Haldiram Incorporation Pvt. Ltd. (s) v. Amrit Hatcheries Pvt. Ltd. And Others (s)., Supreme Court Of India, Judgment, Law, casemine.com

Citation Codes

Equivalent Citations

citation codes

Case Number

Civil Appeal No. 1733 of 2022

Disposition

allowed

Judges

Justice Vikram Nath
Justice Aniruddha Bose

Acts

Section 9 of the Insolvency and Bankruptcy Code, 2016
Section 89 of the Registration Act
Section 17(2)(xii) read with Section 89(4) of the Registration Act, 1908
SARFAESI Act, 2002
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)

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Smart Summary

Factual and Procedural Background

The appellant purchased two blocks of land in Howrah District, West Bengal, at an auction conducted under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”). A sale certificate was issued on 19 August 2019 after the appellant completed payment on 16 August 2019.

On 20 August 2019, an operational creditor initiated a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) before the National Company Law Tribunal (“NCLT”), resulting in a moratorium and commencement of the Corporate Insolvency Resolution Process (“CIRP”). An erstwhile director of the corporate debtor challenged the auction sale, and on 25 February 2020 the NCLT held the sale certificate and hand-over of the property to be illegal, directing that the properties remain assets of the corporate debtor. Punjab National Bank’s appeal from that order was dismissed by the National Company Law Appellate Tribunal (“NCLAT”) on 14 February 2022 by a 2 : 1 majority.

Before the Supreme Court, the liquidator, the erstwhile director, and the Bank acknowledged that the auction sale had concluded prior to the moratorium. Consequently, there was no effective opposition to the appeal filed by the auction-purchaser.

Legal Issues Presented

Whether the auction sale of the corporate debtor’s immovable properties was validly concluded before the declaration of moratorium under the IBC.
Whether, in light of the concluded sale, the properties could be treated as assets in the liquidation estate of the corporate debtor.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Esjaypee Impex Private Limited v. Assistant General Manager and Authorised Officer, Canara Bank (2021) 11 SCC 537	The authorised officer is only required to hand over a duly validated sale certificate to the auction-purchaser and forward a copy for filing under Section 89(4) of the Registration Act, 1908.	Relied upon to affirm that no further registration steps were necessary and that the sale certificate issued to the appellant was valid.
Inspector General of Registration v. G. Madhurambal, SLP(C) No. 16949 of 2022 (decided 11 November 2022)	Followed the principle stated in Esjaypee Impex on sale-certificate registration under SARFAESI.	Cited as consistent authority reinforcing the validity of the appellant’s sale certificate.

Court's Reasoning and Analysis

The Supreme Court noted the unanimous concession by the liquidator, the erstwhile director, and the Bank that the auction sale was completed before the IBC moratorium. No respondent identified any defect in the auction process or in compliance with Section 89(4) of the Registration Act.

Applying the principles from Esjaypee Impex (and the subsequent confirmation in Inspector General of Registration v. G. Madhurambal), the Court held that once a duly validated sale certificate is issued, title passes to the auction-purchaser without any further act of registration. Therefore, the NCLT’s conclusion that the sale was incomplete and that the properties formed part of the liquidation estate was legally unsustainable.

Holding and Implications

APPEAL ALLOWED. The impugned NCLAT order and the underlying NCLT order are set aside insofar as they relate to the two properties situated in Howrah District. The properties shall not form part of the corporate debtor’s liquidation assets, and all pending applications stand disposed of.

Implications: The decision confirms that a sale certificate issued under the SARFAESI Act, once delivered prior to an IBC moratorium, conclusively transfers title to the auction-purchaser. It provides clarity on the interaction between SARFAESI sales and subsequent insolvency proceedings but does not establish a new legal principle beyond reinforcing existing Supreme Court precedent.

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Haldiram Incorporation Pvt. Ltd. (s) v. Amrit Hatcheries Pvt. Ltd. And Others (s).

1. The appellant before us is the purchaser in an auction sale of certain properties of a defaulting borrower. A sale certificate was issued on 19 August 2019 under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) in relation to the immovable properties in respect of which auction sale was held i.e. two blocks of land situated in Howrah district in the State of West Bengal. The auction sale took place in respect of properties mortgaged by the borrower (respondent no. 1 in this case, now represented before us by the Liquidator appointed under the provisions of the Insolvency and Bankruptcy Code, 2016) for availing credit facilities. The latter had defaulted in repayment of the same. It is the case of the appellant that payment was completed by it on 16.08.2019. An operational creditor filed a petition under Section 9 of the 2016 Code before the National Company Law Tribunal (NCLT) and consequently on 20.08.2019 moratorium was declared, initiating the Corporate Insolvency Resolution Process (CIRP). An erstwhile Director of the Corporate Debtor had taken out a notice of motion resisting the sale of the said properties. The NCLT, by an order passed on 25.02.2020 found issue of sale certificate and handing over of the property to be illegal and hence held that the subject-property shall continue to be assets of the Corporate Debtor. The NCLT had proceeded on the basis that sale was not concluded and while commencing the resolution process, directed the Liquidator to take possession of the subject-properties. The Punjab National Bank had appealed against the aforesaid order of the Adjudicating Authority, which was dismissed on 14.02.2022, by a 2 : 1 majority decision, with a technical member of the Appellate Tribunal taking a dissenting view.

2. Though both the erstwhile Director and the Liquidator have filed counter-affidavits contesting the auction sale under the SARFAESI Act, 2002, at the time of hearing before us, the learned counsel representing them conceded the legitimacy of the transaction resulting from sale of the subject property through auction, and both of them agreed that the auction sale stood concluded before declaration of moratorium. This changed position left the appeal without any effective contest.

3. In the case of Esjaypee Impex Private Limited v. Assistant General Manager and Authorised Officer, Canara Bank [(2021) 11 SCC 537], it has been held:—

“16. We are of the view that the mandate of law in terms of Section 17(2)(xii) read with Section 89(4) of the Registration Act, 1908 only required the authorised officer of the Bank under the Sarfaesi Act to hand over the duly validated sale certificate to the auction-purchaser with a copy forwarded to the registering authorities to be filed in Book I as per Section 89 of the Registration Act.”

4. This view has been subsequently followed by a Coordinate Bench of this Court in the case of SLP(C) No. 16949 of 2022 titled “Inspector General of Registration v. G. Madhurambal” decided on 11.11.2022.

5. As we have already indicated, the Liquidator (now representing the Corporate Debtor in liquidation), the erstwhile Director/Promoter of the Corporate Debtor as also the Bank does not dispute the factual position that the sale stood concluded before declaration of moratorium. No reason was cited before us to demonstrate as to why the sale certificate would be held illegal. No case has been made out before us on behalf of the respondents about any defect or default in forwarding the sale certificate in terms of Section 89(4) of the Registration Act, 1908. On the other hand, all the three respondents have concurred at the time of hearing on the point that the sale stood concluded.

6. In these circumstances, the present appeal shall stand allowed to the extent the properties in question are concerned. These properties cannot be treated to be liquidation assets of the Corporate Debtor for the purpose of further steps to be taken in the liquidation proceeding. The impugned order is set aside and that would also render the order of the Adjudicating Authority invalid to the extent the two properties of the Corporate Debtor located in the district of Howrah are concerned.

7. Pending application(s), if any, shall also stand disposed of.

Haldiram Incorporation Pvt. Ltd. (s) v. Amrit Hatcheries Pvt. Ltd. And Others (s).

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Haldiram Incorporation Pvt. Ltd. (s) v. Amrit Hatcheries Pvt. Ltd. And Others (s).

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