Prospective moratorium under the Insolvency Code cannot undo a completed secured asset auction before insolvency filing.
The moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 operates prospectively and does not unsettle a secured asset auction that was already concluded and confirmed before the insolvency petition was filed. Because the sale consideration had been paid and the sale certificate issued, the auction purchaser's rights had crystallised, and the personal guarantor's right of redemption had extinguished before commencement of the moratorium. The auctioned asset therefore no longer formed part of the guarantor's estate, and exclusion of that asset from the Section 94 proceeding was upheld.
Issues: Whether auctioned secured assets could be excluded from the insolvency petition under Section 94 of the Insolvency and Bankruptcy Code, 2016, and whether the moratorium under Section 96 of that Code could undo an auction concluded before the petition was filed.
Analysis: The auction of the secured asset had been held and confirmed before the insolvency petition was filed. The sale consideration had been paid and the sale certificate had been issued, so the auction purchaser's rights had crystallised before the moratorium could operate. The moratorium under Section 96 was held to be prospective and not capable of invalidating transactions lawfully completed earlier. On that basis, the right of redemption of the personal guarantor was treated as having extinguished before commencement of the moratorium, and the auctioned asset was regarded as no longer forming part of the guarantor's estate.
Conclusion: The exclusion of the auctioned assets from the Section 94 proceeding was upheld, and the challenge to that course failed.
Final Conclusion: The appeal was rejected because the impugned exclusion of the auctioned secured assets from the insolvency proceeding disclosed no error in law.
Ratio Decidendi: A moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 operates prospectively and does not unsettle an auction of secured assets that was already concluded and confirmed, with rights of the auction purchaser having crystallised, before the insolvency petition was filed.
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AI Drafter ✕
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