Fraudulent filing under insolvency law rejected where debtor sought to obstruct SARFAESI recovery and moratorium benefits.

An application under the Insolvency and Bankruptcy Code filed after substantial SARFAESI enforcement steps was rejected as fraudulent and malicious. The tribunal noted that the secured creditor had already issued the demand notice, taken measures under the SARFAESI framework, and obtained physical possession of the mortgaged property, while the debtor showed no effective attempt at settlement or restructuring. On that factual matrix, the filing was treated as an to obstruct recovery proceedings and to secure the benefit of moratorium under the Code. The tribunal also observed that the resolution professional's recommendation was partly biased and went beyond the limited fact-finding role contemplated under the Code.

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Issues: Whether the application under Section 94(1) of the Insolvency and Bankruptcy Code, 2016 was liable to be rejected on the ground that it was filed with a fraudulent or malicious intention.

Analysis: The application was filed after the secured creditor had taken substantial coercive steps under the SARFAESI Act, including issuance of demand notice, measures under Sections 13(2) and 13(4), and taking physical possession of the mortgaged property pursuant to the District Magistrate's order. The Tribunal held that the debtor had not shown any effective step for settlement or restructuring and that the timing and circumstances of the filing indicated an attempt to thwart recovery proceedings and obtain the benefit of moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016. The Tribunal also found the resolution professional's recommendation to be biased in part and beyond the limited fact-finding role contemplated under the Code.

Conclusion: The application was held to have been filed with fraudulent or malicious intent and was rejected.

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