Asset preservation in insolvency can continue despite SARFAESI steps where protection of stakeholders remains necessary.

Interim status quo protection over a corporate debtor's assets was discussed as a safeguard in insolvency proceedings where competing creditor claims and SARFAESI action existed. The Tribunal treated its inherent powers under Rule 11 of the NCLT Rules, 2016 and its jurisdiction under the Insolvency and Bankruptcy Code as enabling it to preserve assets to prevent alienation, siphoning off, or abuse of process. It also noted that counsel for the corporate debtor was present when the earlier order was passed, and that the SARFAESI notice had not completed its sixty-day course before symbolic possession was asserted. On that basis, the plea for immediate vacation of the restraint failed and the interim protection was continued.

---

---

Issues: Whether the interim status quo order protecting the corporate debtor's assets should be vacated in view of the secured creditor's actions under the SARFAESI Act and the objection that the order was passed without hearing it, and whether the National Company Law Tribunal could continue such protection in exercise of its inherent and residuary powers.

Analysis: The order dated 30.09.2021 was passed to preserve the corporate debtor's assets in insolvency proceedings so that the property was not alienated or siphoned off before adjudication of the main application. The Tribunal held that its inherent powers under Rule 11 of the National Company Law Tribunal Rules, 2016 and its jurisdiction under the Insolvency and Bankruptcy Code permitted it to pass protective directions to secure substantial justice and prevent abuse of process. It also found that the corporate debtor's counsel was present when the earlier order was made, and the record did not show that the order was passed behind the back of all affected parties. On the SARFAESI issue, the Tribunal noted that the notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 had not run its full sixty-day course before symbolic possession was asserted, and that this circumstance weakened the plea for immediate vacation of the restraint. The Tribunal further held that mere invocation of SARFAESI measures did not by itself defeat the need to preserve the asset pending final hearing, particularly where competing creditor claims existed and the property needed protection for the benefit of all stakeholders.

Conclusion: The application to vacate the status quo order was rejected and the interim protection was directed to continue until the next date of hearing.

---