NCLAT (04.03.2021) in Vanguard Credit & Holdings Pvt. Ltd. Vs. Kshitiz Chhawchharia (RP) of Ramsarup Industries Ltd. & Anr. [Company Appeal (AT) (Ins.) No. 1125 of 2019 ] held that;
By implication of Section 13(4) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, a secured creditor can take possession of the secured assets, including the right to transfer by way of lease, assignment or sale for realising the secured asset.
Accordingly, the mortgagees will have the right to enforce the mortgage over the land.
The Resolution Plan provides the mechanism for the transfer of the land, which is as follows; ARCIL and Axis Bank would assign a portion of the debt to Narantak Dealcom limited (a nominee of the Resolution Applicant).
In pursuance to the obligations of the Applicant under the guarantee obligations and the mortgage provided, the Resolution Applicant's 1st seeking a direction to allow the transfer of the land from the Applicant to the Corporate Debtor.
Failing this, the Resolution Plan suggests that the assignee of the loan and security should be allowed to enforce under SARFAESI Act and transfer the land to the Corporate Debtor.
Excerpts of the order;
# 141. The Appellant Vanguard Credit and Holdings Private Limited being aggrieved by the Order in Company Application (I.B.) No. 462/K.B./2019 under Section 60 (5) of the Insolvency and Bankruptcy Code, 2016 in Company Petition No. (I.B.) 349/K.V./2019 has filed this Appeal.
# 142. The Appellant contends that the Adjudicating Authority has approved the Resolution Plan even though the Resolution Plan in respect of the Corporate Debtor envisages the transfer of land belonging to the Appellant and not the Corporate Debtor, measuring about 52.49 acres situated at Banskopa Inn Road, Gopalpur, Mouza, J.L. No 65, Durgapur in the Burdwan District, West Bengal (hereinafter referred to as "the said premises"). In the eyes of the law, the Appellant is a stranger to the Corporate Insolvency Resolution Process initiated against the Corporate Debtor.
# 143. The Appellant contends that the premises belong to it. The Adjudicating Authority has failed to appreciate that it has no jurisdiction to adjudicate upon the disputes regarding rights, title, and interest in respect of the property. It has failed to consider that no transfer or conveyance of the said premises can be permitted without first obtaining the express consent of the owner of the land, i.e. Appellant herein.
# 144. The Appellant further contends that the Adjudicating Authority has failed to appreciate the provision of Section 18 of the Code read with the Regulation 37(a) of the Insolvency Resolution Process for Corporate Person's Regulation, 2016, which bars the transfer of title of the third party such as the Appellant herein in favour of the Resolution Applicant. Further, the Adjudicating Authority has erred in essentially giving effect to the provisions of the SARFAESI Act, 2002 by allowing the Resolution Plan of the Resolution Applicant, which could not be permitted in law.
# 145. The Appellant further contends that the Adjudicating Authority has failed to appreciate that the Resolution Plan is conditional and contingent in as much as the Resolution Applicant had sought a direction to the effect that upon the Resolution Plan being sanctioned, the land in the Durgapur would be transferred in the name of the Resolution Applicant which cannot be allowed. Further, the land in the Durgapur not being a property of the Corporate Debtor and property belonged to a third party cannot be transferred by way of a Resolution Plan. As such, the Adjudicating Authority approval is conditional under which the property not belonging to the Corporate Debtor, whose ownership lies with the third-party stated to be transferred to the Resolution Applicant under the Resolution Plan.
# 146. The Appellant contends that Vanguard Credit And Holdings Private Limited is the owner of the land measuring 52.49 acres in Durgapur, West Bengal. The said property which is sought to be transferred by way of Resolution Plan does not belong to the Corporate Debtor but belongs to a third party, i.e. Appellant herein, which is ultimately a separate legal entity and even though Vanguard is a stranger to the Corporate Insolvency Resolution Process of the Corporate Debtor. The Resolution Applicant had sought approval from the Adjudicating Authority in regards to the transfer of the said property to the Corporate Debtor in respect of which the Resolution Plan is approved. The Appellant argued that the property which does not belong to the Corporate Debtor could not be transferred by way of a Resolution Plan.
# 147. The Adjudicating Authority failed to consider Section 18(1)(f) of the Code read with the explanation appended to it defines "assets". According to the explanation thereto, "assets does not include assets owned by the third party in possession of the Corporate Debtor or assets of any Indian or foreign subsidiary of the Corporate Debtor". Regulation 37 of the ‘CIRP’ Regulations, 2016, states that Resolution Plan can only contemplate the transfer of all or part of the assets of the Corporate Debtor to one or more persons on sale of all or part of the 'assets' whether or not subject to any security interest or not. It is further contended that the security interest means "security interest created in respect of an asset of the Corporate Debtor" and not security interest created by a separate legal entity or a third party on behalf of the Corporate Debtor. Regulation 37(d) provides for satisfaction or modification of any security interest created by the Corporate Debtor for its own assets and not of the assets belonging to third parties.
# 148. The Resolution Professional contended that the Appellant's property was mortgaged with the Banks/Financial Creditors. Thus, the Resolution Applicant is entitled to transfer the said premises by way of the Resolution Plan. In this context, it is relevant to mention that no possession has been taken under Section 13(4) of the SARFAESI Act, 2002 by any Financial Creditors regarding the Durgapur land. The Appellant has also challenged the notice under Section 13(2) of the SARFAESI Act, 2002 and proceedings under Section 17 of the SARFAESI Act, 2002, pending before DRT, Kolkata. If during the pendency of the proceedings under Section 17 of the SARFAESI Act, 2002 the said premises is transferred by way of Resolution Plan, the entire proceedings before the DRT would be rendered infructuous, especially when the creation of a mortgage and enforcement procedure thereof is under challenge, is under the exclusive jurisdiction of the DRT.
# 149. The Appellant further contends that the Adjudicating Authority has failed to consider that no transfer or conveyance of the said premises can be permitted without first obtaining the landowner's express consent, i.e. the Appellant herein. The Process Memorandum also states that the Resolution Plan cannot be conditional. Still, the Resolution Applicant has submitted the Resolution Plan, which dehors the Process Memorandum; thus, Resolution Plan is liable to be rejected.
# 150. In reply to the above, the Learned Counsel representing the Committee of Creditors submitted that Mr Ashish Jhunjhunwala, the Corporate Debtor’s promoter, had filed an application under Section 10 of the I&B Code, which was admitted on January 8, 2019. He has been a part of almost all ‘CoC’ meetings from the beginning, including the first ‘CoC’ Meeting conducted on February 7, 2018. Time and again, various issues about the Durgapur unit/land have been discussed in the ‘CoC’ Meetings in the presence of Mr Jhunjhunwala. However, he failed even once to point out that the Appellant was to be treated as a separate entity, and the land could not be a part of the Resolution Process. For the first time in the 21st ‘CoC’ Meeting held on February 11, 2019, Mr Ashish Jhunjhunwala raised an objection stating that Durgapur's land does not belong to the Corporate Debtor. The same was done only at the fag end when Mr Jhunjhunwala realised that the ‘CIRP’ was at the final stage against his expectations. Therefore, with the only aim of obstructing the Resolution Process, such objections were raised at such a belated stage, which is an afterthought.
# 151. For the first time, on February 28, 2019, the Appellant wrote to the Resolution Professional, stating that the land that did not belong to the Corporate Debtor should be excluded from the Resolution Process. The Appellant is not a separate legal entity but is only acting on the whims and fancies of Mr Ashish Jhunjhunwala. Therefore, the Corporate veil should be pierced, and the real promoter/management and the acts and intention could be noticed.
# 152. It is an admitted fact that the Appellant is a Corporate Guarantors and had mortgaged the land to the Financial Creditors. The Appellant is a Company, which is wholly owned by the promoter of the Corporate Debtor.
# 153. On perusal of the factory license (page 125 of the convenience compilation), it appears that the Appellant has provided the right to use the land to the Corporate Debtor since September 2006. The Corporate Debtor had constructed a plant and factory on the said land to set up, establish and run the plant and factory for its wire business from the said land.
# 154. The Appellant herein is the Corporate Guarantors to the loans availed by the Corporate Debtor from Financial Creditors. For this purpose, the Appellant had duly executed Deeds of Guarantee dated May 27, 2009. Accordingly, for the purpose of securing the loan granted to the Corporate Debtor, the present Appellant secured the said loans by way of creating an equitable mortgage of the property owned by it, more particularly the land, building and structure along with the immovable property situated at Durgapur.
# 155. The Guarantee described above gave all rights in respect of the mortgaged properties to the Financial Creditors. Clause 10 of the deed, as mentioned earlier, dated July 27 2009, is as under;
"In case the bank sells the hypothecated, pledged or mortgaged security/ies held in the account, the guarantors agree (s) that the bank may sell securities without giving any notice of such sale to the guarantors. The guarantors agrees that he will not question the sale or sale price in any manner or on any ground whatsoever."
# 156. Learned Counsel representing the ‘CoC’ argued that the Financial Creditors such as Punjab National Bank and Axis Bank had provided their respective loans to the Corporate Debtor on the basis that the repayment by the Corporate Debtor was secured by way of a mortgage over the land (provided by the Appellant) and by way of Corporate Guarantees provided by the Appellant itself.
# 157. By creating a mortgage over the land, Appellant created a security interest over the land in favour of Punjab National Bank (subsequently transfer to Respondent No.3/ARCIL) and Axis Bank. It is thus, evident that the land has been committed by the Appellant to be utilised for the repayment of the debts of Punjab National Bank and Axis Bank. The Punjab National Bank has already taken possession of the land and in the exercise of its power under Section 13(4) of the SARFAESI Act, 2002 and thus, the right to enforce the mortgage is created in its favour. The creation of a mortgage is evident based on documents relating to the deposit of the title deed.
# 158. By implication of Section 13(4) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, a secured creditor can take possession of the secured assets, including the right to transfer by way of lease, assignment or sale for realising the secured asset. Accordingly, the mortgagees will have the right to enforce the mortgage over the land. The Resolution Plan provides the mechanism for the transfer of the land, which is as follows; ARCIL and Axis Bank would assign a portion of the debt to Narantak Dealcom limited (a nominee of the Resolution Applicant). Pursuant to such assignment, Vanguard will be required to take all actions is required to transfer the land to the Resolution Applicant. This obligation to transfer the land will be pursuant to discharging of Vanguard's Corporate Guarantee and mortgage obligations. In case of no consensual transfer of Vanguard, the creditors shall have the right to enforce the mortgage for the transfer of land. In pursuance to the obligations of the Applicant under the guarantee obligations and the mortgage provided, the Resolution Applicant's 1st seeking a direction to allow the transfer of the land from the Applicant to the Corporate Debtor. Failing this, the Resolution Plan suggests that the assignee of the loan and security should be allowed to enforce under SARFAESI Act and transfer the land to the Corporate Debtor.
# 159. It is pertinent to mention that Regulation 37 (B) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 2016 provides that "a Resolution Plan shall provide for the measures, as may be necessary for Insolvency Resolution of the Corporate Debtor for maximisation of value of its assets, including but not limited to the sale of all or part of the assets whether subject to any security interest or not."
# 160. As per Section 31 of the Insolvency and Bankruptcy Code, 2016, the approved Resolution Plan binds all the stakeholders, including the Corporate Debtor's Guarantors. Thus Vanguard, being corporate Guarantor of the Corporate Debtor, is bound by the approved Resolution Plan. In light of the above discussion, we believe that the objections raised by "Vanguard/Appellant" are not sustainable.
# 161. The Learned Counsel for Appellant emphasised the judgment of Hon’ble Supreme Court in case of Embassy Property Developments (P) Ltd. v. State of Karnataka, (2020) 13 SCC 308 : 2019 SCC OnLine SC 1542 at page 332; wherein Hon’ble Supreme Court has held:
“38. It was argued by all the learned Senior Counsel on the side of the appellants that an Interim Resolution Professional is duty bound under Section 20(1) to preserve the value of the property of the corporate debtor and that the word “property” is interpreted in Section 3(27) to include even actionable claims as well as every description of interest, present or future or vested or contingent interest arising out of or incidental to property and that therefore the Interim Resolution Professional is entitled to move the NCLT for appropriate orders, on the basis that lease is a property right and NCLT has jurisdiction under Section 60(5) to entertain any claim by the corporate debtor. But the said argument cannot be sustained for the simple reason that the duties of a resolution professional are entirely different from the jurisdiction and powers of NCLT. In fact Section 20(1) cannot be read in isolation, but has to be read in conjunction with Section 18(1)(f)(vi) of the IBC, 2016 together with the Explanation thereunder.
Section 18(1)(f)(vi) reads as follows: “18. Duties of interim resolution professional.—(1) The interim resolution professional shall perform the following duties, namely— (a)-(e) *** (f) take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor, or with information utility or the depository of securities or any other registry that records the ownership of assets including— (i)-(v) *** (vi) assets subject to the determination of ownership by a court or authority; (g) ***
Explanation.—For the purposes of this section, the term “assets” shall not include the following, namely— (a) assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment; (b) assets of any Indian or foreign subsidiary of the corporate debtor; and (c) such other assets as may be notified by the Central Government in consultation with any financial sector regulator.”
40. If NCLT has been conferred with jurisdiction to decide all types of claims to property, of the corporate debtor, Section 18(1)(f)(vi) would not have made the task of the interim resolution professional in taking control and custody of an asset over which the corporate debtor has ownership rights, subject to the determination of ownership by a court or other authority. In fact an asset owned by a third party, but which is in the possession of the corporate debtor under contractual arrangements, is specifically kept out of the definition of the term “assets” under the Explanation to Section 18. This assumes significance in view of the language used in Sections 18 and 25 in contrast to the language employed in Section 20. Section 18 speaks about the duties of the interim resolution professional and Section 25 speaks about the duties of resolution professional. These two provisions use the word “assets”, while Section 20(1) uses the word “property” together with the word “value”. Sections 18 and 25 do not use the expression “property”. Another important aspect is that under Section 25(2)(b) of the IBC, 2016, the resolution professional is obliged to represent and act on behalf of the corporate debtor with third parties and exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings. Sections 25(1) and 25(2)(b) reads as follows:
“25. Duties of resolution professional.—(1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. (2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions: (a) *** (b) represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings;” (emphasis supplied) This shows that wherever the corporate debtor has to exercise rights in judicial, quasi-judicial proceedings, the resolution professional cannot short-circuit the same and bring a claim before NCLT taking advantage of Section 60(5).
41. Therefore in the light of the statutory scheme as culled out from various provisions of the IBC, 2016 it is clear that wherever the corporate debtor has to exercise a right that falls outside the purview of the IBC, 2016 especially in the realm of the public law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right.” (emphasis supplied)
# 162. It is contended that in the case mentioned above, Hon'ble Supreme Court has held that an asset owned by a third party, but which is in possession of the Corporate Debtor under contractual arrangements, is specifically kept out of the definition of the term ‘assets’ under the explanation to Section 18.
# 163. In paragraph 40 of the said judgement, Hon'ble Supreme Court has expressly held that in the light of the statutory claim as culled out from various provisions of I&B Code, it is clear that wherever the Corporate Debtor had to exercise a right that falls outside the purview of I&B Code especially in the realm of public law, they cannot through Resolution Professional take a bypass and go before NCLT for enforcement of such a right.
# 164. In the case, Hon'ble Supreme Court observed that an asset owned by 3rd party but which owns the Corporate Debtor under the contractual arrangement is kept explicitly out of the definition of the term assets under the explanation to Section 18 of the Code. It is further observed that Section 14(1)(D) of I&B Code, 2016, which prohibits, during the period of moratorium, the recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor, will not go to the rescue of the Corporate Debtor, since what is prohibited therein, is only the right not to be dispossessed, but not the right to have the renewal of the lease of such property. The right not to be dispossessed, found in Section 14(1)(D) will have nothing to do with the rights conferred by a mining lease expressly on government land. What is granted under the deed of mining lease in ML 2293 dated January 4, 2001, by the Government of Karnataka, to the Corporate Debtor, for the right to mine, excavate and recover red oxide for a specified period of time. The deed of lease contains a schedule divided into several parts. The restrictions and conditions subject to which the grant can be enjoyed are found in part 3rd of the Schedule. Therefore, NCLT did not have jurisdiction to entertain an Application against the government of Karnataka for a direction to exclude Supplemental Lease Deeds for the extension of the mining lease. Since a NCLT choose to exercise of jurisdiction not vested in it in law, the High Court of Karnataka was justified in entertaining the Writ Petition on the basis that NCLT was quorum non-judice.
# 165. The Learned Counsel for the Appellant, the Corporate Guarantor of the Corporate Debtor, further emphasised the law laid down by Hon'ble Supreme Court in the case of Jaypee Infratech Ltd. Interim Resolution Professional v. Axis Bank Ltd., (2020) 8 SCC 401; it is contended that in the instant case JP Infratech Limited was undergoing ‘CIRP’. Jayprakash Associates Ltd was the holding company. The Corporate Guarantors of JP Infratech Limited mortgaged its property to secure the loan of JP associates Ltd. Before the Hon'ble Supreme Court, the issue was whether the lenders of JP Associates Ltd, in whose favour mortgage was created by JP Infratech limited and joined the Corporate Insolvency Resolution Process of JP Infratech Limited can be treated as Financial Creditor of JP Infratech limited. According to the lenders, JP Infratech Limited, having mortgaged its property and having given a guarantee, has transferred the right, title and interest to the lenders of JP Associates Ltd. Hon'ble Supreme Court held that merely because the mortgage has been created and the guarantee is being given, the Respondent lenders will not be able to claim as Financial Creditors of JP Infratech Limited, which is undergoing ‘CIRP’.
# 166. It is further said applying the ratio of the above-mentioned case, merely because the Vanguard mortgaged its land to secure the debt of the Corporate Debtor, the land does not get vested with the Corporate Debtor and the lenders of the Corporate Debtor are trying for the transfer of the land of the third party in the Corporate Insolvency Resolution Process of the Corporate Debtor.
# 167. In case of Jaypee Infratech Ltd. Interim Resolution Professional v. Axis Bank Ltd., (2020) 8 SCC 401 : 2020 SCC OnLine SC 237at page 529 Hon'ble Supreme Court held that;
"57. For what has been discussed hereinabove, on the issue as to whether lenders of JAL could be treated as financial creditors, we hold that such lenders of JAL, on the strength of the mortgages in question, may fall in the category of secured creditors, but such mortgages being neither towards any loan, facility or advance to the corporate debtor nor towards protecting any facility or security of the corporate debtor, it cannot be said that the corporate debtor owes them any "financial debt" within the meaning of Section 5(8) of the Code; and hence, such lenders of JAL do not fall in the category of the "financial creditors" of the corporate debtor JIL."
# 168. From the facts of the above-mentioned case, it is clear that in the above case, the Hon'ble Supreme Court was dealing with the issue relating to the preferential transaction. The facts and ratio of the above case are distinguishable from the instant case; therefore, the above case law does not apply to this case.
# 169. It is pertinent to highlight that the Financial Creditors such as Punjab National Bank and Axis Bank had provided their respective loans to the Corporate Debtor on the basis that the repayment by the Corporate Debtor was secured by way of a mortgage over the land (provided by the Appellant) and by way of Corporate Guarantees provided by the Appellant itself. By creating the mortgage over the land, the Appellant has created a security interest over the land in favour of Punjab National Bank (subsequently transferred to Respondent No. 3/ARCIL) and Axis Bank. It is thus evident that the land has been committed by the Appellant to be utilised for the repayment of the debts of Punjab National Bank and Axis Bank. The Punjab National Bank has already taken possession of the land in exercise of its powers under Section 13 (4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 from August 1, 2013, and has the right to enforce the mortgage created in its favour. The copy of the letters confirming the deposit of the title deeds to create a mortgage for the Durgapur property indicates the above position.
# 170. It is important to point out that the date of creation of mortgage and extension of guarantees in favour of the Financial Creditors, there were two Directors of the Appellant, namely, Ashish Jhunjhunwala and Naveen Gupta. Mr Ashish Jhunjhunwala being the promoter of the Appellant (also the Promoter / Managing Director of the Corporate Debtor), holds 99.99% of the shareholding of the Appellant even as on date. Therefore, the Appellant's plea that it is an entirely separate and distinct entity is bogus and sham.
# 171. It is also important to point out that land is an essential part of the corporate debtor's business. The entire wire business of the Corporate Debtor being run on the Durgapur unit, which is situated on the said land, forms an essential part of the business of the Corporate Debtor. Therefore it is an essential part of the Resolution Process. The value arrived in the ‘CIRP’, the purported liquidation value, all includes the value of the land and the same has always been the essence of the business of the Corporate Debtor. It is also pertinent to mention that Mr Ashish Jhunjhunwala, who had himself filed the Application before the Adjudicating Authority, had relied on the valuation of the corporate debtor’s assets. Such a list of assets includes the property at Durgapur. Thus it appears that the present Appeal is only a mischievous attempt to segregate a portion of the property from the Corporate Debtor, which was already considered as the assets of the Corporate Debtor by the Appellant as well as Mr Ashish Jhunjhunwala.
# 172. Since Mr Ashish Jhunjhunwala, the Appellant and the Corporate Debtor promoter, had filed An Application under Section 10 of I&B Code, 2016 of the Corporate Debtor. Therefore, after the same was admitted on 8 January 2019, he has been a part of almost all ‘CoC’ meetings from the beginning, including the 1st ‘CoC’ meeting, which was conducted on 7th February 2018. Time and again, various issues about the Durgapur unit/land had been discussed in the ‘CoC’ meetings in the presence of Mr Jhunjhunwala. However, he failed even once to point out that the Appellant was to be treated as a separate entity, and the land could not be part of the Resolution Process. For the 1st time, in the 21st ‘CoC’ meeting held on 11 February 2019, Mr Ashish Jhunjhunwala raised an objection stating that the land at the Durgapur does not belong to the Corporate Debtor. The same was done only at the fag end and when Mr Jhunjhunwala realised that the ‘CIRP’ was at the final stage against his expectations. Therefore, with the only aim of spoiling the resolution process, such objections were raised at such a belated stage which is only an afterthought. For the 1st time on 20th February 2019, the Appellant wrote to the Resolution Professional stating that the land does not belong to the Corporate Debtor and to exclude from the Resolution Process. The same is also indicative that the Appellant is not a separate legal entity but is only acting on the whims and fancies of Mr Ashish Jhunjhunwala. Therefore, the Corporate veil should be pierced, and the real Promoter/Management’s acts and intention cannot be ignored.
# 173. In light of the discussion above, we find no merit in this appeal, and the appeal deserves to be dismissed.
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Blogger’s Comments; All said and done, the following para of the judgement forms the main crux of the issue;
# 158. By implication of Section 13(4) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, a secured creditor can take possession of the secured assets, including the right to transfer by way of lease, assignment or sale for realising the secured asset. Accordingly, the mortgagees will have the right to enforce the mortgage over the land. The Resolution Plan provides the mechanism for the transfer of the land, which is as follows; ARCIL and Axis Bank would assign a portion of the debt to Narantak Dealcom limited (a nominee of the Resolution Applicant). Pursuant to such assignment, Vanguard will be required to take all actions is required to transfer the land to the Resolution Applicant. This obligation to transfer the land will be pursuant to discharging of Vanguard's Corporate Guarantee and mortgage obligations. In case of no consensual transfer of Vanguard, the creditors shall have the right to enforce the mortgage for the transfer of land. In pursuance to the obligations of the Applicant under the guarantee obligations and the mortgage provided, the Resolution Applicant's 1st seeking a direction to allow the transfer of the land from the Applicant to the Corporate Debtor. Failing this, the Resolution Plan suggests that the assignee of the loan and security should be allowed to enforce under SARFAESI Act and transfer the land to the Corporate Debtor.
Mechanism proposed in the resolution plan for transfer of the property (land) of the guarantor, mortgaged with the financial creditor (bank) is as follows;
The guarantor / owner of the property transfers the mortgaged property to the successful resolution applicant.
In case the guarantor/ owner of the land does not agree to transfer the property to the successful resolution applicant, than;
Financial Creditor (Bank) will assign the loan & security interest to the nominee of the resolution applicant.
Assignee of the loan will enforce security interest under SARFAESI Act and transfer the secured asset (land) to the Corporate Debtor.
Now the questions arise;
Whether a non financial institution secured creditor (nominee of the successful resolution applicant in the present case) can enforce security interest under SARFAESI. Secured creditor in SARFAESI has been defined as under;
(zd) “secured creditor” means—
(i) any bank or financial institution or any consortium or group of banks or financial institutions holding any right, title or interest upon any tangible asset or intangible asset as specified in clause (l);
Whether a secured creditor while enforcing security interest can transfer the secured asset without competitive bidding or auction, to a predetermined successful resolution applicant, under the provisions of SARFAESI.
Apparently, the Hon’ble Adjudicating Authority (NCLT) granted waivers for the above provisions of the SARFAESI & the Hon’ble Appellate Authority (NCLAT) upheld the orders of NCLT.
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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Civil Appeal No 1693 of 2021
Aashish Jhunjhunwala Appellant(s)
Versus
Kshitiz Chhawchharia and Others Respondent(s)
W I T H Civil Appeal No 1688 of 2021
Civil Appeal Diary No 10737 of 2021
O R D E R 1 We find no reason to interfere with the impugned orders dated 4 March 2021 passed by the National Company Law Appellate Tribunal in Company Appeal (AT) (Insolvency) Nos 1124 of 2019, 1125 of 2019 and 468 of 2020.
2 The Civil Appeals are accordingly dismissed.
3 Pending applications, if any, stand disposed of.
New Delhi; July 2, 2021
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