Category: News & Updates

An Application was filed by a Claimant, Smt. Sabita A. Biswas, before the Hon’ble NCLT, Cuttack, in the matter of ASREC (India) Limited v. RK Jain Construction (India) Pvt.Ltd., seeking directions against the Resolution Professional to admit the claims of the Applicant/Claimant, to deliver the possession of the premises described in the claim form and to pay the arrears of rent for the occupation of the premises by the Corporate Debtor during the Corporate Insolvency Resolution Process (“CIRP”) period. The said claim of the Applicant/Claimant was rejected by the RP.

Such claim of the Claimant/Applicant was based on an unregistered sale deed engrossed on Rs.100/- stamp paper allegedly executed before the Notary and claim amount was mentioned as per the present market value of the property.

The NCLT held that in view of section 17(1) of Registration Act 1908 the sale deed is compulsorily registrable document, and non-registration makes the document ineffective. Further, since the sale deed was engrossed on insufficient stamp paper in view of section 35 of Indian stamp Act, the said document could not be relied for any purpose. In view thereof, the Applicant/Claimant failed to establish her title to the property and that after the purchase she had let out the premises to the Corporate debtor for rent, was unsustainable and thus, claiming arrears of rent during the CIRP period did not arise at all.

Aggrieved Claimant, Smt. Sabita A. Biswas, appealed against the said order of NCLT before the National Company Law Appellate Tribunal, New Delhi (Smt. Sabita A. Biswas Vs. Shri Vinodkumar Pukhraj Ambavat), seeking direction to the Resolution Professional to accept the claim of the Appellant.

NCLAT in view of the above facts and circumstances, held that the NCLT had rightly taken the view that such kind of sale deed which is neither registered nor stamped and was executed before Notary cannot be basis for any claim with regard to the purchase of immovable property as claimed by the Appellant.

• In a recent judgment of the division bench of the Hon’ble Calcutta High Court in Joy Kali Oil Industries Pvt. Ltd. v. Union Of India and Ors., the Appellant filed an appeal on the grounds that the Executive Magistrate is not the District Magistrate as contemplated under Section 14 of the SARFAESI Act and the order of the District Magistrate (“DM”) delegating his powers to the Executive Magistrate for taking possession of the assets of the Appellant was illegal and ought to be quashed.​

• The Hon’ble Bench discussed and relied on the decisions of the Hon’ble Supreme Court whereby it was held that Section 14 of the SARFAESI Act is not a provision dealing with the jurisdiction of the Court as such. It is a remedial measure available to the secured creditor, who intends to take assistance of the authorized officer for taking possession of the secured asset for enforcement of security furnished by the borrower. The authorized officer essentially exercises administrative or executive functions, to provide assistance to the secured creditor and this may take the color of quasi-judicial function, which can be discharged even by the Executive Magistrate. The authorized officer is not required to adjudicate the contentious issues raised by the concerned parties but only verify the compliances referred to in the first proviso of Section 14 of SARFAESI Act and being satisfied in that behalf proceed to pass an order(s) to facilitate the taking over of the possession of the secured assets.​

• In view of the above facts and circumstances, the Hon’ble Bench held that the step taken by the Chief Metropolitan Magistrate (“CMM”)/DM while taking possession of the secured assets and documents relating thereto is a ministerial step. It could be taken by the CMM/DM himself or through any officer subordinate to him. Section 14 does not oblige the CMM/DM to go personally and take possession of the secured assets which can be discharged even by the Executive Magistrate as was done in this case. Thereby, upheld the decision of the Single Judge and refused to interfere with his order rejecting the submissions of the Appellants.​

The above issue became relevant due to conflicting judgments made by various National Company Law Tribunals (“NCLTs“) regarding the question of whether a petition for Corporate Insolvency Resolution Process (“CIRP“) filed against a Corporate Debtor that was withdrawn in accordance with Section 12A of the I&B Code can be revived in the event the Corporate Debtor breaches the provisions of the said Settlement Agreement. 

In the recent case of Bajaj Rubber Company Pvt. Ltd. v. Saraswati Timber Pvt. Ltd., the Applicant being the Operational Creditor (Bajaj Rubber Company Pvt. Ltd.) filed an Application for reviving its company petition filed under section 9 of the I&B Code which was withdrawn pursuant to the settlement between the parties, and an order in this regard was passed granting liberty to revive the petition in the event of default. In the said facts and circumstances, the Hon’ble NCLT, New Delhi Bench observed that:

•An unpaid installment as per the settlement agreement cannot be treated as an operational debt as per Section 5(21) of I&B Code, 2016 as it is not a claim in respect of the provision of goods or services etc.

•Therefore, the failure or breach of the terms and conditions of the settlement agreement cannot be a ground to trigger CIRP against  the Corporate Debtor under the provision of I&B Code.

•The remedy may lie elsewhere not necessarily before the Adjudicating Authority (NCLT).

The bench thus, rejected and thereof dismissed the said Application.