SARFAESI auction remains incomplete until confirmation and full payment, so the IBC moratorium continues to apply.

A SARFAESI auction is treated as an incomplete enforcement process until full consideration is paid, the secured creditor confirms the sale under Rule 9(6) of the Security Interest (Enforcement) Rules, 2002, and a sale certificate is issued; on that basis, the pending enforcement remains subject to the moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016. The document also notes that disclosure of the pending SARFAESI proceedings in a section 7 petition did not amount to fraud or malicious initiation, so section 65 could not be invoked to recall the admission order. Both applications therefore failed and the admission order was left undisturbed.

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Issues: (i) Whether the alleged auction sale under the SARFAESI proceedings had become a concluded sale and was therefore outside the moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016. (ii) Whether the miscellaneous application disclosed fraud or malicious initiation so as to attract section 65 of the Insolvency and Bankruptcy Code, 2016.

Issue (i): Whether the alleged auction sale under the SARFAESI proceedings had become a concluded sale and was therefore outside the moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The sale process was examined against Rule 9 of the Security Interest (Enforcement) Rules, 2002. Payment of 25% of the bid amount was treated only as an intermediate step in the auction process. The remaining consideration had not been paid, sale confirmation by the secured creditor under Rule 9(6) had not taken place, and sale certificate had not been issued. On that basis, the process was held to remain part of enforcement of security interest under section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Since the process was still pending, the moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 operated upon it.

Conclusion: The sale was not a concluded sale and the SARFAESI proceedings remained suspended during the moratorium; this issue was decided against the applicant.

Issue (ii): Whether the miscellaneous application disclosed fraud or malicious initiation so as to attract section 65 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The petition under section 7 was found to have disclosed the pending SARFAESI proceedings. The initiation of insolvency was held to be within the statutory right of a financial creditor, and no concealment or material fraud was found. In the absence of fraud or malicious intent, the jurisdiction under section 65 could not be invoked to recall the admission order.

Conclusion: The application did not fall within section 65 and no recall was warranted; this issue was decided against the applicant.

Final Conclusion: Both applications failed, the moratorium continued to govern the pending enforcement proceedings, and no ground was made out to disturb the admission order.

Ratio Decidendi: A SARFAESI auction remains a pending enforcement proceeding until the purchaser pays the full consideration and the sale is confirmed by the secured creditor, and such pending enforcement is stayed by the moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016.

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