Voluntary-Surrender Exception to the IBC Moratorium
Commentary on Sincere Securities Private Limited v. Chandrakant Khemka (2025 INSC 931)

1. Introduction

The Supreme Court’s decision in Sincere Securities Private Limited & Ors. v. Chandrakant Khemka & Ors. carves out a significant clarification to the working of the Insolvency and Bankruptcy Code, 2016 (IBC). Central to the dispute was whether Section 14(1)(d)—the moratorium that bars “recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor”—operates as an absolute prohibition, or whether the Committee of Creditors (CoC) and Resolution Professional (RP) may consensually surrender possession when retention is commercially unviable.

• Parties:

• Appellants: Sincere Securities Pvt. Ltd., Noble Dealcom Pvt. Ltd., and Jodhpur Properties & Finance Pvt. Ltd. (collectively, the secured owners/lessors of different portions of the “White House” property in New Delhi).
• Respondent No. 1: Mr Chandrakant Khemka, suspended director of Nandini Impex Pvt. Ltd. (corporate debtor).
• Respondent No. 3: UCO Bank, the sole financial creditor and hence the sole member of the CoC.

• Factual Core: The owners had already received title deeds and conveyance of the subject property pursuant to loan defaults; the corporate debtor stayed on as a licensee. When CIRP was initiated, the CoC and the RP concluded that paying ₹12 lakh per month for the premises was unsustainable and decided to hand the property back. Only Mr Khemka resisted.

2. Summary of the Judgment

The Supreme Court (Justices Sanjay Kumar and Satish Chandra Sharma) allowed the appeal, set aside the NCLAT’s remand order and restored the NCLT’s direction that possession be delivered to the owners. In essence, the Court held:

• Section 14(1)(d) is intended to prevent a forced eviction at the instance of an owner/lessor. It does not restrain the CoC and RP from voluntarily relinquishing property that is no longer required for CIRP.
• The commercial wisdom of the CoC, as recognised in K. Sashidhar v. IOB, remains paramount and non-justiciable unless it violates expressed provisions of law. Here, the CoC’s decision to surrender the premises was a legitimate commercial decision.
• Remanding the matter for fresh consideration was unnecessary because the factual matrix clearly evidenced consensus (barring the suspended director) that retention was financially burdensome.

3. Detailed Analysis

3.1 Precedents Cited and Their Influence

• K. Sashidhar v. Indian Overseas Bank (2019 12 SCC 150): The Court reiterated the principle that the CoC’s commercial wisdom is sacrosanct and courts/tribunals cannot substitute it with their own view. This precedent supplied the main doctrinal foundation for giving primacy to the CoC’s vote to relinquish the lease.
• Other Cases on Section 14 Moratorium (not specifically cited but contextually relevant): Rajendra K. Bhutta v. Maharashtra Housing & Area Development Authority, Embassy Property Developments v. State of Karnataka, and Gujarat Urja Vikas Nigam v. Amit Gupta. These cases collectively underscore that the moratorium is not intended to freeze all action relating to property, but to protect the corporate debtor’s value as a going concern. The present judgment harmonises with this jurisprudence by distinguishing between “recovery from the debtor” and “voluntary surrender by the debtor (through its CoC/RP).”

3.2 Court’s Legal Reasoning

1. Purpose-Driven Interpretation of Section 14(1)(d)
   The Supreme Court asked whether the legislative object of the moratorium—namely, preserving the debtor’s assets during CIRP—would be advanced or frustrated by compulsory retention of an asset that drains value. It concluded that compelling the corporate debtor to pay exorbitant rent served no rehabilitative purpose.
2. Voluntary vs. Involuntary Act Dichotomy
   By analysing the chronology, the Court underscored that the proceedings were initiated not by the owners unilaterally, but on the CoC’s motion. Therefore, the case fell outside the mischief of Section 14(1)(d), which targets owner-initiated recovery.
3. Primacy of CoC’s Commercial Wisdom
   Relying on Shashidhar, the Court affirmed that once the CoC, after due deliberation, decides to forgo costly premises, tribunals must respect that determination, absent illegality, bad faith, or violation of mandatory statutory provisions.
4. Conduct of Respondent No. 1
   The Court gave weight to the fact that Mr Khemka was unwilling to shoulder rent arrears or current rent, weakening his stance that retention was “essential.” His opposition appeared obstructive rather than bona fide.

3.3 Anticipated Impact of the Judgment

• Clarifies Scope of Moratorium: Establishes that Section 14(1)(d) is not an absolute shield but a protective mechanism which can be lifted if the CoC so resolves. This narrows the potential for suspended management to misuse the moratorium to stall resolution.
• Strengthens CoC Autonomy: Tribunals and litigants are reminded that commercial choices—whether to keep or release assets—lie with financial creditors, streamlining CIRP timelines.
• Economic Efficiency: By allowing exit from financially draining contracts, the decision fosters preservation of the debtor’s value and potentially enhances recovery prospects for creditors.
• Lease/Licence Jurisprudence: Landlords and asset-owners now have clearer guidance: they cannot enforce eviction during moratorium, but they may receive possession if the CoC/RP volunteers it. This can influence drafting of financing and security documents to anticipate insolvency scenarios.
• Litigation Strategy: Suspended directors and promoters face greater difficulty in leveraging Section 14(1)(d) to perpetuate control or delay surrender of expensive or unneeded assets.

4. Complex Concepts Simplified

• CIRP (Corporate Insolvency Resolution Process): A time-bound procedure (currently 330 days including litigation delays) that seeks to either rescue the company through a resolution plan or send it into liquidation.
• Moratorium (Section 14): An automatic “freeze” on suits, enforcement actions, and recovery of property once CIRP begins. Its spirit is to provide a breathing space for the debtor.
• Section 14(1)(d): Specifically halts landlords/owners from evicting the debtor. • Key takeaway from this case: The bar applies to coercive recovery, not to consensual surrender approved by the CoC.
• Committee of Creditors (CoC): A body comprising all financial creditors (or a single creditor, as here). It exercises ultimate control over major commercial decisions during CIRP, such as whether to continue leases, approve resolution plans, or proceed to liquidation.
• Commercial Wisdom: A judicially crafted term denoting the business judgment of the CoC, which courts respect unless it violates explicit law.

5. Conclusion

Sincere Securities v. Chandrakant Khemka elucidates an important nuance: the IBC moratorium shields the corporate debtor from involuntary dispossession, but does not bind it to burdensome contracts when the creditors themselves deem them wasteful. By reaffirming the pre-eminence of CoC’s commercial wisdom and introducing the “voluntary-surrender exception,” the Supreme Court has both added flexibility to insolvency proceedings and curbed tactical misuse of Section 14(1)(d). Future tribunals are now equipped with a clearer lens to differentiate obstructive litigation from legitimate protection of the debtor’s estate, thereby advancing the Code’s core goal of timely and value-maximising resolution.