Case: – Haldiram Incorporation Pvt. Ltd. v/s Amrit Hatcheries Pvt. Ltd. & others; Civil Appeal No. 1733 of 2022
In a recent judgement, the Hon’ble Supreme Court of India has ruled that properties sold in an auction sale before the declaration of moratorium cannot be treated as liquidation assets.
The facts of the case are that the sale certificate for the properties was issued on 19.08.2019, and the auction sale was held in relation to properties mortgaged by the borrower for availing credit facilities. However, an Operational Creditor filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) before the National Company Law Tribunal (“NCLT”) on 16.08.2019, and a moratorium was declared on 20.08.2019, initiating the Corporate Insolvency Resolution Process (“CIRP”).
The NCLT found the issue of sale certificate and handing over of the property to be illegal, and held that the subject-property shall continue to be assets of the Corporate Debtor. The Punjab National Bank, which had appealed against the NCLT’s order, had its appeal dismissed by a 2:1 majority decision, with a technical member of the Appellate Tribunal taking a dissenting view.
However, both the erstwhile Director and the Liquidator representing the Corporate Debtor in liquidation filed counter-affidavits contesting the auction sale under the SARFAESI Act. At the time of hearing before the Supreme Court, the learned counsel representing them conceded the legitimacy of the transaction resulting from the sale of the subject property through auction, and both of them agreed that the auction sale stood concluded before the declaration of moratorium. This changed position left the appeal without any effective contest.
Thus, the Hon’ble Apex Court, in its judgement, held that the properties in question cannot be treated as liquidation assets of the Corporate Debtor for the purpose of further steps to be taken in the liquidation proceeding. The impugned order was set aside, and the order of the Adjudicating Authority was rendered invalid to the extent the two properties of the Corporate Debtor located in the district of Howrah are concerned.

Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

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