2022 (12) TMI 1055 - AT - Insolvency and Bankruptcy

Validity of Sale Confirmation Letter and Sale Certificate - stand of the 1st Respondent / Resolution Professional is that the Appellant/ 1st Respondent / Financial Creditor had issued a Sale Certificate on 20.01.2021. during the Moratorium Period which is impermissible as per Section 14 of the I B Code 2016 - HELD THAT - Before the Adjudicating Authority the 1st Respondent / Resolution Professional had prayed for passing of an Order in Setting aside the Sale Certificate issued by the Appellant / Financial Creditor to and in favour of the 2nd Respondent and to pass an Order in directing the Respondents in Interlocutory Application No. 124 of 2021 therein to handover the Properties of the Corporate Debtor including Company s entire fixed and current assets including stocks and receivables which include Plant and Machinery on the lease hold land admeasuring Plant and Machinery on the lease hold land admeasuring Ac. 11.37 guntas in Sy. No. 334 / A 3 / 1A 3 / 1B 5 and Ac. 10.27 guntas in Sy. No. 332 / A 333/A 7 8B 8A are situated at Kaveli Village Kohir Mandal Sangareddy District (erstwhile Medak District) and (d) to pass an Order in directing the Commissioner of Police Sangareddy at Office of the Superintendent of Police Sangareddy to provide necessary assistance to him and his team to takeover the Control and Custody of the Properties of the Corporate Debtor etc. The subject Asset over which the Security Interest was created to and in favour of United Bank of India (under SARFAESI Act 2002) by the Borrower was purportedly assigned in favour of the Appellant / 1st Respondent through Assignment Deed dated 04.04.2019 - The Appellant / 1st Respondent had caused a Notice as per Section 13 (1) of the SARFAESI Act 2022 requiring the Borrower to wipe out the Liability within the time prescribed therein and owing to the failure of the Borrower in fulfilling the conditions of the Demand Notice the Secured Asset was taken possession by means of the Possession Notice dated 27.09.2019 and subsequently the Property was sold based on a Private Treaty to the 2nd Respondent for a Monetary Consideration of Rs.9, 75, 00, 000/- - As a matter of fact the Sale was affirmed on 20.01.2021 and was Registered on 04.03.2021 in the Office of the Sub-Registrar Zaheerabad Medak District in favour of the 2nd Respondent. There is no second opinion of the fact that the Moratorium declared by the Adjudicating Authority (National Company Law Tribunal Hyderabad Bench I Hyderabad) was published on 22.01.2021 and later the Sale Certificate dated 20.01.2021 in favour of the 2nd Respondent was Registered by the Appellant / 1st Respondent which is in Negation of the ingredients of Section 14 (1) (a) of the Code. Therefore the Plea taken on behalf of the Appellant / 1st Respondent that the Registration of Sale Certificate is only a Ritualistic Formality is not acceded to by this Tribunal especially the Registration of Sale Certificate was made in breach of the Order of Moratorium declared by the Adjudicating Authority in the main Company Petition on 18.01.2021. As far as the present case is concerned the Sale by an Authorised Officer pursuant to a Private Treaty between the Appellant / 1st Respondent and the 2nd Respondent is to be Compulsorily Registered and also the Requisite Stamp Duty is to be paid in terms of Article 18C read with Article 23 of Schedule I of the Stamp Act 1899 as held by this Tribunal. As such the contra plea taken on behalf of the Appellant / 1st Respondent is unworthy of acceptance. One cannot remain in Oblivion as to the crystalline fact that the Appellant / 1st Respondent had Registered the Sale Certificate to and in favour of the 2nd Respondent in utter disregard to the Order of Moratorium declared by the Adjudicating Authority in the main CP (IB) No. 673 / 7 / HDB / 2019 dated 18.01.2021. Viewed in that perspective the availing of remedy under Section 17 (1) of the SARFAESI Act 2002 by the Aggrieved before the Debts Recovery Tribunal I Hyderabad is an Otiose one and the same is Negatived by this Tribunal considering the fact that the provisions of I B Code 2016 overrides the SARFAESI Act 2002. This Tribunal on a careful consideration of divergent contentions and also on going through the impugned order dated 23.12.2021 in IA No. 124 of 2021 in CP (IB) No. 673 / 7 / HDB / 2019 passed by the Adjudicating Authority (National Company Law Tribunal Hyderabad Bench I Hyderabad) comes to a clear cut conclusion that the same is free from legal infirmities - Appeal dismissed.

Summary

Issues Involved:
1. Violation of the Moratorium Order.
2. Registration and Legal Validity of the Sale Certificate.
3. Good Faith Acquisition under Section 44 of the Insolvency and Bankruptcy Code (IBC).
4. Jurisdiction of the National Company Law Tribunal (NCLT) versus the Debt Recovery Tribunal (DRT).

Detailed Analysis:

1. Violation of the Moratorium Order:
The core issue was whether the sale and registration of the property violated the moratorium order issued under Section 14 of the IBC. The moratorium, effective from 18.01.2021, prohibits any action to foreclose, recover, or enforce any security interest against the corporate debtor. The sale certificate issued on 20.01.2021 and its registration on 04.03.2021 were deemed violations of this moratorium.

2. Registration and Legal Validity of the Sale Certificate:
The NCLT Hyderabad Bench held that the sale certificate issued by the Authorized Officer of the bank must be registered and subject to stamp duty under Article 18-C read with Article 23 of Schedule 1 of the Stamp Act, 1899. The sale certificate, issued and registered during the moratorium period, was declared void and unenforceable. The Tribunal emphasized that immovable property can be legally and lawfully transferred only by a registered deed of conveyance, as per the Supreme Court's ruling in Suraj Lamp and Industries Private Ltd vs State of Haryana.

3. Good Faith Acquisition under Section 44 of the IBC:
The plea of good faith acquisition by the second respondent under Section 44 of the IBC was rejected. The Tribunal noted that the respondents consciously violated the moratorium order, and no substantial evidence was provided to support the plea of good faith. Consequently, the second respondent could not claim any right, title, or interest in the property covered by the sale certificate.

4. Jurisdiction of the NCLT versus the DRT:
The Tribunal addressed the argument that the appellant had an alternative remedy before the DRT under Section 17(1) of the SARFAESI Act. It was clarified that the issue at hand was the violation of the moratorium order under the IBC, which falls within the exclusive jurisdiction of the NCLT. The plea that the application was not maintainable before the NCLT was rejected.

Conclusion:
The judgment concluded that the sale and registration of the property during the moratorium period were null and void. The NCLT's order declaring the sale certificate void and unenforceable was upheld, and the appeal was dismissed. The Tribunal emphasized the overriding effect of the IBC provisions over the SARFAESI Act, ensuring the protection of the corporate debtor's assets during the insolvency resolution process.