Ms. Manju Sirohi vs Assets Care & Reconstruction Enterprise Ltd. & Anr. - We need to appreciate that the estate, comprising all property belonging to the bankrupt at the commencement date, vests in the Trustee by operation of law, without any conveyance, assignment or transfer. Thus, it is clear that money at credit in a bank account is property and from 21.05.2025, the balance was the Trustee’s to hold, and every withdrawal by the Appellant was a dealing with property that was not hers to deal with.

  NCLAT (2026.10.07) in Ms. Manju Sirohi vs Assets Care & Reconstruction Enterprise Ltd. & Anr.  [Comp. App. (AT) (Ins) No. 1772 of 2026 & I.A. No. 6703 of 2026] held that; 

• We need to appreciate that the estate, comprising all property belonging to the bankrupt at the commencement date, vests in the Trustee by operation of law, without any conveyance, assignment or transfer. Thus, it is clear that money at credit in a bank account is property and from 21.05.2025, the balance was the Trustee’s to hold, and every withdrawal by the Appellant was a dealing with property that was not hers to deal with.

• Section 155(2)(a) excludes only “excluded assets” as defined in section 79(14) of the code. The Clause (c) protects only unencumbered personal ornaments which cannot be parted with, in accordance with religious usage, of a value not exceeding Rs. 1,00,000/- (Rule 5(a) of the 2019 Bankruptcy Rules).

• It has also been brought to our notice that on the commencement date, the Appellant held no ornaments (her Form-E shows jewellery as Nil but a bank balance, which none of clauses (a) to (e) of section 79(14) of the code mentions, and nothing in the Code carries the protected character over to sale proceeds.

Excerpts of the order;

# 1. There are two appeals before us i.e. Company Appeal (AT) (INS) No. 1772 of 2026 and Company Appeal (AT) (INS) No. 1773 of 2026 filed by the Appellant, Manju Sirohi.

# 2. The appeal is filed by the Appellant i.e., Manju Sirohi who is a Personal Guarantor of M/s Saha Infratech Private Limited under Section 61 of the Insolvency and Bankruptcy Code, 2016, (“Code”) arising out of Impugned Order dated 03.08.2026 passed in IA/ND/4604/2025 in CP(IB)-80/ND/2023 by the Hon'ble National Company Law Tribunal, New Delhi (“Adjudicating Authority”). Assets Care & Reconstruction Enterprise Ltd., who is the Financial Creditor, acting in its capacity as trustee of ACRE-100-TRUST, is the Respondent No.1 herein.  Mr. Anup Kumar, who is the Bankruptcy Trustee of the Appellant is the Respondent No.2 herein.

# 3. The appeal is filed by the Appellant i.e., Manju Sirohi who is a Personal Guarantor of M/s Saha Infratech Private Limited under Section 61 of the Insolvency and Bankruptcy Code, 2016, (“Code”) arising out of Impugned Order dated 20.08.2026 passed by the Hon'ble National Company Law Tribunal (“Adjudicating Authority”) in CP(IB)-80/ND/2023, whereby RA-73/ND/2026 seeking recall of the Order dated 03.08.2026 being being ex-parte Order was dismissed. Assets Care & Reconstruction Enterprise Ltd., who is the Financial Creditor, acting in its capacity as trustee of ACRE-100-TRUST, is the Respondent No.1 herein. Mr. Anup Kumar, who is the Bankruptcy Trustee of the Appellant is the Respondent No.2 herein.

Common Pleadings of the Appellant

# 4. The Appellant submitted that Respondent No. 1 had filed an application under Section 95(1) of the Code, to initiate the insolvency process against her on account of the failure of M/s Saha Infratech Pvt. Ltd. (Corporate Debtor) to repay the debt. The Appellant stated that vide order dated 10.04.2023, the Adjudicating Authority appointed Mr. Anup Kumar as the Resolution Professional in CP(IB)- 80/ND/2023. The Appellant contended that Respondent No. 1 thereafter filed IA- 5276/2024 under Section 123 of the Code seeking initiation of the bankruptcy process against her, and that due to her non-appearance, the Adjudicating Authority initiated ex-parte proceedings by order dated 21.02.2025. 

# 5. The Appellant submitted that on 03.03.2025 and again on 16.03.2025 she sold her personal jewellery in order to sustain herself in Delhi NCR, with the sale proceeds being credited to her personal bank account, and that on 11.03.2025 she received funds transferred from her mother-in-law’s bank account pursuant to its closure. The Appellant contended that on 14.05.2025 the Adjudicating Authority reserved orders in IA-5276/2024, and that on 21.05.2025 the Adjudicating Authority declared her bankrupt under Section 126 of the Code and appointed Respondent No. 2 as the Bankruptcy Trustee under Section 125 of the Code.

# 6. The Appellant submitted that on 11.09.2025, Respondent No. 2 filed IA- 4604/ND/2025 under Regulation 12 of the relevant IBBI Regulations read with Section 186(D) of the Code, seeking, inter alia, directions to the Appellant to submit her complete financial position, to return a sum of Rs. 19,17,500/- forming part of the bankruptcy estate, to furnish details of after-acquired property, and to extend co-operation in the bankruptcy process.

# 7. The Appellant stated that a complete transaction summary of her Union Bank of India account (No. 398502010053816) reveals deposits totalling Rs. 18,92,214.00 comprising Rs. 5,66,966.00 transferred from her mother-in-law’s account on 11.03.2025 and Rs. 13,25,248.00 realised from the sale of gold jewellery and related items on 24.03.2025, against withdrawals totalling Rs. 19,19,500.00 made between 16.06.2025 and 24.07.2025, primarily by selfwithdrawal and ATM.

# 8. The Appellant contended that her counsel, who was recently engaged,  appeared on 03.08.2026 through video conferencing when the Adjudicating Authority disposed of IA-4604/ND/2025 and passed an ex-parte order directing her to pay back Rs. 19,17,500/- to Respondent No. 2. The Appellant submitted that although her counsel was present when the matter was called, an unstable internet connection prevented necessary submissions, resulting in the ex-parte order.

# 9. The Appellant submitted that being aggrieved by the said ex-parte order, she preferred RA-73/ND/2026 under Rule 11 of the NCLT Rules, 2016 seeking its recall. The Appellant stated that on 20.08.2026, the recall application was heard and dismissed by the Adjudicating Authority on the ground that IA- 4604/ND/2025 had been allowed and disposed of on merits and that a recall application was not the appropriate remedy, even though the order dated 03.08.2026 itself recorded that the application was allowed due to the absence of any denial.

# 10. The Appellant submitted that the Adjudicating Authority grossly erred in dismissing the recall application and failed to appreciate that the order dated 03.08.2026 was not passed on merits and was made without affording her an  opportunity of hearing. The Appellant stated that she is a senior citizen residing in Delhi NCR with no source of income, that the sale of her personal jewellery was a last resort to sustain herself, and that she was unaware of the moratorium at the time of the withdrawals.

# 11. The Appellant contended that her personal jewellery constitutes an excluded asset under Section 155(2) of the Code, and that the amounts withdrawn from her savings account represented the sale proceeds of such jewellery together with the sum transferred from her mother-in-law’s account, both of which are excluded assets under Section 79(14) of the Code.

# 12. Concluding arguments, the Appellant requested this Appellate Tribunal to set aside the Impugned Orders and allow the both appeals. 

# 13. Per contra, the Respondent No.2 (Bankruptcy trustee), the contesting Respondent , denied all the averments made by the Appellant as misleading and baseless.

# 14. The Respondent No. 2 stated that in the captioned matter the Personal Insolvency Resolution Process was initiated on 18.01.2024 and, upon nonsubmission of a repayment plan, the Adjudicating Authority passed an order on 02.07.2024 under Section 114 of the Code, directing the financial creditor to file an application against the personal guarantor/Appellant. The Respondent No. 2 contended that the financial creditor thereafter filed an application under Section 123 of the Code, and vide order dated 21.05.2025 the Adjudicating Authority initiated the bankruptcy process against the Appellant and appointed the answering Respondent as the Bankruptcy Trustee to conduct the proceedings in accordance with law.

# 15. The Respondent No. 2 submitted that pursuant to the order dated 21.05.2025, a public announcement was made on 30.05.2025 inviting creditor claims by 06.06.2025, and simultaneous intimation of initiation of the bankruptcy proceedings.

# 16. The Respondent No. 2 stated that pursuant to the public announcement claims were received from two financial creditors and admitted as follows: M/s Assets Care & Reconstruction Enterprises Ltd. claimed Rs. 426,19,59,899/-, of which Rs. 55,06,45,056.52/- was admitted and Rs. 371,13,14,842.48/- was admitted as contingent; M/s IDBI Trusteeship Services Ltd. claimed Rs. 544,33,62,699/- which was admitted entirely as contingent, resulting in a total claim of Rs. 970,53,22,598/-, of which Rs. 55,06,45,056.52/- was admitted and Rs. 915,46,77,541.48/- was admitted as contingent.

# 17. The Respondent No. 2 contended that pursuant to Section 133 of the Code the first meeting of creditors was convened on 01.07.2025, in which the Appellant through her representative participated and assured the Bankruptcy Trustee that the financial statement of the Bankrupt would be submitted as called for in the intimation letter dated 30.05.2025. The Respondent No. 2 submitted that despite the assurance, the Appellant failed to provide the financial statement as called for, whereupon another intimation was sent on 18.07.2025 seeking relevant information; in response the Appellant furnished details of bank accounts and other information.

# 18. The Respondent No. 2 stated that upon receiving the information, the Bankruptcy Trustee collected the bank account statements and instructed the banks to mark debit freeze on all accounts till further instructions. Upon perusal of the statements, it was found that the Appellant had withdrawn a total of Rs. 19,17,500/- between 16.06.2025 and 24.07.2025, the details being: 16.06.2025 – Self – Rs. 9,95,000/-; 21.06.2025 – Self – Rs. 9,00,000/-; 06.07.2025 – ATM – Rs. 10,000/-; 23.07.2025 – ATM – Rs. 10,000/-; 24.07.2025 – ATM – Rs. 1,000/- , Rs. 1,500/-, Rs. 500/- and Rs. 500/-.

# 19. The Respondent No. 2 contended that an application (IA-4604/2025) was filed before the Adjudicating Authority seeking return of the unauthorised withdrawal of Rs. 19,17,500/-. The Appellant appeared on 08.12.2025 but thereafter failed to appear despite notice, compelling the Adjudicating Authority to proceed ex-parte and pass the impugned order dated 03.08.2026 directing return of the said amount. The Appellant’s subsequent recall application (RA- 73/ND/2026) was dismissed by the Adjudicating Authority vide order dated 20.08.2026.

# 20. The Respondent No. 2 submitted that the amount of Rs. 19,17,500/- constitutes an unauthorised withdrawal because, under Section 154 of the Code, 2016, the estate of the bankrupt vests in the Bankruptcy Trustee immediately from the date of appointment without any conveyance, assignment or transfer. The Respondent No. 2 stated that any amount lying in the account of the Bankrupt forms part of the bankruptcy estate under Section 155 of the Code and is to be distributed to the creditors under Section 178 of the Code.

# 21. The Respondent No. 2 contended that the withdrawal is illegal as it was made after due intimation given by the Bankruptcy Trustee vide letter dated 30.05.2025. The Respondent No. 2 further submitted that while the Appellant seeks exclusion of the assets under Section 79(14) of the Code, the Insolvency and Bankruptcy (Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtors) Rules, 2019 prescribe that the value of unencumbered personal ornaments under clause (c) of the said subsection shall not exceed one lakh rupees.

# 22. The Respondent No. 2 stated that the Appellant failed to avail the ample opportunities granted by the Adjudicating Authority and therefore cannot raise the plea at this stage. The Respondent No. 2 contended that the present appeals are without any merit or ground and are liable to be dismissed outright. 

# 23. Concluding the arguments, the Respondent No.2 requested this AppellateTribunal to dismiss both appeals.

Findings

# 24. We have already noted the rival contentions of the parties in preceding paragraphs. The material facts are not in dispute. The Appellant was declared bankrupt on 21.05.2025 and Respondent No. 2 was appointed Bankruptcy Trustee. The Union Bank of India statement of her savings account, filed by both sides and admittedly authentic, shows Rs. 19,07,366.46 at her credit on that date. Between 16.06.2025 and 24.07.2025 the whole of it was drawn out: two Self withdrawals of Rs. 9,95,000.00 and Rs. 9,00,000.00, and six ATM withdrawals totalling Rs. 23,500.00, leaving Rs. 114.32. The Appellant does not deny any withdrawal and her own table lists them. Her defence is one of law and hardship, not of fact.

# 25. It may be stated that the correct test is vesting, not moratorium. The Trustee’s intimation of 30.05.2025 and his application, and the Appellant’s plea of being unaware of the moratorium, all proceed on a wrong label. We observe that Section 128(1)(c) of the code restrains creditors from acting against the bankrupt’s property; it does not regulate the bankrupt. We need to appreciate that the estate, comprising all property belonging to the bankrupt at the commencement date, vests in the Trustee by operation of law, without any conveyance, assignment or transfer. Thus, it is clear that money at credit in a bank account is property and from 21.05.2025, the balance was the Trustee’s to hold, and every withdrawal by the Appellant was a dealing with property that was not hers to deal with.

# 26. We are of clear opinion that the plea of unawareness is no defence to vesting, which does not depend on the bankrupt’s knowledge, and is in any case unproved. It has been brought to our notice that the Trustee’s intimation was delivered to the Appellant on 05.06.2025 , eleven days before the first withdrawal and she was represented at the creditors meeting on 01.07.2025 and further she wrote to the Trustee about her accounts on 22.07.2025, after which the ATM withdrawals of 23–24.07.2025 followed.

# 27. We would like to state that the jewellery sale proceeds of Rs. 13,25,248.00 (69.5 % of the balance) are not excluded assets as Section 155(2)(a) excludes only “excluded assets” as defined in section 79(14) of the code. The Clause (c) protects only unencumbered personal ornaments which cannot be parted with, in accordance with religious usage, of a value not exceeding Rs. 1,00,000/- (Rule 5(a) of the 2019 Bankruptcy Rules). We are not in position to accept the pleadings of the appellant because the proceeds are more than thirteen times the cap prescribed in the regulations. Further the exclusion attaches to described assets, not to money. It has also been brought to our notice that on the commencement date, the Appellant held no ornaments (her Form-E shows jewellery as Nil but a bank balance, which none of clauses (a) to (e) of section 79(14) of the code mentions, and nothing in the Code carries the protected character over to sale proceeds.

# 28. We are of considered opinion that claimed hardship by the Appellant cannot enlarge section 79(14) of the code, which is a closed list. We also do not find any rationale for withdrawal of Rs. 18,95,000/- by the Appellant in five days without explanation.

# 29. We note that the recall application (RA-73/ND/2026) was dismissed. It needs to be appreciated that recall is not a matter of right. The Appellant’s case that her counsel could not be heard on 03.08.2026 for want of connectivity is not supported by any record. We have noted that notice had been served to the Appellant on 22.09.2025 and no reply had been filed for over ten months. Even on the Appellant’s version, no prejudice is shown. Thus, we do not find any meritin the contents of the appellant regarding denial of recall application by the Adjudicating authority.

# 30. Based on the above analysis, we do not find any merit in either of the appeals. The appeals fail and stand rejected. No order as to cost. IA, if any, stands closed.

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IndusInd Bank Ltd. & Ors. vs Vamsee Teja Modern Rice Mill Pvt. Ltd. - In view of the foregoing, we find that the adjustment of the Corporate Debtor’s receivables from M/s. Tammana Trading Company against the liabilities due to the Respondent-directors had the effect of reducing/extinguishing their antecedent liabilities and correspondingly diminishing the receivables of the Corporate Debtor. The transactions therefore, require to be examined as preferential transactions within the meaning of Section 43 of the Code.

 NCLT Amaravati (2026.08.31) in IndusInd Bank Ltd. & Ors. vs Vamsee Teja Modern Rice Mill Pvt. Ltd. [(2026) ibclaw.in 3488 NCLT, IA(IBC)/199/2026 in IA(IBC)(LIQ)/2/2026 with IA(IBC)/200/2026 in IA(IBC)(LIQ)/2/2026 in CP(IB)/45/7/AMR/2023] held that; 

• In view of the foregoing, we find that the adjustment of the Corporate Debtor’s receivables from M/s. Tammana Trading Company against the liabilities due to the Respondent-directors had the effect of reducing/extinguishing their antecedent liabilities and correspondingly diminishing the receivables of the Corporate Debtor. The transactions therefore, require to be examined as preferential transactions within the meaning of Section 43 of the Code.

Blogger’s comments; It is pertinent to refer to Regulation 28 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”), which expressly recognises assignment/transfer of debt due to a creditor during the CIRP period.

Regulation 28 – Transfer of debt due to creditors
(1) In the event a creditor assigns or transfers the debt due to such creditor to any other person during the insolvency resolution process period, both parties shall, within seven days of such assignment or transfer, provide the interim resolution professional or the resolution professional, as the case may be, the terms of such assignment or transfer and the identity of the assignee or transferee.
(2) The resolution professional shall notify each participant and the Adjudicating Authority of any resultant change in the committee within two days of such change.

In light of the above, a clear distinction must be drawn between the following two categories of transactions:

1. Transfer/assignment of debt due to a creditor, initiated at the instance of the creditor

• Here, the creditor (assignor) transfers its claim against the corporate debtor to an assignee/transferee.

• Such assignment is expressly contemplated under Regulation 28 of the CIRP Regulations.

• Since this is a transfer of the creditor’s right to receive payment (and not a transfer of the corporate debtor’s property), it does not, by itself, constitute a “preferential transaction” under Section 43 of the IBC.

2. Transfer of assets/receivables by the corporate debtor to creditors (against antecedent liabilities of directors/others), without creditor assignment/transfer instruments

• In this scenario, the corporate debtor transfers its own property (e.g., receivables/assets) to one or more creditors, typically in discharge or adjustment of antecedent debts/liabilities.

• Such a transaction squarely engages the avoidance regime under Section 43 of the IBC, as it involves: (a) a transfer of property or an interest thereof of the corporate debtor; (b) for the benefit of a creditor (or surety/guarantor); (c) for or on account of an antecedent financial/operational debt or other liability; and (d) having the effect of putting that creditor in a more beneficial position than would result under the waterfall in Section 53.

• The absence of formal assignment/transfer letters from creditors further indicates that the transaction is not a Regulation 28 debt-assignment, but rather a corporate-debtor-side transfer susceptible to characterization as a preferential transaction (subject to the “relevant time” and other statutory conditions).

Accordingly, while creditor-initiated debt assignments are regulatory-recognized and do not per se amount to preferences, transfers of the corporate debtor’s assets/receivables to creditors against antecedent liabilities—particularly without proper creditor assignment documentation—fall within the contemplation of Section 43 and may be avoidable as preferential transactions.

Excerpts of the order;

This Interlocutory Application (hereinafter referred to as the “IA” or “IA 199/2026”) has been filed on 11.05.2026 vide Diary No.825, by Mr. Kambhammettu Sri Vamsi, Liquidator (hereinafter referred to as the “Applicant” or the “Liquidator”) of Vamsee Teja Modern Rice Mill Private Limited (hereinafter referred to as the “Corporate Debtor”), under Sections 43 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “IBC” or “Code”), seeking the following reliefs:

• (i) Declare and hold that the transactions detailed in the present IA constitute preferential transactions within the meaning of Section 43 of the Code;

• (ii) Pass appropriate orders under Section 43 of the Code, directing Respondent Nos. 1 and 2 to restore and/ or repay to the Corporate Debtor the amounts received by them under the preferential transactions, aggregating to Rs.2,10,39,546/-, along with such interest, as this Adjudicating Authority may deem fit;

• (iii) Direct Respondent Nos. 1 and 2 to return the benefits derived by them from the preferential transactions and to restore the same in the Corporate Debtor for the benefit of its creditors.

• (iv) Pass such other or further orders as this Adjudicating Authority may deem fit and proper in the facts and circumstances of the present case.

# 2. The facts of the case, as submitted by the Counsel of the Applicant are as below:

(i) The Corporate Debtor was admitted into Corporate Insolvency Resolution Process (hereinafter referred to as the “CIRP”) by this Adjudicating Authority vide order dated 03.06.2025 in CP (IB)/45/7/AMR/2023, wherein the Applicant was appointed as the Interim Resolution Professional (hereinafter referred to as the “IRP”).

(ii) Subsequently, the Committee of Creditors (hereinafter referred to as the “CoC”) consisting of the sole Financial Creditor-Induslnd Bank Ltd. in its first meeting held on 03.07.2025 resolved with 100% voting and confirmed the IRP as Resolution Professional (hereinafter referred to as the “RP”) for conducting the CIRP proceedings of Corporate Debtor, which was also approved by this Adjudicating Authority vide its Order dated 28.07.2025.

(iii) During the CIRP, the Applicant formed an opinion was formed under Regulation 35A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as the “CIRP Regulations”) regarding the existence of transactions falling within Sections 43, 45, 50 or 66 of the Code, pursuant to which M/s. Mahadevan & Co., Chartered Accountants, were appointed as Transaction Auditor. A draft report was received on 20.11.2025 and was placed before the 5th meeting of the Committee of Creditors held on 21.11.2025. The CoC thereafter approved filing of the PUFE application.

(iv) The CIRP ultimately culminated in liquidation, as the CoC did not approve continuation of the CIRP and resolved for commencement of liquidation. This Adjudicating Authority, vide order dated 11.02.2026, allowed the liquidation application and appointed the Applicant as the Liquidator.

(v) The final Transaction Audit Report dated 28.11.2025 was received on 05.03.2026, and two transactions were identified as preferential transactions under Section 43(2) of the Code, both the transactions by the Corporate Debtor with related party during the period of two years preceding of Insolvency commencement date, i.e., 03.06.2025, the details of the transactions are below:

Name of Respondent	Amount in (Rs.)
N. Udaya Durga, Director and Shareholder	19,92,733.41
N.V. Satya Narayana, Director and Shareholder	1,90,46,813.92
Total	2,10,39,547.33

(vi) The Corporate Debtor had passed adjustment entries in favour of its related parties, whereby certain current assets were set off against corresponding liabilities through journal vouchers, without any actual inflow of funds. During the audit, these entries were brought to the notice of the suspended directors, however, no response was received from them.

(vii) The Journal Register of the CD as on 01.04.2024 placed on record at page no.141 of the application corroborates that on 01.04.2024, Journal Vch No.12 recorded an adjustment of Rs.1,90,46,813.92 in the account of N.V. Satyanarayana (US) against Tammana Trading Company, and Journal Vch.No.13 recorded an adjustment of Rs.19,92,733.41 in the account of N. Udaya Durga (US) against Tammana Trading Company.

(viii) The Amount receivables from Tammana Trading Company ought to have been recovered by the Corporate Debtor and utilised towards discharge of its secured/ financial creditors, particularly when the receivables and current assets were charged in favour of the Financial Creditor. Instead of recovery of such receivables and utilisation thereof for the benefit of the creditors, the same were adjusted towards liabilities payable to the directors, who are related parties. The Applicant therefore contends that the aforesaid transactions fall within the ambit of Section 43 of the Code.

# 3. The Respondent Nos.1 and 2 have filed their Counter vide Diary No. 1565 and 1562 both dated 18.08.2026 respectively.

# 4. During the course of hearing, the Counsel appearing for Respondent Nos.1 and 2, while reiterating the averments in the Counter Affidavit, submitted that the present Application is misconceived and that the Applicant has failed to independently establish the essential ingredients of Section 43 of the Code, merely relying upon the Transaction Audit Report, which is only an opinion of the Transaction Auditor. It is contended that the impugned transactions are merely journal/ adjustment entries without any actual inflow or transfer of money or property of the Corporate Debtor and that there is no material to show that the Respondents were placed in a more beneficial position under Section 53 of the Code. It is further contended that the adjustments were made in the ordinary course of business and that the Applicant has failed to establish the relevant circumstances so as to attract Section 43(4). It is also contended that Tammana Trading Company, being the third party in respect of whose the alleged adjustments of receivables were made, has not been impleaded as a party and, therefore, the alleged receivables and their adjustment cannot be conclusively determined in its absence. Reliance has been placed on the judgment of the Hon’ble Supreme Court in Anuj Jain, IRP for Jaypee Infratech Ltd. v. Axis Bank Ltd.. The Respondents also raised objections regarding delay and non-compliance with Regulation 35A and submitted that the liabilities attributable to Respondent Nos.1 and 2 are distinct and no consolidated or joint liability can be fastened upon them.

# 5. The Counsel for the Applicant/ Liquidator submitted that the Applicant had formed an opinion in terms of Regulation 35A of the CIRP Regulations and the same is also mentioned in the IA and thereafter, after approval of the CoC in its 5th meeting of the held on 21.11.2025, filed the present IA. It is submitted that the transactions dated 01.04.2024 fall within the two-year look-back period prescribed under Section 43(4)(a), the insolvency commencement date being 03.06.2025. The Journal Register also records the corresponding adjustment entries of Rs.19,92,733.41 and Rs.1,90,46,813.92 in the accounts of Respondent Nos.1 and 2 respectively, which places the Respondent Nos.1 and 2 in a beneficial position under section 53 of the Code.

# 6. We have considered the rival submissions and perused carefully the IA and Counter Affidavit and other documents placed on record.

# 7. As regards the objection of delay and non-compliance with Regulation 35A, the Applicant has explained the chronology leading to the filing of the present Application after receipt and consideration of the final Transaction Audit Report. Having regard to the facts and circumstances of the case, we find no sufficient ground to reject the Application on that count. In the present case, the Applicant has explained the circumstances leading to the filing of the Application after consideration of the Transaction Audit Report.

# 8. Before examining the impugned transactions, it is appropriate to note that Section 43 requires the Applicant to establish the transfer of property or interest of the Corporate Debtor for the benefit of a creditor on account of an antecedent liability, the resulting beneficial position visà-vis Section 53, the relevant period under Section 43(4), and the absence of any exclusion under Section 43(3). These requirements are required to be examined cumulatively in terms of the judgment of the Hon’ble Supreme Court in Anuj Jain, IRP for Jaypee Infratech Ltd. (Supra).

# 9. In the present case, Respondent Nos. 1 and 2 are directors/ shareholders of the Corporate Debtor. The Transaction Audit Report identifies the two transactions as preferential transactions and records that the unsecured loans payable to the Respondent-directors were set off against the receivables from M/s. Tammana Trading Company through journal vouchers. The Journal Register independently records the corresponding entries dated 01.04.2024.

# 10. The contention that there was no actual cash payment and that the transactions were only journal entries cannot, by itself, take the transactions outside the scope of Section 43. What requires consideration is the effect of the adjustment. The material on record indicates that the Corporate Debtor’s receivables from Tammana Trading Company were adjusted against the liabilities payable to the Respondent-directors, thereby reducing the liabilities owed to them while correspondingly diminishing the receivables of the Corporate Debtor.

# 11. The objection regarding non-impleadment of M/s. Tammana Trading Company does not affect the present Application, as no relief is sought against it. The issue is only whether the Corporate Debtor’s receivables were adjusted against the liabilities of the Respondent/directors, thereby benefiting them. As held by the Hon’ble Supreme Court in Anuj Jain, IRP for Jaypee Infratech Ltd (Supra), the enquiry under Section 43 focuses on the transfer of the Corporate Debtor’s property or interest for the benefit of a creditor and the resulting beneficial position. Hence, non-impleadment of Tammana Trading Company does not prevent determination of the preferential nature of the impugned transactions.

# 12. The plea of ordinary course of business also cannot be accepted merely on a general assertion. The impugned transactions concern adjustment of the Corporate Debtor’s receivables against liabilities owed to its own directors/shareholders. No sufficient material has been placed to establish that such specific adjustment was made in the ordinary course of the business or financial affairs of both the Corporate Debtor and the transferees. The ordinary-course exclusion under Section 43(3) has to be examined with reference to the particular transaction and circumstances.

# 13. The impugned entries dated 01.04.2024 fall within the two-year period preceding the insolvency commencement date of 03.06.2025, as contemplated under Section 43(4)(a). Further, the adjustment was made against amounts stated to be payable to Respondent Nos.1 and 2, thereby meeting the requirement of an antecedent liability under Section 43(2)(a).

# 14. In view of the foregoing, we find that the adjustment of the Corporate Debtor’s receivables from M/s. Tammana Trading Company against the liabilities due to the Respondent-directors had the effect of reducing/extinguishing their antecedent liabilities and correspondingly diminishing the receivables of the Corporate Debtor. The transactions therefore, require to be examined as preferential transactions within the meaning of Section 43 of the Code.

# 15. The present case is distinguishable from a mere intra-group journal adjustment undertaken as part of an established and undisputed commercial arrangement. Here, the impugned entries concern liabilities of the Corporate Debtor towards its own directors and the corresponding reduction of receivables from Tammana Trading Company. The record before us does not establish that the particular adjustments were undertaken as part of an ordinary, undistinguished flow of business.

# 16. We therefore hold that the two transactions dated 01.04.2024, amounting to Rs.19,92,733.41 in favour of Respondent No.1 and Rs.1,90,46,813.92 in favour of Respondent No.2, satisfy the ingredients of Section 43 of the Code and constitute preferential transactions.

# 17. Consequently, the benefit obtained by Respondent Nos.1 and 2 through the aforesaid preferential transactions is liable to be restored to the liquidation estate in terms of Section 44 of the Code. Section 44 empowers the Adjudicating Authority, inter alia, to require a person to pay to the Liquidator such sums in respect of benefits received by him from the Corporate Debtor.

# 18. At the same time, we find merit in the submission of Respondent No.1 that the liabilities attributable to Respondent Nos.1 and 2 are distinct. Therefore, the liability of each Respondent shall be confined to the amount specifically attributable to such Respondent and they shall not be jointly or severally saddled with the amount attributable to the other Respondent merely because the aggregate amount is claimed in the Application.

# 19. Accordingly, Respondent No.1, Nookala Udaya Durga, is liable to restore/ pay a sum of Rs.19,92,733.41 to the Liquidator for being credited to the liquidation estate of the Corporate Debtor, and Respondent No.2, Nukla Venkata Satyanarayana, is liable to restore/pay a sum of Rs.1,90,46,813.92 to the Liquidator.

# 20. In view of the above discussion, IA (IBC)/199/2026 is allowed in the following terms:

• a) The transaction of Rs.19,92,733.41 recorded in the account of Respondent No.1 on 01.04.2024 and the transaction of Rs.1,90,46,813.92 recorded in the account of Respondent No.2 on 01.04.2024 are hereby declared to be preferential transactions within the meaning of Section 43 of the Insolvency and Bankruptcy Code, 2016.

• b) Respondent No.1, Nookala Udaya Durga, is directed under Section 44 of the Code to pay/restore Rs.19,92,733.41 to the Liquidator within 15 days from the date of receipt of this order and file a compliance memo within 30 days from the date of this order.

• c) Respondent No.2, Nukla/Nukala Venkata Satyanarayana, is directed under Section 44 of the Code to pay/restore Rs.1,90,46,813.92 to the Liquidator within 15 days from the date of receipt of this order and file a compliance memo within 30 days from the date of this order.

• d) The amounts so realised shall form part of the liquidation estate of the Corporate Debtor and shall be dealt with by the Liquidator in accordance with the provisions of the Code.

• e) The liability of each Respondent shall remain confined to the amount specifically attributable to him/her as stated above.

• f) The Liquidator shall report the compliance of the above directions by way of a memo within 45 days of this order in the main CP.

# 21. IA (IBC)/199/2026 is accordingly allowed and disposed of in the above terms. No order as to costs.

IA(IBC)/200/2026:

The counsel for both the parties sought two weeks’ time to submit their arguments. Time, as prayed for, is granted. List the matter for hearing on 18.09.2026.

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Positron Biogenics Pvt. Ltd. vs Uttar Pradesh State Industrial Development Authority and Anr. - The outstanding dues of the property tax relating to period prior to sale confirmation are thus dues that are akin to claim of an unsecured creditor (Bhatpara Municipality in the present case) and should be discharged in terms of the properties regarding distribution of assets given in section 53 of IBC. The auction-purchaser cannot be held liable to pay any such dues relating to period prior confirmation of sale as has been held by the Hon’ble Supreme Court in the matter of AI Champdany Industries Ltd. vs. The Official Liquidator & Anr. (supra).”

  NCLT All. (2026.09.02) in Positron Biogenics Pvt. Ltd. vs Uttar Pradesh State Industrial Development Authority and Anr. [(2026) ibclaw.in 3509 NCLT, IA No. 485 of 2023 in CP(IB) No. 55/ALD/2017] held that; 

• In view of the above, the mere “as is where is” condition or the subsequent transfer of the leasehold interest cannot convert the pre-CIRP liability of the Corporate Debtor into an independent personal liability of the Applicant. The pre-CIRP dues of the Corporate Debtor were required to be dealt with through the liquidation process in accordance with Section 53 of the Code, particularly when the Respondent No. 1 had already lodged its claim in the liquidation proceedings of the Corporate Debtor.

• The outstanding dues of the property tax relating to period prior to sale confirmation are thus dues that are akin to claim of an unsecured creditor (Bhatpara Municipality in the present case) and should be discharged in terms of the properties regarding distribution of assets given in section 53 of IBC. The auction-purchaser cannot be held liable to pay any such dues relating to period prior confirmation of sale as has been held by the Hon’ble Supreme Court in the matter of AI Champdany Industries Ltd. vs. The Official Liquidator & Anr. (supra).”

• Thus, in view of the law laid down by the Hon’ble NCLAT in Bhatpara Municipality Through its Chairperson v. Nicco Eastern Pvt. Ltd. (supra), the outstanding dues pertaining to the period prior to the issuance of the Sale Certificate/handing over of possession are to be treated as pre-CIRP liabilities of the Corporate Debtor and dealt with in accordance with the waterfall mechanism prescribed under Section 53 of the Code, and cannot simultaneously be recovered from the auction purchaser merely because the purchaser required transfer of the leasehold interest in its favour. Accordingly, the Applicant/Auction Purchaser cannot be held liable to pay the pre-CIRP dues of the Corporate Debtor.

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Excerpts of the order;

# 1. The instant application has been filed on 08.10.2023, by M/s Positron Biogenics Private Limited (hereinafter referred as “Applicant/ Auction Purchaser”) under section 60(5) and Section 53(1) of the Insolvency and Bankruptcy Code, 2016 (“IBC/Code”) read with Rule 11 of National Company Law Tribunal Rules, 2016 against Uttar Pradesh State Industrial Development Authority (hereinafter referred to as “Respondent No.1/UPSIDA”) and the Liquidator (hereinafter referred to as “Respondent No.2”) of M/s L.M.L. Limited i.e., Corporate Debtor. The Applicant inter alia seeks the following prayers:

• a) Allow the present application;

• b) Kindly pass an order to the Respondent No.1 Uttar Pradesh State Industrial Development Authority (UPSIDA) to Transfer the Part of Parcel A,B & C, Site-03, Panki Industrial Area, Kanpur and Refund an Amount of Rs 82, 53,013.37 (INR Eighty Two Lakhs Fifty Three Thousand Thirteen and Paise Thirty Seven Only) to Applicant which paid UNDER PROTEST towards the dues of Respondent No 2 i.e. LML Limited to avoid the delay in implementation of the Project;

• c) Pass an order declaring that Respondent No.1 Uttar Pradesh State Industrial Development Authority (UPSIDA) is not entitled to claim any dues of Respondent no 2 over the property of the Applicant;

• d) Pass such other or further order(s) as may be deemed fit and proper the facts and circumstances of the instant case.”

# 2. The brief facts as submitted by the Applicant are as follows:

• a. The Corporate Debtor i.e., M/s L.M.L Limited was admitted into Liquidation on 23.03.2018, on an application filed by the Resolution Professional.

• b. Pursuant to the issuance of Public Announcement in Form-A, the Respondent No.1 has filed a claim to the tune of Rs. 2,77,12,397/-, which has been admitted in toto by the Resolution Professional under the category of ‘Operational Creditor’.

• c. Subsequently, the Liquidator issued an auction notice dated 07.09.2022 for sale of assets of the Corporate Debtor and thereafter, E-auction was held on 04.10.2022. The Applicant herein was declared as the successful bidder for Property No. Parcel A, B and C, Site-III, Panki Industrial Area, Kanpur. A sale certificate was executed ‘as is where is basis’, ‘no recourse basis’ on 28.12.2022, and possession of the aforesaid property was handed over to the Applicant on 30.12.2022.

• d. However, on application for transfer of the aforesaid plot to the Applicant being the auction purchaser, the Respondent No.1 rejected the transfer and raised a demand of Rs. 82,53,013.53 being the rental dues for the year 2000-2008 in order to execute the transfer of the aforesaid plot. Detailed distribution of outstanding demand over the period of 2000 to 2008 as stated in the Application has been reproduced below: . . . . 

• e. The Applicant submits that the demand of Rs. 82,53,013.53 was paid under protest by the Applicant to the Respondent No.1 to register the transfer of land on the understanding that the same shall be repaid by the Respondent No.1 pending the outcome of this application.

# 3. The Applicant submits that it is a bona fide purchaser of the said property conducted through the legally established procedure under the Code, and has already deposited the entire sale proceeds in the liquidation account of the Corporate Debtor. The Applicant also submits that the sale proceeds received by the Liquidator were also duly distributed in accordance with Section 53(1) of the IBC.

# 4. It is further submitted that the creditors of the Corporate Debtor would receive their dues in terms of the waterfall mechanism provided under Section 53(1) of the IBC. In this regard reliance has been placed on the Judgement of Hon’ble NCLAT in Bhatpara Municipality Th. Chairperson v. Nicco Eastern Pvt. Ltd., (Company Appeal (AT) (Ins) No. 714 of 2021).

# 5. The Applicant finally submits that the demand of Respondent No.1 is not maintainable in terms of provisions of the Code and the Applicant cannot be asked to pay the alleged dues for pre-CIRP period.

REPLY OF RESPONDENT NO.1

# 6. The Respondent No.1 /UPSIDA in its reply filed vide diary no. 656 dated 13.03.2024 disputes and denies the relief made in the present application and submits as follows:

a. The Respondent No.1/ UPSIDA submits that the aforesaid property was leased to the Corporate Debtor for a period of 66 years vide lease deed dated 23.12.1994 and the Corporate Debtor being the original lessee should have informed Respondent No.1/lessor that the company is undergoing insolvency proceedings.

b. The Respondent No.1 contends that a Transfer memorandum was issued by UPSIDA on 05.09.2023 only on execution of an affidavit and indemnity bond by the Applicant on 05.09.2023 in favour of Respondent No.1 stating that the Applicant shall immediately pay all demands raised by UPSIDA.

c. Furthermore, as submitted, Clause 2 of the said Transfer Memorandum stipulates as follows:

• “2. Deposits made by ex-allottee against the plot will be adjusted first towards interest and Lease Rent upto payment and balance if any, towards premium. In case a balance playability is found after adjustment as above, the same shall be payable by you.”

d. It is further submitted that the Applicant is bound by covenants of lease deed and thus cannot evade payment of arrears of lease rentals as well as rentals thereon.

e. The Respondent No.1 further submits that sale was made in “as is where is basis”, “As is what is basis”, “Whatever there is basis” and “No recourse basis” as per certificate of sale deed dated 28.12.2022, which in itself creates contractual obligations to discharge the payment of past lease rentals and interest thereon.

REPLY OF RESPONDENT NO.2

# 7. The Respondent No.2 / Liquidator has filed his reply dated 24.01.2024, in which he submits as follows:

a. The Applicant was declared as successful bidder for aforementioned property and it was sold on “as is where is basis”, “As is what is basis”, “Whatever there is basis” and “No recourse basis” as mentioned in clause Q of e-auction process document dated 07.09.2022 as well as certificate of sale dated 19.10.2022.

b. The Respondent No.2 further submits that the claim of Respondent No.1 has been admitted and it will be distributed to stakeholders by the liquidators as per Section 53 of the Code and payment to operational creditors are covered under Section 53(1)(f) of the Code.

c. It is also submitted that he does not have any role in the present matter and all allegations are bought up against Respondent No.1.

WRITTEN SUBMISSIONS

# 8. The Applicant also filed written submissions on 14.03.2024, wherein the submissions already dealt with in the preceding paragraphs have been reiterated.

FINDINGS AND ORDER

# 9. We have heard the learned counsels for the Applicant and Respondents and perused the material on record.

# 10. The instant application has been filed by the Applicant/Auction Purchaser under section 60(5) of the Code against U.P. State Industrial Development Authority (UPSIDA) claiming refund of the amount which has been deposited under protest as per the demand raised by UPSIDA on the property sold through e-auction by the liquidator during liquidation of the Corporate Debtor. The principle issue for consideration is whether the amount paid by the Applicant under protest to the Respondent No.1/UPSIDA is liable to be refunded.

# 11. It is not in dispute that the Applicant was declared the successful auction purchaser of the said properties pursuant to the e-auction held on 04.10.2022. The Certificate of Sale dated 28.12.2022 and the Possession/Delivery Letter dated 30.12.2022 have been placed on record as Annexure-5 and Annexure-6, respectively. Accordingly, the Applicant acquired the leasehold interest in the said properties pursuant to the sale conducted in the liquidation proceedings on 28.12.2022.

# 12. In the facts of the present case, it is also relevant to consider the circumstances in which the Applicant deposited the amount of Rs.82,53,014/- with Respondent No.1. Upon perusal of the letters dated 17.08.2023 and 25.08.2023 addressed by the Applicant to UPSIDA attached as Annexure 10, it is evident that the Applicant had, at the outset, disputed its liability to discharge the pre-liquidation dues of the Corporate Debtor and specifically requested Respondent No.1 to lodge its claim with the Liquidator in accordance with the provisions of the Code.

# 13. In the aforesaid letters, the Applicant further stated that its pharmaceutical project was being stalled on account of the pending transfer of the subject property and, therefore, while reserving its rights and proposing to approach this Adjudicating Authority under Section 60(5) of the Code, deposited the demanded amount of Rs.82,53,014/- vide Demand Draft No.496798 dated 25.08.2023 under protest. The Applicant also expressly recorded its understanding that the said amount would be refunded to it, with interest, in the event of the application being decided in its favour. Also, the affidavit and indemnity executed by the Applicant formed part of the documents furnished in connection with the transfer of the assets, and was given in the context of the payment made under protest. Therefore, the documents furnished for seeking transfer of the assets were consequential to the protest payment and cannot be treated as an independent undertaking or deposit by the Applicant towards the pre-CIRP dues of the Corporate Debtor.

# 14. Further, during the course of hearing held on 03.08.2026, the learned Counsel appearing for the Applicant submitted that, as UPSIDA was not executing the transfer documents, the Applicant was compelled to deposit the pre-CIRP dues under protest. Thus, the payment cannot be construed as a voluntary acceptance of the underlying liability or as an admission that the pre-CIRP dues of the Corporate Debtor were payable by the Applicant.

# 15. Further, on perusal of the E-Auction Process Document it is noted that the asset was sold on “AS IS WHERE IS, AS IS WHAT IS, WHATEVER THERE IS AND WITHOUT RECOURSE BASIS” and required the bidder to make their own independent inquiries regarding “claims/rights/dues” affecting the asset. Thus, while the Applicant was put on notice regarding the dues affecting the asset, the said document does not specifically provide that the Applicant would assume the pre-CIRP debt of the Corporate Debtor towards UPSIDA as its own liability over and above the sale consideration of Rs. 26.73 crore.

# 16. This position is further borne out from the Terms and Condition attached as Annexure-1 to the Certificate of Sale. Though Clause 7 thereof records that the Applicant has conducted due diligence and has satisfied itself regarding the “dues in respect of Asset”, the Certificate of Sale does not contain any express undertaking by the Applicant to discharge the pre-CIRP dues of Corporate Debtor towards UPSIDA. On the contrary, Clause 12 records that the original lease deed dated 04.07.2000 between UPSIDC and Corporate Debtor was handed over as a title document. Thus, what was transferred was the leasehold interest of the Corporate Debtor in the asset pursuant to the liquidation sale and not, in express terms, the pre-CIRP liabilities of the Corporate Debtor.

# 17. The nature of UPSIDA’s claim is also corroborated by the claim record available on the IBBI website, which records a claim of Rs. 2,77,12,397/- lodged by UPSIDA. The said claim was lodged more than one year prior to the auction sale in favour of the Applicant and it has been admitted in full. Although the said amount differs from the subsequent demand of Rs. 82,53,013.37/-, the record establishes that UPSIDA had already asserted its monetary claim against the Corporate Debtor in the insolvency proceedings prior to the Applicant’s acquisition of the property.

# 18. Now, proceeding to examine the nature of the demand, it is evident from the demand letter dated 14.08.2023 that Respondent No.1/UPSIDA demanded an amount of Rs.82,53,013.37/- towards maintenance charges, interest on maintenance charges, lease rent and GST on lease rent. The period-wise computation shows that the maintenance charges relate to the period from 01.07.2000 to 31.03.2009. The Respondent No.1/ UPSIDA has not specifically denied, in its reply, the period to which the aforesaid maintenance charges pertain. Thus, the principal maintenance dues had accrued during the period when the Corporate Debtor was the lessee of the subject properties, much prior to commencement of the CIRP on 30.05.2017 and the subsequent acquisition of the properties by the Applicant pursuant to the liquidation sale in 2022. Accordingly, the liability towards the principal maintenance charges had accrued against the Corporate Debtor, being the lessee during the relevant period, and could not merely by virtue of the subsequent liquidation sale, be treated as a liability originally incurred by the Applicant.

# 19. Further, the amount of Rs. 63,30,997.37/- towards interest on maintenance charges was thereafter calculated on the aforesaid defaults up to 31.08.2023 and the demand also includes Rs. 30,638/- towards lease rent and Rs. 5,515/- towards GST on lease rent. The fact that interest was computed up to a date subsequent to commencement of CIRP or even subsequent to the auction sale does not alter the character of the underlying principal liability. The interest is consequential upon the failure of Corporate Debtor to discharge the maintenance charges which had already fallen due between 2000 and 2009. All these amounts are therefore arising from a pre-CIRP liability demanded from the Applicant on account of Corporate Debtor.

# 20. The subsequent Lease Deed dated 06.11.2023 also does not alter the above position. The said Lease Deed creates continuing obligations upon the Applicant as the present lessee, including payment of lease rent and maintenance/service charges during its own tenure. It does not expressly state that the Applicant has assumed the already accrued pre-CIRP debt of the Corporate Debtor. The condition in the Transfer Memorandum dated 05.09.2023 that dues of the “ex-allottee” found payable in future may be recovered from the “current transferee” also cannot, in the facts of the present case, be treated as an unequivocal novation of UPSIDA’s already lodged and collated pre-CIRP claim, particularly when the Applicant’s payment was expressly made under protest.

# 21. Further, during the course of hearing on 03.08.2026, on the point of distribution in accordance with Section 53 of the Code, the Ld. Counsels representing the respective parties submitted as follows:

• “1. Ld. Counsel representing the applicant states that she is the successful Auction Purchaser and has purchased the assets in an open e-auction as a going concern in the auction process conducted by the Liquidator.

• 2. She states that there was a claim lodged by UPSIDA during the CIRP / liquidation process and the claim has been collated for pre-CIRP outstanding amount. However, UPSIDA was not executing the documents of transfer/ mutation. Ld. Counsel further submits that since the UPSIDA was not executing the documents, therefore it was compelled to deposit the dues of the pre-CIRP under protest.

• 3. The present applications have therefore been filed for seeking refund of the amount paid by the applicants to the UPSIDA on account of the formalities to be completed for the said purpose.

• 4. Ld. Counsel representing the Liquidator states that the liquidation assets have already been sold to the extent of about 280 crore, and out of which, approximately Rs. 259 crore has already been distributed. The remaining amount is also in the process of being distributed in accordance with the provisions of section 53 of Code.

• 5. Ld. Counsel, Mr. Rahul Kr. Jadaun, has put in appearance for UPSIDA and states that he would not have any grievance, if the distribution takes place in accordance with Section 53 of the Code and as per the entitlement of the UPSIDA.”

# 22. In view of the above, the mere “as is where is” condition or the subsequent transfer of the leasehold interest cannot convert the pre-CIRP liability of the Corporate Debtor into an independent personal liability of the Applicant. The pre-CIRP dues of the Corporate Debtor were required to be dealt with through the liquidation process in accordance with Section 53 of the Code, particularly when the Respondent No. 1 had already lodged its claim in the liquidation proceedings of the Corporate Debtor.

# 23. At this juncture, it would be apposite to refer to the law laid down by the Hon’ble NCLAT in Bhatpara Municipality Through its Chairperson v. Nicco Eastern Pvt. Ltd., (2021) (Company Appeal (AT) (Ins) No. 714 of 2021) wherein it was held as follows:

• “14. Thus the liquidator had a duty to prepare an asset memorandum containing the value of the assets. Clause (f) of sub regulation 2 of regulation 34 stipulates the inclusion of “any other information that may be relevant for the sale of the asset”. Regulation 13 of the said Regulations (supra) enjoins upon the liquidator to submit a preliminary report to the Adjudicating Authority with the Asset Memorandum. Therefore, the liabilities with respect to the assets should have been brought to the notice of the Adjudicating Authority by the liquidator.

• 15. Clause (g) of sub section 1 of section 55 of the Transfer of Property Act, 1882 binds the seller as hereunder: –

• “(1) The seller is bound –

• (g) to pay all public charges and rent accrued due in respect of the property up to the date of the sale, the interest on all encumbrances on such property due on such date, and, except where the property is sold subject to encumbrances, to discharge all encumbrances on the property then existing.

• 16. The outstanding dues of the property tax relating to period prior to sale confirmation are thus dues that are akin to claim of an unsecured creditor (Bhatpara Municipality in the present case) and should be discharged in terms of the properties regarding distribution of assets given in section 53 of IBC. The auction-purchaser cannot be held liable to pay any such dues relating to period prior confirmation of sale as has been held by the Hon’ble Supreme Court in the matter of AI Champdany Industries Ltd. vs. The Official Liquidator & Anr. (supra).”

# 24. Thus, in view of the law laid down by the Hon’ble NCLAT in Bhatpara Municipality Through its Chairperson v. Nicco Eastern Pvt. Ltd. (supra), the outstanding dues pertaining to the period prior to the issuance of the Sale Certificate/handing over of possession are to be treated as pre-CIRP liabilities of the Corporate Debtor and dealt with in accordance with the waterfall mechanism prescribed under Section 53 of the Code, and cannot simultaneously be recovered from the auction purchaser merely because the purchaser required transfer of the leasehold interest in its favour. Accordingly, the Applicant/Auction Purchaser cannot be held liable to pay the pre-CIRP dues of the Corporate Debtor.

# 25. In view of the foregoing discussion, the amount of Rs. 82,53,013.37/-, as demanded by UPSIDA vide letter dated 14.08.2023 and paid by the Applicant under protest towards the pre-CIRP dues of the Corporate Debtor, is not liable to be borne by the Applicant merely on account of its purchase of the asset in liquidation. The Applicant is accordingly entitled to refund of the said amount. UPSIDA shall remain entitled to receive its admissible claim against the liquidation estate in accordance with Section 53 of the Code, as also recorded in the order dated 03.08.2026, wherein the Ld. Counsel representing UPSIDA submitted that UPSIDA would have no grievance if the distribution takes place in accordance with Section 53 of the Code and as per its entitlement.

# 26. The Respondent No.1/ UPSIDA is directed to refund an amount of Rs. 82,53,013.53/- to the Applicant.

# 27. Accordingly, the present application bearing IA No. 485 of 2023 is allowed in the aforesaid terms.

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