2021 (9) TMI 790 - Tri - Insolvency and Bankruptcy

Tribunal Orders Share Transfer Despite Jurisdictional Dispute

Jitender Kumar Jain, Liquidator of Maestros Mediline Systems Limited Versus Floral Deck Plaza Premises Coop. Society Ltd. and Ors.

The Tribunal held jurisdiction to order the transfer of shares held by the Corporate Debtor, ruling that it could adjudicate disputes despite other laws' ... Jurisdiction - Power of Tribunal to order registration of transfer of shares held by Corporate Debtor - e-auction - HELD THAT:- It is trite law, that the claims/dues of R1 society pertaining to the preadmission of CIRP, had to be filed before the Applicant and if these claims were not filed with the Applicant and these are not realizable unless the claims are filed with the Applicant. Be that as it may, the R1 society cannot exercise any lien/create encumbrance on the said property as the said property has been sold by way of e-auction and the rights of title/ownership/possession has been passed on to the R3 vide a Registered Sale Deed executed on 10.03.2021. This Bench is of the considered opinion that the property has been validly transferred to the R3 vide Registered Sale Deed dated 10.03.2021 and that the R1 cannot link granting of NOC to its past dues. The transfer of property act contemplates transfer of title/ownership/possession, there can be no fetters attached to such transfers which have been conducted by a process of e-auction and it is held in catena of judgments that the claim of dues of the society amounts to be an Operational Debt and cannot be linked or claimed from the third party bonafide purchaser. Respondent No. 1 is directed to transfer shares of Corporate Debtor in favour of Respondent No. 3 and grant NOC in favour of Respondent No. 3 - Respondent No. 1 is directed to file its claims/dues of Respondent No. 1 society to the Applicant forthwith - application allowed. Issues:1. Jurisdiction of the Tribunal to order transfer of shares held by the Corporate Debtor.2. Refusal of Respondent No. 1 to issue NOC for non-payment of dues by Corporate Debtor.3. Validity of property transfer to successful bidder in e-auction.Analysis:Issue 1: Jurisdiction of the TribunalThe Tribunal considered whether it had jurisdiction to order the transfer of shares held by the Corporate Debtor. The Liquidator had called for claims and received a claim from Respondent No. 1 society. The property owned by the Corporate Debtor was sold through e-auction, and the successful bidder was declared. After the relinquishment of security interest by State Bank of India (SBI), the property was sold, and the sale proceeds were distributed to the secured creditor. The Tribunal held that it had the authority to adjudicate disputes related to the Corporate Debtor, overriding jurisdiction conferred upon other laws like the Maharashtra Co-operative Society's Act, 1960.Issue 2: Refusal to Issue NOCThe Tribunal addressed the refusal of Respondent No. 1 to issue a No-Objection Certificate (NOC) for non-payment of dues by the Corporate Debtor. Despite being informed about the sale of the property and requested to provide the NOC, Respondent No. 1 refused due to outstanding dues. The Tribunal emphasized that claims of Respondent No. 1 society had to be filed before the Liquidator for realization. It ruled that Respondent No. 1 could not create encumbrances on the property sold through e-auction, as ownership rights had transferred to the successful bidder.Issue 3: Validity of Property TransferRegarding the validity of property transfer to the successful bidder in the e-auction, the Tribunal affirmed that the property had been lawfully transferred to the successful bidder through a Registered Sale Deed. It clarified that Respondent No. 1 could not withhold the NOC based on past dues, as the transfer of title, ownership, and possession had been completed through the auction process. The Tribunal cited Section 238 of the Insolvency and Bankruptcy Code, stating that its provisions supersede conflicting laws. It held that the society's claim for dues was an operational debt and could not be enforced against a bona fide third-party purchaser.Court's OrdersThe Tribunal directed Respondent No. 1 to transfer shares of the Corporate Debtor to the successful bidder and issue the NOC. Additionally, Respondent No. 1 was instructed to promptly file its claims and dues with the Liquidator. The Interlocutory Application was allowed and disposed of with the specified directions.This detailed analysis covers the key issues addressed in the judgment, providing a comprehensive understanding of the Tribunal's decision and the legal principles applied.