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 support setting aside the sale certificate. The NCLAT held that survey/demarcation is a statutory function requiring technical expertise and must be undertaken by competent authorities under the Kerala Survey and Boundaries Act, 1961; such powers cannot be delegated to, or exercised by, a liquidator under the IBC. Since the property had already been surveyed at the liquidator's instance by the competent authorities in accordance with the 1961 Act, and the appellant had not pursued the statutory remedies for any further demarcation, no direction for re-survey could be issued; the appeal was dismissed.

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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.

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