NATIONAL COMPANY LAW APPELLATE TRIBUNAL

Indian Overseas Bank vs. RCM Infrastructure Ltd. & Anr.

MANU/NL/0105/2021

26.03.2021

Company

Any transaction done with respect to the assets of the Corporate Debtor/Corporate Applicant after imposition of moratorium is invalid

The present Appeal is filed against the Order passed by the National Company Law Tribunal, Hyderabad (Adjudicating Authority), whereby the Adjudicating Authority sets aside the sale of the assets of the Corporate Debtor. The issues felt for consideration is (a) whether after imposition of moratorium, any transaction done with respect to the assets of the Corporate Debtor/Corporate Applicant deemed to be valid or not, (b) whether provisions of IBC prevail over other laws?

The Resolution Professional (RP) is duty bound to preserve and protect the assets of the Corporate Debtor under IBC and is also authorised to represent and act on behalf of the Corporate Debtor under Section 25 of Insolvency and Bankruptcy Code, 2016 (IBC) and exercise right for the benefit of the Corporate Debtor. However, the stand of the RP is that they received a claim in Form-C on 21st January, 2019 for an amount of Rs. 78,94,50,634 and further received revised claim for an amount of Rs. 46,35,42,634. According to Respondent No. 2 herein, they have not admitted the revised claim and they restricted the claim made by the Appellant on 21st January, 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. Respondent No. 2 herein being the aggrieved person rightly filed Application before the Adjudicating Authority by invoking Section 60(5) of IBC.

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 of the Corporate Debtor in the revenue records. Therefore, it is evident that as on the date of moratorium, the assets belong to the Corporate Debtor.

Admittedly, as on the date of commencement of CIRP, the sale was not complete and the total sale price was not paid to the Auction Purchaser. Further, it is also on record that the Appellant filed its total claim before the IRP on 21st January, 2019 after commencement of CIRP. Thus, it explicitly shows that, the sale was not concluded.

The Corporate Applicant i.e., RCM Infrastructure Ltd. filed an Application invoking Section 10 of IBC before the Adjudicating Authority. The Appellant is arrayed as a party to the said proceeding. From the records, it is evident that, the Appellant filed Counter Affidavit to the Application and it is also on record that the Corporate Debtor availed financial facility and also stated that they have initiated proceeding under SARFAESI Act, 2002 and issued Demand Notice dated 17th January, 2017 and also issued possession notice dated 18th April, 2018 for Rs. 74,72,73,108 and took symbolic possession of all the secured assets. From the order of the Adjudicating Authority, it is evident that Appellant had opposed admission of Application.

It is also on record that by filing revised claim in Form-C on 11th February, 2019 before the RP by the Appellant, the Appellant clearly violates the order of moratorium. The Appellant Bank lost sight of the fact that, IBC is a complete Code itself and Section 238 of IBC has overriding effect over all other laws including SARFAESI Act, 2002.

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" also held that, Section 238 of IBC will prevail over any of the provisions of the SARFAESI Act, 2002 if it is inconsistent with any of the provisions of IBC.

When the moratorium was imposed by the learned Adjudicating Authority, receipt of the balance sale consideration is illegal and the learned Adjudicating Authority rightly set aside the sale transaction. Further Section 238 of IBC, have overriding effect over other laws as held by the Hon'ble Apex Court, and this Tribunal in Encore Asset Reconstruction Company Ltd.

Learned Adjudicating Authority has rightly set aside the sale of assets of the Corporate Applicant. The sale of assets of the Corporate Applicant during moratorium is against the spirit of Section 14 of IBC. Accordingly, there is no infirmity in the order passed by the learned Adjudicating Authority. Appeal dismissed.

Tags : Imposition Moratorium Transaction

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