The Supreme Court in the case Haldiram Incorporation Pvt Ltd. vs. Amrit Hatcheries Pvt. Ltd observed and has stated that the properties of a defaulting borrower sold in an auction sale could not be treated as liquidation assets if the sale was concluded before the declaration of a moratorium under the Insolvency and Bankruptcy Code 2016.
The bench comprising of Justice Aniruddha Bose and Justice Vikram Nath in the case observed and has set aside the order passed by the National Company Appellate Tribunal, Delhi, NCLAT. The present case revolves around the insolvency of Amrit Hatcheries Pvt. Ltd., the present respondent. Thus, the Punjab National Bank had advanced various credit facilities to the respondent and in turn, the respondent had mortgaged two sets of properties to the bank. On default of payment, the properties in the Howrah district, West Bengal, were sold to the appellant via auction sale. Therefore, the court observed that the appellant completed the payment on August 16, 2019, the Insolvency Process of the respondent was initiated on August 20, 2019 and the same resulted in the declaration of a moratorium by the National Company Tribunal, NCLT.
The National Company Law Tribunal found the issue of the sale certificate and handing over of the property illegal and hence held that the subject property should continue to be assets of the Corporate Debtor. Thus, the NCLT had proceeded on the basis that sale was not concluded. The court liquidator was directed while commencing the resolution process to take possession of the subject properties.
The said matter approached the Supreme Court, while the appellate tribunal dismissed the appeal. The Supreme Court in the case also referred to the case Esjaypee Impex Private Limited v. Assistant General Manager and Authorised Officer, Canara Bank, wherein the court held that as per Section 17(2) (xii) read with Section 89(4) of the Registration Act, 1908 only required the authorised officer of the Bank under the SARFAESI Act to hand over the duly validated sale certificate to the auction-purchaser. Further, the court stated that a copy will be forwarded to the registering authorities to be filed in Book I as per Section 89 of the Registration Act. The court noted that no case has been made to show that there is a default, per the concerned provisions, in giving the sale certificate.
The counsel representing the erstwhile Director and Liquidator agreed that the auction sale concluded before the moratorium declaration. The court observed and has held that the properties cannot be treated as liquidation assets of the Corporate Debtor and allowed the appeal.
The court while considering the facts and circumstances of the case observed that in another tagged appeal, which the Bank preferred, a question of law was kept open. The same was as whether the subject immovable asset vests in the lender bank on the issue of a public auction notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and since the said question involved the interpretation of the 2002 Act as well as the Insolvency and Bankruptcy Code 2016. Accordingly, the court listed the matter for further consideration on January 10, 2024.