been contested by the counsel for the respondents. It was submitted that secured creditor does not get locus to seek release of the properties by invoking section 32 A of the Code of 2016. 8. It is further submitted that even if the properties in question were mortgaged to the appellant, though it is not a fact because they are the assignee of the loan amount under the SARFAESI Act, 2002. In any case, even if it is assumed, their rights are not affected. The appeal and the application has been filed in ignorance of section 8 of the Prevention of Money Laundering Act. 9. The sub section (8) of section 8 provides for settlement of rights of the claimants having legitimate interest in the properties even if it is attached and confiscated. 10. The rights of the parties or the financial institution having mortgage the properties and thereupon attached under the Act of 2002 are protected under section 8(8) of the Act of 2002. 11. The release of the properties would however be after conclusion of the trial whereas the financial institution would be affected on account of non-realization of the dues during the intervening period. In general, there remain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 2 of the Limited Liability Partnership Act, 2008 or an "officer who is in default", as defined in clause (60) of section 2 of the Companies Act, 2013, or was in any manner in-charge of, or responsible to the corporate debtor for the conduct of its business or associated with the corporate debtor in any manner and who was directly or indirectly involved in the commission of such offence as per the report submitted or complaint filed by the investigating authority, shall continue to be liable to be prosecuted and punished for such an offence committed by the corporate debtor notwithstanding that the corporate debtor's liability has ceased under this sub-section. (2) No action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process of the corporate debtor, where such property is covered under a resolution plan approved by the Adjudicating Authority under section 31, which results in the change in control of the corporate debtor to a person, or sale of liquidation assets under the provisions of Chapter III of Part II of this Code to a person, who was not - (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be clarified by the counsel for the appellant. They have made claim as a secured creditor of the property on assignment of loan to them by the institution who financed the loan to the defaulter whose account was declared to be NPA. 16. At this stage, it would be relevant to refer to the Judgement of the Apex court in the case of Manish Kumar v. Union of India and Anr. (2021) 16 SC holding section 32 A to be constitutionally valid. Its application has been subjected to various conditions which includes the approval of the resolution plan resulting in change and control of the corporate debtor to a person who was as not a promoter or in the management of the corporate debtor etc. The condition on sale of liquidated assets is the same. In the instant case, neither resolution plan has been approved nor there exist element of sale of liquidated assets under chapter III of the part II of the Code of 2016. 17. Thus, how section 32 A (2) would apply to the fact of this case could not be clarified. 18. In the light of the aforesaid, we do not find that application under section 32 A would be maintainable at this stage, rather that application may be pre-mature. 19. The appeal has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. The appellant would press the claim being assignee of the debts pursuant to the proceedings under SARFAESI Act, 2002. At this stage, we need to reiterate the effect of the attachment of the property under section 5 of the Act of 2002. 21. We have already recorded finding that the attachment of the property does not effect or transfer the title unless the property is confiscated and it can be when the accused is convicted. The settlement of the property, if confiscated is provided under section 8 (8) of the Act of 2002. If the prayer of the financial institution for protection of their right and for that to lift the attachment or quash it is accepted that it may be in ignorance of section 8 (8) of the Act of 2002. 22. It may be that mortgage of the property is to secure the loan amount, but there may be cases where the property so mortgaged was acquired out of the proceeds of crime. The observation aforesaid has been made because we have come across the cases where an accused mortgaged the property to a bank and acquired the loan amount and subsequently committed default in making the payment. When the bank pursued the matter for recovery of the amount and for that even to auc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by getting the amount over and above secured, out of the auction to settle the dues of financial institutions. In that case again victim would suffer whereas if the mechanism given under section 8 (8) is applied, safeguard would exist to settle the amount in favour of the rightful claimant". 27. We don't wish to comment as to what happens in the auction conducted by the bank, that is as to whether the real value of the property is achieved or not. The proposition above may have exception in case of a clean claim having no consequence to others. It can be in a case of rightful claimant. 28. The aforesaid illustration has been given to analyze the consequence of the release of the property at the instance of financial institutions. Though invariably pleas raised that the property was mortgaged much prior to the commission of crime and is not alleged to be the proceeds of crime. That may be a favourable aspect for the financial institution but then Tribunal needs to propound a ratio which may take care of all the legitimate claims, leaving no anarchy. 29. We have already a point that in general there remains appreciation of the properties and in that case, the delay in auction of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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