AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (11) TMI 780
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....s of the applicant to enforce its security and/or the rights of the third party to enjoy the property purchased by it in public auction, - or in the alternative to modify the Moratorium order dated 29.5.2017 to the extent that the said order does not operate and/or does not in any manner effect the rights of the applicant to enforce its security and/or the rights of the third party to enjoy the property purchased by it in public auction and such the reliefs as this Tribunal deems fit. 2. For the sake of brevity, the petitioner/financial creditor in the CP is referred as "Indus", corporate debtor as "corporate debtor" only, applicant/secured creditor in MAas "JM", the purchaser of the property in SARFAESI proceedings, namely Omni Active Health Technologies Ltd. as "Omni", Learned Debt Recovery Tribunal, Mumbai as "DRT". 3. JM is an asset reconstruction company incorporated under Companies Act, 1956 and thereafter registered u/s 3 of SARFAESI Act. For the Corporate debtor defaulted in making repayment of the loan facility availed on mortgage of its assets situated at Village Maan, Taluka Mulshi, District Pune from Corporation Bank, it invoked SARFAESI proceedings again....
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....t for extension of time for payment of Rs. 5 crores as directed by the Ld. DRT. Surprisingly, Indus who moved this Company petition filed an Intervening Application on 18.4.2017 before the Ld. DRT that it was willing to deposit Rs. 5 crores on behalf of the Corporate Debtor and also deposit the remaining balance of Rs. 14.26 crores within a period of six months, but the Ld. DRT did not entertain that application from by treating Rs. 5 crores deposited by Indus as paid by the Corporate Debtor. Though Rs. 5 crores has been paid by Indus within the extended period, remaining balance amount did not come within a period of six weeks, i.e. on or before 30.5.2017, then JM moved an application before Ld. DRT for vacating the stay granted for enabling it to hand over the possession of the property to Omni. JM says when hearing date 30.5.2017 came, Indus has caused its appearance before Ld. DRT with a prayer for the stay of pending securitisation application on the ground that it had already filed CP u/s 7 of Insolvency & Bankruptcy Code, 2016 before this Bench. JM further submits that this Bench admitted the CP u/s 7 of Insolvency & Bankruptcy Code on 29.5.2017 declaring moratorium over the....
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....ppeal was preferred by this applicant against the order dated 21.3.2017 passed by DRT granting an opportunity to the Corporate Debtor to redeem the property on payment. Indus further submits that though JM tried to develop an argument to impress upon this Bench that this application is covered by Section 65 of the Insolvency & Bankruptcy Code, 2016, the prayers in the Miscellaneous Application are contrary to the averments of the Affidavit. The Indus Counsel further submits that the asset was sold for low price, though rate of the asset is higher, if it fetches right value Indus could also get something from the corporate debtor company. In this situation, as no other option available to protect its interest, Indus approached this Authority with bonafide intention either to redeem the Corporate Debtor for impending insolvency and safeguard its claim or in the alternative to liquidate the Corporate Debtor assets equitably to satisfy all the claims under the supervision of an Insolvency Resolution Professional. The counsel of Indus also says that even in resolution process also, JM being a financial creditor having majority stake, everything happens at the wish of JM alone, but only ....
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.... into the legal preposition on this point, let us see what the factual situation in this case is. It is a fact that SARFAESI proceedings were initiated against the immovable asset of the company, in pursuance thereof, the sale of the said asset was also initiated u/s 13 of SARFAESI Act. In furtherance of it, Omni paid 25% of sale price in compliance of Rule 9 (3) of Security Interest (Enforcement) Rules, 2002 but the remaining balance has not yet been paid by the auction purchaser. In the meanwhile, the Corporate Debtor approached DRT and obtained a conditional order that the Corporate Debtor should pay Rs. 5 crore initially and the remaining balance of Rs. 14.06 crores to be paid in six weeks thereof. When the Corporate Debtor failed to pay this amount on its own, Indus alongwith other unsecured creditor, deposited Rs. 5 crores before the DRT expressing their willingness to pay remaining balance of Rs. 14.06 crores within six months while the said application was pending before DRT, since Indus coming forward for making payment has not been agreed by the Ld DRT, Indus moved this Company petition u/s 7 of Insolvency & Bankruptcy Code on which this Bench declared moratorium....
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.... creditor effect the sale at such price. (3) On every sale of immovable property, the purchaser shall immediately pay a deposit of twenty-five per cent of the amount of the sale price, to the authorised officer conducting the sale and in default of such deposit; the property shall forthwith be sold again. (4) The balance amount of purchase price payable shall be paid by the purchaser to the authorised officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties. (5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited and the property shall be resold and the defaulting purchaser shall forfeit all claims to the property or to any part of the sum for which it may be subsequently sold. (6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorised officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the form given in Appendix V to these rules. (7) Where the immovab....
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....immovable property in favour of the purchaser in the form given in Appendix V to these Rules. By giving a combined reading to sub rules 2 to 6, we will find two confirmations, one confirmation appears in sub-rule 2 - here in this sub-rule, authorised officer who is conducting auction will confirm the sale price offered by the purchaser in the bid, the purchaser will not even make 25% by the time this confirmation is given, therefore it can be in no way understood as confirmation of sale in favour of the auction purchaser, it is only a confirmation that the said purchaser made highest offer, therefore bid is complete for the price and purchaser is confirmed. It is obvious whenever auction is held, bid is declared as complete by declaring the highest bidder and bid price, since this process of auction is given to authorised officer, he will confirm the same, therefore it can't be said confirmation given by authorised officer in Sub Rule -2 cannot be equated to making sale absolute. That apart, in sub rule - 2 itself, it is made clear that such confirmation by authorised officer is subject to confirmation by the secured creditor. Thereafter, we will not find word "co....
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....closes on 15th day from the sale of the property. If at all said purchaser defaulted in making the balance payment, such person shall forfeit all claim to the property and the same could be resold just as prescribed under The Security Interest (Enforcement) Rules, 2002. Striking difference is, conspicuous absence of provisions similar to Order 21 Rules 89-91 of CPC in Security Interest (Enforcement) Rules, 2002, such as any person claiming interest in the property, in between, can file application under Rule 89 of Order 21 of CPC likewise, application on the ground of irregularity or fraud under Rule 91 of the Order 21 or entitlement of purchaser to seeking set-aside of sale on the no saleable interest to Judgement Debtor under Rule 91 of Order 21, but a right of 30 days notice to the borrower is given so as to get hearing before auction under Rule 8 (6) of Enforcement Rules. Sub-Rule 6 of Rule 9 of Enforcement Rules speaks of confirmation of sale and issuing of sale certificate after full payment has been made, same is the case under Order 21 Rule 92 and 94 of CPC, no difference at all. In both the cases, confirmation and issuing sale certificate will happen only....
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....ale price under sub-rule 2 cannot be construed as confirmation of sale by the secured creditor as envisaged under sub-rule 6 of Rule 9 of the Enforcement Rules. It is true it is an established legal proposition that normally once sale is confirmed and made absolute then issuing of sale certificate has been connoted as an administrative in nature. But as long as full payment has not been made and the same has not been confirmed by the secured creditor, it can't be considered that the sale is complete. As long as sale is not complete, and made absolute, no interest can be construed as transferred to the purchaser as is the case herein. In view of the above proposition, the sale cannot be called as concluded sale, the only difference in CPC and Enforcement Rules is, in CPC, Civil Court will confirm and will make the sale absolute, whereas as here secured creditor will confirm sale, but the common denominator in both the situations as above stated is payment in full by the purchaser thereafter confirmation by the secured creditor in the case of Enforcement Rules and in the case of civil case, it is before Civil Court. Now let us look into Section 14 of Insolvency & Ba....
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....I pending. It appears to us that Indus has not hidden anything from the light of this Authority, therefore, we have not seen that Indus fraudulently curtailing the legitimate rights of JM or Omni. When this Financial Creditor (JM) has a right to initiate proceedings in accordance with law, this Bench obviously to decide lis come before this Adjudicating Authority, and pass a valid order declaring moratorium on admitting the Petition filed by the Petitioner. When law permits to pass an order notwithstanding the proceedings pending before some other forum, this applicant is not expected to jump to a conclusion that this Petitioner initiated proceedings fraudulently so as to circumvent the proceedings pending before some other forum. Since this Bench has already held that it is not a concluded sale, the order passed by this Bench will certainly prevail over the proceedings under SARFAESI so long as moratorium is in force. Accordingly, we hereby hold that the Petitioner herein has not initiated the proceedings u/s 7 fraudulently or with a malicious intention for any process other than for resolution of insolvency therefore, the situation does not warrant this Bench to invoke jurisdicti....
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....Bench, New Delhi, it appears the Ld. Bench has come to a conclusion that the petitioner, who filed CP under Section 10 of Insolvency & Bankruptcy Code, has not furnished full particulars in relation to the assets mortgaged and already set up one of the promoters' driver as a tenant of the Corporate Debtor properties so as to frustrate the SARFAESI proceedings, therefore, the Petition was dismissed by holding that Section 10 Petition was filed with a fraudulent intention to frustrate the interest of financial institution. Here, this Bench having not seen a situation as apparent in the case aforementioned therefore, it is not applicable to say that Petitioner has filed this case with fraudulent intention to frustrate the interest of JM. Moreover, as I already stated the petitioner has brought the pendency of SARFAESI proceedings to the notice of the Adjudicating Authority, basing on those facts, the Adjudicating Authority, i.e. Ld. Member Shri Mukul Shrawat declared moratorium by admitting the petition therefore the aforesaid citation is not applicable to this case. 14. JM counsel relied upon a case in between Pattam Kader Khan v. Pattam Sardar Khan [1996] 5 SCC 48 to say that whe....
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....n that the Financial institution has not complied Rule 54 of the Rules as well as non-service of Form 17 upon the judgement-debtor. 18. The facts of the present case are contrary to the facts of the case supra, there being an explicit rider under section 14 over all other proceedings covered under Section 14, once this Authority holds that the proceeding pending under SARFAESI falls within the ambit of Section 14, an analogy by taking a ratio decided on facts and legal proposition altogether different from the facts and legal position of this case cannot be taken into consideration. Hence, the ratio above is not applicable to the present case. 19. The applicant relied upon a case in between Mohan Singh v. International Airport Authority of India [1997] 9 SCC 132, if the facts of the case are looked into, it appears it's a case where procedural aspect giving notification under Section 4(1) of Land Acquisition Act is not to be treated as mandatory in the cases where Government exercised urgent provision (Section 17(4)) to acquire land on urgent basis to cater the needs of the public. 20. The points looking important in the case Supra are as follows: 1. No univ....
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....may" be so and so done, by such and such officer and body then the word "may" is held in all soundness of construction to confer, a power but the word "shall" is held to make that power, or the exercise of that power compulsory." 25. Insolvency & Bankruptcy Code operates in the following manner: 1. Notwithstanding clause under Section 238 of the Code will have effect on any other law inconsistent with the provisions of the Code, SARFAESI Act also being an Act dealing with creditor and debtor relation and operation of law in both the enactments being on the same field, Insolvency & Bankruptcy Code will prevail over SARFAESI Act. 2. Section 14 having categorically mentioned that declaration of moratorium will prohibit enforcement of security interest created by the Corporate Debtor in respect of its property including any action under SARFAESI Act, 2002, it can't be said that sale in progress will not remain under suspension during the moratorium period. 26. As I already said sale is not concluded because full payment is not made till date and confirmation has not been given as prescribed under sub Rule 6 of Rule 9 of Enforcement Rules, which are notified taki....