Tribunal dismisses JM and Omni applications, upholds Indus petition, citing SARFAESI sale process and IBC Section 14.

The Tribunal dismissed the applications filed by JM and Omni, ruling that the sale process under SARFAESI was not concluded due to non-completion of full payment and being affected by the moratorium under Section 14 of the IBC. The petition by Indus was deemed legitimate, with no fraudulent intent found. The order declaring the moratorium was upheld, and the applications were dismissed without costs.

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Issues Involved:
1. Whether the sale allegedly confirmed is hit by the declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC), 2016.
2. Whether the application can be treated as a grievance under Section 65 of the IBC, 2016.

Issue-wise Detailed Analysis:

1. Whether the sale allegedly confirmed is hit by the declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC), 2016:

The Tribunal analyzed the proceedings under the SARFAESI Act and the Security Interest (Enforcement) Rules, 2002. It was noted that the sale process initiated by JM Financial Asset Reconstruction Company (JM) was not concluded because the full payment by the auction purchaser, Omni Active Health Technologies Ltd. (Omni), was not completed. According to the Tribunal, the sale could only be confirmed by the secured creditor after the full payment was made, as per Rule 9 of the Security Interest (Enforcement) Rules, 2002. Since only 25% of the sale price was paid, and the remaining balance was pending, the sale was not considered concluded.

The Tribunal further emphasized that under Section 14 of the IBC, the moratorium suspends any enforcement of security interest, including proceedings under the SARFAESI Act. Hence, the ongoing sale process was hit by the moratorium declared on 29.5.2017, and the sale could not be treated as concluded. The proceedings under SARFAESI were to remain suspended until the completion of the moratorium period.

2. Whether the application can be treated as a grievance under Section 65 of the IBC, 2016:

The Tribunal examined whether the petition filed by Indus (the financial creditor) was fraudulent or malicious under Section 65 of the IBC. It was determined that Indus, being a financial creditor, had the right to initiate insolvency proceedings under Section 7 of the IBC, regardless of the pending SARFAESI proceedings. The Tribunal found no evidence of fraud or malicious intent by Indus. The petition was filed to protect the interests of unsecured creditors and to seek a resolution plan under the supervision of an Insolvency Resolution Professional (IRP).

The Tribunal noted that the previous order dated 29.5.2017, which declared the moratorium, was valid and that Indus had not hidden any facts from the Tribunal. Therefore, the application by JM to recall the order on grounds of fraud was dismissed. The Tribunal held that the proceedings under Section 7 were not initiated with fraudulent intentions and did not warrant invoking Section 65 of the IBC.

Conclusion:

The Tribunal dismissed the applications filed by JM and Omni, holding that the sale process under SARFAESI was not concluded and was hit by the moratorium declared under Section 14 of the IBC. The petition filed by Indus was not found to be fraudulent or malicious, and the order declaring the moratorium was upheld. The applications were dismissed without costs.

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