Indian Overseas Bank Vs. M/S RCM Infrastructure Ltd.

Bank could not have continued the proceedings under the SARFAESI Act once the CIRP was initiated and the moratorium was ordered – Indian Overseas Bank Vs. M/s RCM Infrastructure Ltd. and another – Supreme Court

Hon’ble Supreme Court held that in the present case, the balance amount has been accepted by the appellant Bank on 08.03.2019. The sale under the statutory scheme as contemplated under Rules 8 and 9 of the said Rules would stand completed only on 08.03.2019. This date falls much after 03.01.2019, i.e., on which date CIRP commenced and moratorium was ordered. In view of the provisions of Section 14(1)(c) of the IBC, which have overriding effect over any other law, any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the SARFAESI Act is prohibited. We are of the view that the appellant Bank could not have continued the proceedings under the SARFAESI Act once the CIRP was initiated and the moratorium was ordered.

Bank could not have continued the proceedings under the SARFAESI Act once the CIRP was initiated and the moratorium was ordered – Indian Overseas Bank Vs. M/s RCM Infrastructure Ltd. and another – Supreme Court Read Post »

If as on the date of commencement of CIRP, the sale of the assets of the Corporate Debtor under SARFAESI Act, 2002 was not completed and the total sale price was not paid, when the moratorium was imposed, receipt of the balance sale consideration is illegal – Indian Overseas Bank Vs. M/s RCM Infrastructure Ltd. – NCLAT New Delhi

When the Adjudicating Authority commences the CIRP proceeding and imposes moratorium, no proceeding shall be continued or commenced and not to carry out any auction of the assets of the Corporate Debtor. Therefore, in the facts of the present case, NCLAT holds that:
(1) When the moratorium was imposed by the learned Adjudicating Authority, receipt of the balance sale consideration is illegal and the learned Adjudicating Authority rightly set aside the sale transaction.
(2) Further Section 238 of IBC, have overriding effect over other laws as held by the Hon’ble Apex Court, and this Tribunal in Encore Asset Reconstruction Company Ltd.
In the present case, the sale was not completed and it is evident that balance sale amount was received after imposition of moratorium. Therefore, in the facts of the case, this judgment is not helpful to the Appellant. Further the Appellant relied upon in the matter of “Shakeena and Another Vrs. Bank of India and Others” reported in 2019 SCC OnLine SC 1059, the Hon’ble Supreme Court held that the Appellants cannot be permitted to assail the auction process on any other count. Even this judgment is not helpful to the facts of the present case. We are of the view that the Assets of the Corporate Debtor/Applicant forms part of valuation. Learned Adjudicating Authority has rightly set aside the sale of assets of the Corporate Applicant. We are of the view that the sale of assets of the Corporate Applicant during moratorium is against the spirit of Section 14 of IBC. Accordingly, we do not find any infirmity in the order passed by the learned Adjudicating Authority. The appeal is devoid of merit and liable to be dismissed. Accordingly, the appeal is dismissed. No orders as to cost.(p38-39)

If as on the date of commencement of CIRP, the sale of the assets of the Corporate Debtor under SARFAESI Act, 2002 was not completed and the total sale price was not paid, when the moratorium was imposed, receipt of the balance sale consideration is illegal – Indian Overseas Bank Vs. M/s RCM Infrastructure Ltd. – NCLAT New Delhi Read Post »

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