2026 (1) TMI 267 - AT - IBC

Demarcation and re-survey of mortgaged land sold in liquidation: liquidator can't order it; sale certificate upheld, appeal dismissed

The dominant issue was whether the liquidator could be directed to demarcate and identify mortgaged land and whether a repeat survey was warranted to ... Setting aside of sale certificate - direction to Liquidator to cooperate with the process of identification of the location of the land and of identifying the property mortgaged to the Applicant Bank - rejection of application as the land which has been sought to be demarcated and identified, has already been demarcated and identified by the Taluk surveyor and Village officer - HELD THAT:- The Appellant has to blame himself for having not resorted to the remedies which were available to him under law. It is to be acknowledged that survey and demarcation of land requires a particular expertise and skill set it needs to be carried, by officials having the expertise available and the liquidator, could not have alternatively exercise the power of the Taluk surveyor for identifying the land. It is not an authority vested with the liquidator to identify the property and that is the reason why the observation has been made in the Impugned Order that, the property was already surveyed at the behest of the liquidator and owing to the survey report thus submitted, the Tribunal rightly observed that since the survey has already been completed, on the request being made by the Liquidator by the competent authority and that too in accordance with the provisions of the Kerala Survey and Boundaries Act, 1961, no repeat survey or demarcation, is required to be made on the request of the Appellant and that too when it is made for the first time before the Liquidator without filing any appeal against the respondent as per Act of 1961. The appropriate recourse available to the Appellant would have been to file an appropriate application for survey and demarcation, before the competent authorities if at all there was any need, as mandated under the Kerala Survey and Boundaries Act, 1961, as the authority to conduct survey of land created under the statute cannot be delegated to the liquidator making herein competent to demarcate the land. There is nothing on record to show, that the Appellant had ever moved any application for demarcation, hence, he has to blame himself for his inability to resort to the appropriate remedies at an appropriate given time, available to him under law, rather the Appellant indirectly intends to impose the responsibility on the liquidator to demarcate and identify the land which is not within the powers vested with the liquidator under the I & B Code. There could be yet another aspect, which is required to be observed and considered at this juncture, which is that an action involving demarcation and survey of any land always entails in itself an adjudication of a Civil right of a person over the property, which has to depend upon an appreciation of fact and law which has to be undertaken by experts in the field, which under no set of circumstances could be exercised by the liquidator, being a power which is outside the ambit of his powers as a liquidator. Hence, when the factum of the survey having been concluded has been taken, as the basis by the Learned Adjudicating Authority for rejecting the application, it cannot be faulted in any manner, because the survey was being required to be done by the liquidator in a very limited manner for identifying the properties of the liquidation estate of the Corporate Debtor which were supposed to be sold in the liquidation proceedings. Appeal dismissed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the Adjudicating Authority was required, in liquidation proceedings, to set aside the sale certificate and direct the liquidator to cooperate in identifying/demarcating land allegedly mortgaged to a secured creditor, when the liquidator asserted that the mortgaged land did not form part of the liquidation estate and the liquidation estate land had already been surveyed/demarcated by competent revenue officials. (ii) Whether the Adjudicating Authority/Appellate Tribunal could compel a fresh demarcation or re-survey at the secured creditor's instance, or treat demarcation/identification of the creditor's mortgaged land as a matter to be undertaken within insolvency/liquidation jurisdiction, despite the existence of a specialised state statute and designated survey authorities for such functions. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Setting aside the sale certificate and restraining/conditioning liquidation sale on prior identification/exclusion of the alleged mortgaged land Legal framework (as discussed by the Court): The Court treated survey/demarcation of land as governed by a state law regime, noting land as a State subject and referring to the self-contained mechanism under the Kerala Survey & Boundaries Act, 1961 for survey operations and boundary determination by designated 'survey officers'. Interpretation and reasoning: The Court accepted the liquidator's stated position that (a) the property sold formed part of the liquidation estate, (b) identification/demarcation of the liquidation estate had already been carried out with the assistance of competent revenue officials, and (c) the land allegedly mortgaged to the secured creditor did not form part of the liquidation estate. On that foundation, the Court held that the secured creditor's request to set aside the sale certificate and to obtain directions to the liquidator to locate/demarcate the creditor's mortgaged land could not be treated as a subject to be adjudicated within liquidation proceedings, particularly where the sale was confined to land already demarcated as liquidation estate property. Conclusion: The refusal to set aside the sale certificate or to impose a restraint/condition on the sale process based on the creditor's requested identification/exclusion exercise was affirmed; the applications were rightly rejected and warranted no appellate interference. Issue (ii): Competence of the liquidator/NCLT to order or undertake demarcation/re-survey for the creditor's mortgaged land; effect of prior survey and creditor's non-invocation of statutory remedies Legal framework (as discussed by the Court): The Court emphasised that the Kerala Survey & Boundaries Act, 1961 vests survey and demarcation powers in statutory revenue/survey authorities and provides remedies, including the ability to challenge/appeal survey outcomes under that regime. The Court also treated demarcation as involving adjudication of civil/property rights requiring expertise and fact-based determination by competent officials. Interpretation and reasoning: The Court reasoned that demarcation/survey requires specialised expertise and is not within the liquidator's powers under the insolvency framework; the insolvency forum cannot be used to 'confer' such jurisdiction upon the liquidator. Since a survey had already been conducted at the liquidator's request for the limited purpose of identifying the liquidation estate to be sold, and the earlier demarcation remained unobjected, the Court held that no repeat survey/demarcation could be directed at the creditor's behest within liquidation proceedings. The Court further relied on the creditor's own position in appeal: it did not dispute that the survey was conducted, did not challenge the survey report's propriety, and had not invoked statutory remedies under the 1961 Act or otherwise moved competent authorities for demarcation. The Court attributed the creditor's grievance to its failure to pursue available remedies at the appropriate time, rather than any actionable omission by the liquidator. Conclusion: The Court conclusively held that the creditor's appropriate recourse lay under the specialised land survey statute before competent authorities, not through directions to the liquidator or re-opening of the already-concluded survey within liquidation jurisdiction; accordingly, no direction for fresh demarcation/re-survey was warranted, and the appeals were dismissed on merits.