Bank cannot proceed with SARFAESI enforcement during moratorium despite obtaining symbolic possession before insolvency proceedings

The NCLAT dismissed an appeal concerning the effect of moratorium on SARFAESI proceedings where symbolic possession had already been taken. The appellant bank argued that since SARFAESI proceedings were completed and symbolic possession obtained before the moratorium, their rights should remain unaffected. However, following the Delhi HC precedent in Sanjay Dhingra v IDBI Bank Ltd, the NCLAT held that the bank cannot proceed further under SARFAESI Act during the interim moratorium period arising from pending insolvency proceedings against the personal guarantor, despite prior symbolic possession.

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Issues Involved:
1. Whether the proceedings under the SARFAESI Act, 2002 were complete upon taking symbolic possession of the property and if the moratorium under Section 96 of the Insolvency and Bankruptcy Code (IBC) would affect the appellant's rights.
2. Applicability of the principles laid down in Section 14 of IBC to proceedings under Section 95 of the Code.
3. Impact of interim moratorium under Section 96 of IBC on the enforcement of security interest under SARFAESI Act.

Issue-wise Detailed Analysis:

1. Completion of Proceedings under SARFAESI Act and Effect of Moratorium under Section 96 of IBC:
The appellant argued that the proceedings under the SARFAESI Act were complete on 20.06.2019 when symbolic possession of the property was taken. The appellant claimed a vested right in the property, asserting that the moratorium under Section 96 of the IBC should not affect its rights. The court referred to the Delhi High Court judgment in *Sanjay Dhingra Vs IDBI Bank Ltd & Ors*, which clarified that the moratorium under Section 96 of IBC applies to all debts, including those secured by mortgaged property. The court emphasized that the interim moratorium under Section 96 stays all legal actions in respect of any debt, thus impacting the appellant's ability to proceed under the SARFAESI Act.

2. Applicability of Section 14 of IBC to Proceedings under Section 95 of the Code:
The appellant contended that the principles laid down in Section 14 of IBC should apply to proceedings under Section 95 of the Code, arguing that the symbolic possession of the mortgaged property exempts it from the interim moratorium. The court, however, highlighted the Supreme Court's interpretation in *Dilip B. Jiwrajka Vs Union of India*, which differentiated the moratorium under Section 14 (applicable to corporate debtors) from the interim moratorium under Section 96 (applicable to personal guarantors). The court concluded that the interim moratorium under Section 96 is intended to restrain legal actions against the debt, not the debtor, and thus applies to the appellant's case.

3. Impact of Interim Moratorium under Section 96 of IBC on SARFAESI Proceedings:
The court examined the implications of the interim moratorium on SARFAESI proceedings, referencing the Supreme Court's decision in *Indian Overseas Bank Vs RCM Infrastructure Limited*. The court noted that even if the bank had initiated sale proceedings under SARFAESI before the commencement of IBC proceedings, the moratorium would halt further actions. The court concluded that, in the present case, no sale process had commenced, and therefore, the appellant could not proceed under SARFAESI after the interim moratorium began.

Conclusion:
The court held that the interim moratorium under Section 96 of IBC applies to the security interest created by the personal guarantor. Consequently, the appellant cannot proceed with actions under the SARFAESI Act until the moratorium is lifted. The appeal was dismissed, and the court directed that the appellant shall not proceed further under the SARFAESI Act regarding the subject property during the moratorium period. Pending applications were also disposed of.

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