TaxTMI 
TaxTMI 
2026 (3) TMI 1084
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....ial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'the Securitisation Act' for short). 2. In a number of such matters, it is found that the borrowers/ guarantors act as fence sitters and do not take any steps when the secured creditors proceed under Section 13(2) of the Securitisation Act and take further consequential steps, till the culmination of the process and auction purchasers coming into the picture. At the stage when the auction sale has been conducted and the auction purchaser has come into the picture, in a few instances, even after the sale certificate is issued, when physical possession of the secured asset is about to be handed over to the auction purchaser, the original borrowers/guarantors initiate collusive proceedings under Section 94 or Section 95 of the IBC, claiming triggering of moratorium under Section 96 thereof, the moment such proceedings are filed before the National Company Law Tribunal (NCLT). As a consequence, all steps taken under the provisions of the Securitisation Act, suddenly come to a standstill and such borrowers/guarantors, who are defaulters, wear a cloak of immunity under the garb of moratorium triggere....
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....t No. 1, Ground Floor, Building No. 27/E, Mazgaon Terrace Co-op. Housing Society Limited, near Sales Tax Office, Mazgaon Nesbit Road, Mazgaon, Mumbai, was mortgaged and it was the secured asset. The respondent-borrowers defaulted in repayment of the amounts and on 7th March 2017, respondent No. 2-bank issued notice under Section 13(2) of the Securitisation Act, calling upon the respondents-borrowers to pay Rs.6,96,16,488.23 with further contractual interest. As required by law, the notice was duly served upon the respondents-borrowers as well as the guarantors. Thereupon, the respondent No. 2-bank proceeded under Section 13(4) of the Securitisation Act and eventually, on 14th August 2018, it filed an application under Section 14 of the Securitisation Act before the Chief Judicial Magistrate, Esplanade Court, Mumbai, for taking physical possession of the secured asset. Respondent No. 3-borrower offered to pay Rs. 3.30 crores towards full and final settlement of the loan account. This was the first One Time Settlement (OTS) proposed by the respondent No. 3-borrower. Thereafter, on 25th November 2019, the respondent No. 3-borrower reiterated the said proposal stating that the offer am....
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....oval of the OTS being conveyed, totaling to the aforesaid amount of Rs.4.90 crores. 10. The respondent No. 3-borrower did not make payments as per the sanctioned OTS. In such circumstances, the respondent No. 2-bank sent four reminders between 6th October 2023 and 9th January 2024, but to no avail. Eventually, on 2nd May 2024, the respondent No. 2-Bank revoked the OTS approval letter/ sanction. Thereafter, the respondent No. 2-bank scheduled auctions on further six occasions between 14th March 2024 and 29th October 2024, but the said scheduled auctions failed because of want of bids. On every occasion, the respondent Nos. 3 to 7 were served notice of the scheduled auctions, as required by law. This is evident from the number of OTS proposals submitted by the respondent Nos. 3 to 7. 11. On 25th November 2024, the respondent No. 2-bank scheduled the 10th auction of the secured asset on 13th December 2024. It is at this stage that on 12th December 2024, the respondent No. 3-borrower, for the first time, approached the DRT by filing Securitisation Application No. 215 of 2024, challenging the said 10th auction and the notice issued under Section 13(2) of the Securitisation Act dat....
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....ot form part of the estate of the personal guarantor (respondent No. 7). 15. On 6th October 2025, the sale deed was registered in favour of the petitioners. On 13th October 2025, the respondent Nos. 3 to 7 i.e. the borrowers and guarantors filed Interim Application No. 2207 of 2025 before the DRT, seeking stay of further proceedings and taking of physical possession of the secured asset, again claiming that moratorium under Section 96 of the IBC was triggered, as a creditor had now filed an application under Section 95 of the IBC before the NCLT at Guwahati, to initiate insolvency resolution process. It was submitted that since such an application was now filed on 6th October 2025, there was another round of moratorium and the DRT ought not to proceed. On 14th October 2025, the DRT adjourned hearing on the said interim application and it is claimed that the respondent No. 2-bank was orally directed to defer possession till the next date. The next date was fixed on 29th October 2025. In the meanwhile, the respondent No. 7 had approached the NCLAT by filing Company Appeal No. 1644 of 2025, to challenge the order of the NCLT, Mumbai, dated 2nd September 2025, whereby the secured as....
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....e than 7 years later by filing Securitisation Application No. 215 of 2024. It was submitted that when it became obvious to respondent Nos. 3 to 7 that they would not be able to secure any interim relief, a deliberate tactic was adopted, whereby respondent No. 7 first filed an application under Section 94 of the IBC before the NCLT, Mumbai to trigger moratorium. The petitioners as well as respondent No. 2-bank had to struggle for a period of nine months before the NCLT to ensure that the secured asset was excluded from the moratorium. Respondent Nos. 3 to 7 did not stop at this and moved before the NCLAT and then before the Supreme Court. Eventually, the Supreme Court passed its order on 26th February 2026, confirming the order of the NCLT. This paved the way for the petitioners to take physical possession of the secured asset in respect of which sale certificate was already registered in their favour. 18. At this point in time, respondent Nos. 3 to 7 caused an application under Section 95 of the IBC to be filed before the NCLT at far away Guwahati, to claim that moratorium was once again triggered. It was submitted that a bare perusal of the deed of guarantee and the alleged not....
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....sued, which was registered and yet, the respondent No. 2-bank has not been able to put the petitioners in possession, only because of the aforesaid repeated collusive steps taken by the said respondents by misusing the provisions of the IBC. It was submitted that such design of the respondents-borrowers and guarantors ought not to be allowed to succeed and this Court exercising writ jurisdiction must intervene in the interest of justice. 20. Reliance was placed on the judgment of the Supreme Court in the case of Arce Polymers Private Limited vs. Alphine Pharmaceuticals Private Limited & Ors., (2022) 2 SCC 221, to impress upon this Court that the respondent Nos. 3 to 7 had intentionally relinquished their claim and this was a clear case of waiver, in the light of the fact that the securitisation application itself was filed more than 7 years after notice under Section 13(2) of the Securitisation Act was served. It was submitted that this Court may pass appropriate orders in the light of the said position of law. 21. On the other hand, Ms. Kruti Bhavsar, learned counsel appearing for respondent Nos. 3 to 7 i.e. the borrowers and guarantors, submitted that the DRT had proceeded ....
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....ors have been taking recourse to the provisions of the IBC, particularly Sections 94, 95 and 96 thereof, shows that such strategies are frustrating the very object of the IBC, apart from paralyzing the whole process of lawful steps taken by secured creditors in respect of secured assets under the provisions of the Securitisation Act. As noted hereinabove, chronic defaulters of loan and financial facilities, when facing the heat of proceedings initiated by secured creditors reaching culmination, scamper to file proceedings under Sections 94 and 95 of the IBC in a collusive manner, so as to claim that the moment such proceedings are initiated, moratorium is triggered under Section 96 thereof, as a result of which further lawful proceedings are stayed. The filing of such proceedings under the IBC is only with the object of frustrating the legal process and it has nothing to do with the object with which the IBC was enacted. 26. In the present case, the undisputed facts show that upon the respondent Nos. 3 to 7 i.e. borrowers and guarantors defaulting, the respondent No. 2-bank (secured creditor) issued notice under Section 13(2) of the Securitisation Act, as far back as on 7th Marc....
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....cember 2024, sale certificate was issued in favour of the petitioners, which was registered on 26th December 2024 and the petitioners were to be put in physical possession. 30. It is at this stage that the respondent No. 7, claiming to be the personal guarantor, filed the said application under Section 94 of the IBC on 24th December 2024 and claimed that moratorium stood immediately triggered under Section 96 of the IBC. A perusal of Section 96 of the IBC shows that under sub-Section (1) (a), an interim moratorium commences on the date the application under Sections 94 and 95 of the IBC is filed and that such moratorium would operate in relation to all debts. In view of the said fact brought to the notice of DRT, by an order dated 21st January 2025, the DRT refused to proceed and observed that there was a moratorium. The petitioners as well as the respondent No. 2-bank were constrained to approach the NCLT, by filing intervention applications. It took nine months for the intervention applications to be considered and disposed of. In its order dated 2nd September 2025, while holding that the secured asset stood excluded from the moratorium, the NCLT observed as follows : ....
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....party to take recourse to legal remedies cannot be denied, but the said sequence of events clearly demonstrates that the respondents-borrowers/guarantors instead of making any sincere attempt of repaying the debt, left no stone unturned to ensure that somehow the steps being taken by the respondent No. 2-bank as the secured creditor and the petitioners as the auction purchasers, were repeatedly frustrated. 33. The next event, demonstrating the tactics adopted by the respondents-borrowers and guarantors, came in the form of an application being filed on 6th October 2025 before the NCLT, Guwahati. This application has been purportedly filed by a creditor. As a writ Court we have considered the document on record and we find force in the contention of the petitioners and the respondent No. 2-bank that this proceeding was a collusive proceeding initiated at the behest of respondent Nos. 3 to 7 i.e. the borrowers and guarantors, to further frustrate the legal process being undertaken by the respondent No. 2-bank, as the secured creditor, and the petitioners, as auction purchasers. 34. Before we go into the nature of documents relied upon by respondent Nos. 3 to 7, to claim that mo....
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..... 36. In this backdrop, a perusal of the documents relied upon by the respondents-borrowers and guarantors, as also the creditor, who filed the application under Section 95 of the IBC before the NCLT at Guwahati, show that the purported deed of guarantee executed again by respondent No. 7, is only signed by her. There are no signatures of witnesses. It is not a registered deed of guarantee, merely bearing stamp of a Notary Public and the document also does not show details of the register of the Notary Public. It is also significant to note that all letters addressed to respondent No. 7 as the personal guarantor by the aforesaid creditor, who filed the application under Section 95 of the IBC before the NCLT, Guwahati, merely bear the signature of the authorized signatory and all have been purportedly served by hand. This raises a strong suspicion about the documents having been created to somehow file an application at NCLT, Guwahati, to then claim triggering of moratorium. Even the receipt showing payment of necessary fees before the NCLT, Guwahati on 6th October 2025, is of a bank at Borivali (West), Mumbai in Maharashtra. This further creates suspicion about the collusive nat....
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....nder Section 94 of the IBC before the NCLT at Mumbai on 24th December 2024, claiming the triggering of the moratorium. The subsequent events have been already noted hereinabove. 39. In this backdrop, we find substance in the reliance placed on behalf of the petitioners and respondent No. 2-bank on the judgment of the Supreme Court in the case of Arce Polymers Private Limited vs. Alphine Pharmaceuticals Private Limited & Ors. (supra). In the said judgment, the Supreme Court referred to and relied upon its earlier judgment in the case of ITC Ltd. vs. Blue Coast Hotels Ltd., (2018) 15 SCC 99 and observed as follows: "14. Paras 31 and 32 of the decision in ITC Ltd. vs. Blue Coast Hotels Ltd., record as under : "31. From the above, it is clear that the creditor was induced by the debtor not to take auction against them through assurances and promises. The creditor appeared to have entered into negotiations for the settlement of the dues and even accepted cheques in repayment much after the notice [ Dated 26-3-2013] under Section 13(2) and after the debtor's letter of representation [Dated 27-5-2013]. Many opportunities were granted by the creditor to the debtor ....
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....ok its chance and even procured favourable decisions. Even if we are to assume that the borrower did not waive the remedy, its conduct had put the Bank in a position where they have lost time, and suffered on account of delay and laches, which aspects are material. Auction on the subject property was delayed by more than a year as at the behest of the borrower, the Bank gave them a long rope to regularise the account. To ignore the conduct of the borrower would not be reasonable to the Bank once third-party rights have been created. In this background, the principle of equitable estoppel as a rule of evidence bars the borrower from complaining of violation." 40. We find that the said position of law inures to the benefit of the petitioners and the position taken by respondent No. 2-bank in the present petition, as the respondent Nos. 3 to 7 herein also kept on giving OTS proposals and never challenged the actions taken by respondent No. 2-bank under the provisions of the Securitisation Act. Instead, after filing the securitisation application in December 2024 before the DRT, the said respondents have been seeking to avoid the inevitable by triggering the process under the IBC an....