LI Network
Published on: December 19, 2023 at 15:35 IST
The Supreme Court, in its ruling, asserted that properties sold in auction sales before the declaration of a moratorium under the Insolvency and Bankruptcy Code 2016 (IBC) cannot be categorized as liquidation assets.
The bench, presided by Justices Aniruddha Bose and Vikram Nath, overturned an order issued by the National Company Appellate Tribunal, Delhi (NCLAT).
The case revolves around the insolvency of Amrit Hatcheries Pvt. Ltd., the respondent in question. After defaulting on credit facilities provided by Punjab National Bank, the mortgaged properties in Howrah district, West Bengal, were auctioned to the appellant. Despite the appellant’s completion of payment on August 16, 2019, the respondent’s insolvency process commenced on August 20, 2019, leading to the declaration of a moratorium by the National Company Tribunal (NCLT).
The NCLT deemed the sale certificate and property handover illegal, asserting that the property should remain an asset of the Corporate Debtor.
The NCLAT upheld this decision. However, the Supreme Court, referencing Esjaypee Impex Private Limited v. Assistant General Manager and Authorised Officer, Canara Bank (2021) 11 SCC 537, noted that no evidence was presented to demonstrate any default in providing the sale certificate.
The Court highlighted that the sale was concluded before the moratorium declaration, a fact not contested by the Liquidator, the former Director, or the Bank.
The Court, concluding that the properties cannot be considered liquidation assets, allowed the appeal. Notably, in a related appeal by the Bank, a question regarding the immovable asset’s vesting in the lender bank following a public auction notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, was left open.
The Court included the Union of India and scheduled the matter for January 10, 2024.