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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: (i) Whether a Section 94 application filed after auction sale had been concluded and confirmed could unsettle the confirmed sale by invoking moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016. (ii) Whether the personal guarantor's recourse to Section 94 was a bona fide attempt at insolvency resolution or an abuse of process intended to stall SARFAESI recovery steps.
Issue (i): Whether a Section 94 application filed after auction sale had been concluded and confirmed could unsettle the confirmed sale by invoking moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016.
Analysis: The application under Section 94 was filed only after the auction had been held and the sale had been confirmed. On these facts, the filing of the insolvency application did not operate so as to invalidate completed recovery steps or unsettle the rights that had crystallised in favour of the auction purchaser. The moratorium under Section 96 was held to operate prospectively and could not be used to undo a concluded sale.
Conclusion: The issue was decided against the appellant and in favour of the respondents.
Issue (ii): Whether the personal guarantor's recourse to Section 94 was a bona fide attempt at insolvency resolution or an abuse of process intended to stall SARFAESI recovery steps.
Analysis: The sequence of events showed that the personal guarantor invoked Section 94 only after the secured creditor had completed the auction process and the sale had been confirmed. The Tribunal treated the timing and conduct as indicating an attempt to obstruct recovery rather than a genuine attempt at insolvency resolution. The applications were therefore found to lack bona fides and to amount to an abuse of process.
Conclusion: The issue was decided against the appellant and in favour of the respondents.
Final Conclusion: The challenged orders rejecting the applications under Section 94 were upheld, and the appeals failed.
Ratio Decidendi: A Section 94 application filed after auction sale has been concluded and confirmed cannot be used to defeat completed SARFAESI recovery measures or to unsettle the auction purchaser's rights, particularly where the filing is found to be a belated and abusive attempt to invoke moratorium rather than a bona fide insolvency resolution process.
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