TMI Blog2021 (3) TMI 1378X X X X Extracts X X X X X X X X Extracts X X X X ..... n of pending suits or proceedings against the Corporate debtor, including execution of any judgment, decree or order in any Court of law, tribunal, arbitration panel, or any other authority. Further, the Hon ble Supreme held that Section 238 IBC give an overriding effect to the IBC over all other laws - The Hon ble Supreme Court in Anand Rao Korada, Resolution Professional Vs. Varsha Fabrics (P) Ltd. and Others clearly held that once the proceeding under IBC had commenced and an order declaring moratorium was passed by NCLT, on 04.06.2019, the High Court was not justified in passing the order dated 14.08.2019 and 05.09.2019 for carrying out auction of the assets of the Respondent i.e., Corporate Debtor before the NCLT. The imposition of moratorium as per Section 14 of IBC is to protect the interest of the Corporate Debtor by protecting the assets of the Corporate Debtor for the sole objective to maximisation the value of assets. This Tribunal in the matter of Encore Asset Reconstruction Company Pvt. Ltd. Vs. Charu Sandeep Desai and Others [ 2019 (8) TMI 529 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] also held that Section 238 of IBC will prevail over any of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority, the Appellant Financial Creditor filed the present appeal praying this Bench to set aside the impugned order for the reasons as stated hereunder: BRIEF FACTS : 3. Learned Counsel for the Appellant submitted that the Appellant- Bank extended certain credit facilities to the Corporate Debtor- Respondent No. 1 herein. However, the Corporate Debtor failed to repay the dues and the loan account of the Corporate Debtor became irregular and was classified as NPA on 13.06.2016 as per the RBI guidelines. 4. The Appellant issued a Demand Notice under Section 13(2) of the SARFAESI Act, 2002 on 12.01.2018 calling upon the Corporate Debtor and its guarantors to repay the outstanding amount due to the Appellant-Bank. Failing to repay the outstanding debt, the Appellant Bank was constrained to take possession of two Secured assets which were mortgaged exclusively with the Appellant Bank in exercise of powers under Section 13(4) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (in short SARFAESI Act, 2002 ). Thereafter, e-auction Notice was issued on 27.09.2018 to auction the said property. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 13.12.2018 much prior to the commence of CIRP i.e. on 03.01.2019. He further submitted that once the property is sold in public auction and confirmed the sale in favour of the Purchaser, the sale becomes absolute and the title vests in the Purchaser. It is well settled that when an Auction Purchaser derives title on confirmation of sale in his favour and a sale certificate issued evidencing such sale and titled, no further deed of transfer is contemplated or required. Therefore, the sale has to stand completely on the date the sale certificate is issued in favour of Auction Purchaser. 12. Learned Counsel for the Appellant further submitted that the Appellant Bank received 25% of the sale consideration on 13.12.2018 and the balance sale consideration and issuance of sale certificate was only in continuation of sale confirmed, vide their letter dated 13.12.2018 and the same cannot be hit by the moratorium period as sale stood confirmed before the Insolvency Petition. Having confirmed the sale, the Corporate Debtor had a remedy under Section 17 of the SARFAESI Act, 2002 to challenge the sale auction conducted on 12.12.2018. The Corporate Debtor/Respondent No. 1 without availing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auction process on any other count. In view of the above facts, as stated above, the learned Counsel prayed this Bench to allow the Appeal. 16. Respondent No. 1, the IRP filed reply to this appeal and submitted that the Hon ble Adjudicating Authority admitted the Application filed by the Corporate Debtor under Section 10 of IBC and initiated CIRP by an order dated 03.01.2019 and appointed IRP. After appointment of IRP, the Committee of Creditor (in short CoC ) ratified IRP as Resolution Professional (in sort RP ). The Appellant Bank submitted claim to the tune of Rs. 79,94,50,634/- on 21.01.2019 and the said claim was duly admitted by the IRP and based on which CoC has been constituted and the Appellant Bank s claim amount is representing 39.83% of voting share in the CoC of the Corporate Debtor. The claim Form of the Appellant was no reference with regard to sale of assets of the Corporate Debtor or the Corporate Guarantor prior to CIRP. Subsequently, the Appellant filed revised claim in Form- C for an amount of Rs. 46,35,42,634/- on 11.03.2019 by disclosing the fact that the collateral security provided by the Corporate Debtor and Corporate Guarantor namely Ravi Crane and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Corporate Applicant stands in the name of Corporate Applicant as on the date of commencement of CIRP. Therefore, the sale of assets of the Corporate Applicant was rightly set aside by the Hon ble Adjudicating Authority. Learned Counsel further submitted that once moratorium was imposed under Section 14(1)(d) of IBC, no transaction shall take place including any action under SARFAESI Act, 2002. He further submitted that moratorium prohibits actions for realising security interest under SARFAESI Act, 2002. Learned Counsel further submitted that it can be said that the sale of an asset is only complete after complete payment is made and the certificate of sale is issued. However, in the present case the Appellant Bank receives only 25% of the bid amount prior to CIRP and no sale certificate was issued since the Appellant Bank did not receive the full amount. Therefore, in view of moratorium, Appellant is prohibited further transaction with regard to issue of sale certificate since the asset belongs to Corporate Applicant. The Hon ble Adjudicating Authority rightly set aside the sale by order dated 15.07.2020 and he prayed the Tribunal to dismiss the Appeal. 18. Learned Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er laws. Further, learned Counsel relied upon judgment of the Hon ble Supreme Court in the matter of Duncans Industries Limited Vs. A.J. Agrochem reported in 2019(9) SCC 725 . At paragraph-7.2, the Hon ble Supreme Court held that IBC is a complete Code in itself. Further, the Hon ble Supreme Court also referred to judgment of the Hon ble Supreme Court in Swiss Ribbons Pvt. Ltd Anr. Vs. Union of India Ors reported in 2019(4) SCC 17 and also referred to the judgment in the matter of Innoventive Industries Ltd. Vs. ICICI Bank Anr. reported in 2018(1) SCC 407 . Hon ble Supreme Court also referred to the judgement in the matter of ArcelorMittal (India) Ltd. Vs. Satish Kumar Gupta reported in (2019) 2 SCC 1 . 21. Further, learned Counsel for the Respondent No. 2 relied upon judgment of this Tribunal in the matter of Encore Asset Reconstruction Company Pvt. Ltd. Vs. Charu Sandeep Desai and Others reported in 2019 SCC OnLine NCLAT 284 . This Tribunal in paragraph -15 16 is of the view that SARFAESI Act 2002 being an existing law, Section 238 of IBC will prevail over any of the provisions of the SARFAESI Act 2002 if it is inconsistent w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Appellant on 21.01.2019 and assigned the vote rights in the CoC on the basis of said claim. It is also on record that they have not altered the percentage of voting rights nor admitted the revised claim. Therefore, it cannot be said that RP only to have filed the Application before the Adjudicating Authority and not Corporate Applicant. We are of the view that Respondent No. 2 herein being the aggrieved person rightly filed Application before the Adjudicating Authority by invoking Section 60(5) of IBC. 25. Other contention of the Appellant is that the sale of the assets of the Corporate Applicant sold through e-auction on 12.12.2019 and the sale was confirmed on 13.12.2018 and 25% of the sale proceeds was paid by the Auction Purchaser. Therefore, the sale was initiated and was in continuation prior to commencement of CIRP i.e., on 03.01.2019. We are of the view that mere receiving of 25% of the sale proceeds does not conclude the sale unless the full amount is paid prior to imposition of moratorium. It is on record that balance 75% of the amount was paid on 08.03.2019 i.e., after imposition of moratorium. Further, it is on record that assets are still in the name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate Debtor in respect of its property including any action under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); the recovery of any property by any owner or lessor where such property is occupied by or in possession of the Corporate Debtor; 28. From the order it is clear that there is a prohibition with respect to the assets of Corporate Applicant including transfer, encumbered, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein. Further, the order prohibits in respect of the Corporate Applicant s property including any action under SARFAESI Act, 2002. Therefore, the Appellant is aware of the order and filed its claim in Form-C dated 21.01.2019 claiming an amount of Rs. 78,92,50,634/-. When the Appellant is having the knowledge of imposition of moratorium, the sale of assets of the Corporate Debtor cannot be proceeded and concluded and they strictly abide by Section 14 of IBC. For beneficial reference, Section 14 of IBC is extracted hereunder: 14. Moratorium. -( 1) Subject to provisions of subsections (2) and (3), on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vides that on the insolvency commencement date, the Adjudicating Authority shall by order, declare a moratorium prohibiting the institution of suits, or continuation of pending suits or proceedings against the corporate debtor, including execution of any judgment, decree, or order in any court of law, tribunal, arbitration panel, or any other authority. .. 31. The Hon ble Supreme Court held that Section 14 IBC on the insolvency commencement date, the Adjudicating Authority shall by order, declare a moratorium prohibiting the institution of suits, or continuation of pending suits or proceedings against the Corporate debtor, including execution of any judgment, decree or order in any Court of law, tribunal, arbitration panel, or any other authority. Further, the Hon ble Supreme held that Section 238 IBC give an overriding effect to the IBC over all other laws. 32. The Hon ble Supreme Court at paragraph 14 of the aforesaid judgement in - Anand Rao Korada, Resolution Professional Vs. Varsha Fabrics (P) Ltd. and Others clearly held that once the proceeding under IBC had commenced and an order declaring moratorium was passed by NCLT, on 04.06.2019, the High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Hon ble Apex Court, and this Tribunal in Encore Asset Reconstruction Company Ltd. 35. Therefore, the stand of the Appellant that the Respondent No. 2 should have availed remedy under SARFAESI Act, 2002 is uncalled for. 36. Further, the Hon ble Supreme Court in the matter of Duncans Industries Limited Vs. A.J. Agrochem reported in 2019(9) SCC 725 by referring to the judgment in the matter of ArcelorMittal (India) Ltd. Vs. Satish Kumar Gupta reported in (2019) 2 SCC 1 has held as under: 28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its facts, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promotors/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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