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Issues: Whether SARFAESI proceedings could continue against the petitioner's mortgaged property after commencement of interim moratorium under the Insolvency and Bankruptcy Code, 2016, and whether the petitioner could pursue writ relief on the jurisdictional objections raised against the bank's action.
Analysis: On initiation of insolvency proceedings under Section 95(1) of the Insolvency and Bankruptcy Code, 2016, the interim moratorium under Section 96 operates in respect of all debts and stays any legal action or proceeding pending in respect of such debts. The protection was held to extend to the debt secured by the mortgage created by the personal guarantor, so that the secured creditor could not continue SARFAESI action after the moratorium commenced. The Court also noted the overriding effect of Section 238 of the Insolvency and Bankruptcy Code, 2016, and held that the fact that possession had earlier been taken did not permit further enforcement steps, since the sale process had not been completed. As to the jurisdictional objections based on the Dubai lending arrangement, the Court held that such issues, including the bank's authority and territorial jurisdiction under SARFAESI, could be urged before the Debt Recovery Tribunal under Section 17 of the SARFAESI Act, 2002, and no finding on their merits was recorded.
Conclusion: The bank was restrained from proceeding further under SARFAESI during the interim moratorium, and the petitioner was left free to raise all jurisdictional objections before the Debt Recovery Tribunal if and when the moratorium is lifted.
Final Conclusion: The petition succeeded to the extent of halting further recovery action under SARFAESI during the subsisting interim moratorium, while leaving the merits of the jurisdictional objections open for adjudication before the statutory forum.
Ratio Decidendi: An interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016, bars continuation of recovery proceedings in respect of the debt, including enforcement against security created by a personal guarantor, and such bar prevails over inconsistent action under SARFAESI by virtue of the Code's overriding effect.
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