SARFAESI sale completion and insolvency moratorium: Supreme Court bars post-CIRP enforcement and upholds sale setting aside.

In a statutory SARFAESI sale, transfer is completed only on full receipt of the sale consideration and issuance of the sale certificate; mere confirmation of sale or part payment does not complete the transfer. Because the balance amount was accepted only after commencement of the corporate insolvency resolution process, the sale did not predate the moratorium and could not survive it. The Code's moratorium also barred continuation of recovery and enforcement proceedings once insolvency commenced, with section 238 giving the Code overriding effect over inconsistent laws. Allegations that the insolvency petition was mala fide were rejected on the facts, and the orders setting aside the sale were upheld.

---

---

Issues: (i) Whether the SARFAESI sale stood completed before the commencement of the corporate insolvency resolution process and could therefore survive the moratorium; (ii) Whether continuation of the recovery proceedings after commencement of the corporate insolvency resolution process was barred by the Insolvency and Bankruptcy Code, 2016; (iii) Whether the voluntary insolvency petition was vitiated by mala fides.

Issue (i): Whether the SARFAESI sale stood completed before the commencement of the corporate insolvency resolution process and could therefore survive the moratorium.

Analysis: The sale arose from a statutory sale governed by Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002. The Court held that, in such a sale, completion occurs only when the entire sale consideration is received and the authorised officer issues the sale certificate. Mere confirmation of sale or receipt of part consideration does not complete the transfer. Since the balance amount was accepted only after commencement of the corporate insolvency resolution process, the sale was not complete before moratorium.

Conclusion: The sale did not stand completed before commencement of the corporate insolvency resolution process and could not be treated as immune from the moratorium.

Issue (ii): Whether continuation of the recovery proceedings after commencement of the corporate insolvency resolution process was barred by the Insolvency and Bankruptcy Code, 2016.

Analysis: Section 14(1)(c) imposes a moratorium on any action to foreclose, recover or enforce a security interest, including action under the SARFAESI Act, once the corporate insolvency resolution process commences. Section 238 gives the Code overriding effect over inconsistent laws and instruments. On that basis, the Court held that the secured creditor could not continue enforcement proceedings after the moratorium came into force.

Conclusion: Continuation of the SARFAESI proceedings after commencement of the corporate insolvency resolution process was barred.

Issue (iii): Whether the voluntary insolvency petition was vitiated by mala fides.

Analysis: The Court found no merit in the allegation of mala fides. The petition disclosed the relevant steps taken by the secured creditor, and the complaint of abuse of process was not accepted on the facts. The Court also declined to base any finding on the separate liquidation proceedings.

Conclusion: The allegation of mala fides was rejected.

Final Conclusion: The concurrent orders setting aside the sale were upheld, and the appeal was dismissed because the statutory enforcement process could not continue after commencement of insolvency.

Ratio Decidendi: In a statutory SARFAESI sale, transfer is completed only on full payment and issuance of the sale certificate, and once corporate insolvency resolution commences, the moratorium under the Insolvency and Bankruptcy Code bars any further enforcement action with overriding effect over inconsistent laws.

---