SARFAESI auction sale protected where auction process began before insolvency moratorium and later confirmation did not invalidate it.

An auction sale under SARFAESI was held not to be invalidated merely because confirmation or payment occurred after commencement of the corporate insolvency resolution process, where the auction notice and sale process had already begun before insolvency and the statutory process had materially progressed. The Tribunal applied the amended Section 13(8) framework and noted that the mortgagor-mortgagee relationship for redemption purposes ends upon issuance of the sale notice in the manner recognised by the provision. It also emphasised protection of completed public auction proceedings. The sale was therefore not treated as a post-moratorium action and was not liable to be set aside under Section 14(1)(c) of the Insolvency and Bankruptcy Code.

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Issues: Whether the auction sale conducted under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 could be invalidated on the ground that the sale was completed after commencement of the corporate insolvency resolution process and thus offended the moratorium under Section 14(1)(c) of the Insolvency and Bankruptcy Code, 2016.

Analysis: The notice for auction and the sale process had commenced before initiation of the corporate insolvency resolution process. The earlier decision relied on by the Appellate Authority had considered the effect of Section 13(8) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and had held that the mortgagor-mortgagee relationship for redemption purposes comes to an end upon issuance of the sale notice in the manner recognised by the amended provision. The Tribunal also noted that public auction proceedings deserve protection and that interference with a completed auction should be avoided where the statutory process had already progressed before commencement of insolvency proceedings. In that view, the sale could not be treated as a post-moratorium action merely because confirmation or payment occurred later.

Conclusion: The auction sale was not liable to be set aside under Section 14(1)(c) of the Insolvency and Bankruptcy Code, 2016, and the impugned order could not be sustained. The appeals were allowed.

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