Mr.K.S.Chowdry vs Ms.Mummaneni Vazra Laxmi & Ors.

Per: [Rajeev Bhardwaj, Member (Judicial)]

The instant application has been filed by the promoter and member of suspended Board of M/s.Ravi Cranes and Movers Limited (hereinafter referred as Corporate Debtor) under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, read with Rule 11 of the National Company Law Tribunal Rules, 2016 praying for the following reliefs:

The facts necessary to dispose of the present application are that:

ii) The Corporate Debtor purchased a part of the open land measuring Ac 1-20 guntas, equivalent to 7260 Sq yards 0r 6096.36 sq.mts in survey No.170, situated at Gopanapally, Serilingampally Mandal, Ranga Reddy District (hereinafter referred as ‘disputed property’) for a sale consideration of Rs.2,25,00,000/-.

iii) Another company M/s.RCM Infrastructure Limited (hereinafter referred as ‘RCM’) availed loan from various banks including the Respondent No.2. The Applicant alongwith other Directors of the Corporate Debtor had given personal guarantee and the ‘RCM’ had given Corporate Guarantee for the loan availed by ‘RMC’.

iv) However, the ‘RCM’ was unable to pay the loan amount and therefore, its account was classified as Non-Performing Asset (NPA) on 13.06.2016 and the said company filed application under Section 10 of IBC, 2016, which was admitted vide order dated 03.01.2019.

vi) As per the balance sheet of the Corporate Debtor, the disputed property is of the Corporate Debtor since the Financial Years 2013-14 till 2021-22.

vii) The disputed property is still reflected in the name of the Corporate Debtor, which was mortgaged with the Respondent No.2. The balance sheet of the Corporate Debtor and the Statement of Encumbrance dated 01.07.2023 make it clear that the Corporate Debtor is the owner of this property. When the disputed property is the asset of the Corporate Debtor, it was wrong on the part of the Resolution Professional of the Corporate Debtor not to include it in the Information Memorandum. The Resolution Professional also obtained valuation report which did not correctly reflect the assets of the Corporate Debtor and the valuation should have been carried out after taking into account the disputed property. Thus, the valuation is also undervalued.

ix) In view of the above said circumstances, the Applicant has approached this Authority.

The Respondent No.2 while filing the reply has contented and contested the averments of the applicant and submitted that:

The consortium of banks led by Andhra Bank (now Union Bank of India) including the Respondent No.2 extended credit facilities to the ‘RCM’. When the ‘RCM’ failed to repay the loan amount, its account was classified as NPA on 30.01.2016.

The Respondent No.2 issued Demand Notice dated 12.01.2018 under Section 13(2) of the SARFAESI Act, 2002 to the ‘RCM’ and its guarantors including the Respondent No.1. When default occurred, Respondent No.2 took into possession two secured assets mortgaged exclusively with the bank on 18.4.2018.

Both the properties belonging to ‘RCM’ and Respondent No.2 were put to e-auction on 12.12.2018 and an offer of Rs.32.92 crores was accepted. The earnest amount of Rs.8.23 crores was deposited on 13.12.2018 and time to pay the remaining amount was extended up to 08.03.2019.

In the meantime, the ‘RCM’ approached the NCLT, Hyderabad by filing Application under Section 10 of the IBC, 2016, which was admitted on 03.01.2019.

The bank accepted the remaining 20% of the auction bid amount on 08.03.2019 and Sale Certificate was issued on 11.03.2019.

The ‘RCM’ filed IA No.832 of 2010 before the NCLT, Hyderabad to set aside the sale of both the properties. As per order dated 15.07.2020, the realisation of security interest owned by the present Corporate Debtor was upheld, while that of the ‘RCM’ was set aside in view of the moratorium dated 03.01.2019. Aggrieved by the order dated 15.07.2020, the bank preferred an Appeal under Section 61(1) of the IBC, but the same was dismissed vide order dated 26.03.2021 by the Hon’ble NCLAT and subsequently challenge to the said order was also dismissed by the Hon’ble Supreme Court.

Thus, it becomes clear that the order against the present Corporate Debtor has not been set aside and accordingly, it is submitted that the Corporate Debtor is not entitled for any right over the said property.

The Statement of Encumbrance of property is also not a proof of the title and reliance has been placed on the decision of the Hon’ble Supreme Court in Shakeena and Another versus Bank of India and Others (2021)12 SCC 761 and B.Arvind Kumar versus Government of India and others (2007)5 SCC 745.

We have heard the Learned Counsels for both the parties and have also gone through the entire records.

Indisputably, the ‘RCM’ took loan from the consortium of banks including the Respondent No.2 and the present Corporate Debtor was one of the guarantors to the said loan. In pursuance of the provisions of the SARFAESI Act, 2002, the Respondent No.2 took possession of the properties tabulated below:

Both the properties were put to auction and an amount of Rs.32.92 crores was offered on 12.12.2018. The bidders deposited 25% of the bid amount as earnest amount on 13.12.2018 and remaining amount was to be deposited by 08.03.2019. Meanwhile, an application under Section 10 of IBC was filed by the ‘RCM’ which was admitted on 03.01.2019 and therefore, moratorium started in respect of the properties of the ‘RCM’.

The Bidders also deposited remaining 75% of the auction amount on 08.03.2019 and the Sale Certificate was issued on 11.03.2019. However, the NCLT, Hyderabad in IA No.832 of 2020 set aside the Sale Certificate of the property of the ‘RCM’ because of the moratorium and the Appeal against the said order was also dismissed by the Hon’ble NCLAT and further by the Hon’ble Supreme Court.

The Applicant has approached this Authority on the strength of the admission of another Application under Section 7 of the IBC on 26.09.2022 which has been filed by the Respondent No.2 against the Corporate Debtor and the fact that the name of the Corporate Debtor is still recorded as owner in the Encumbrance Certificate. It is relevant to note that before the start of the CIRP, the sale of the disputed property became final on issuance of Sale Certificate on 11.03.2019.

Transfer of title is done in one of the modes mentioned in the Transfer of Property Act. Incorporation of such transfer in the revenue record is only for updating the record. Merely because the name of the Corporate Debtor is still being shown in the Encumbrance Certificate of the disputed property does not mean that this property belonged to it as one becomes owner by transfer of title not by any charge on the property created by the previous owner. The moratorium will affect this property owned by the Corporate Debtor and not of the valid transactions which took place prior to CIRP period. The sale in case of the disputed property was complete when Sale Certificate dated 11.03.2019 was issued.

In this regard, we also place reliance on the decision of the Hon’ble Supreme Court in S.Karthik and Others versus N.Subhash Chand Jain and Others 2020 SCC Online SC 787 which says that any case arising out of the SARFAESI Act, 2002, the sale process is complete on issuance of the Sale Certificate. In Shakeena and Another and B.Arvind Kumar cases supra, the Hon’ble Supreme Court held that even execution and registration of sale deed is no more required after issuance of a sale certificate.

As a result, the Resolution Professional was right in not including the disputed property in the Information Memorandum as the asset of the Corporate Debtor.

For the reasons given above, there is no merit in the application. Accordingly, this IA No.1178 of 2023 in CP(IB) No.36/7/HDB/2022 is dismissed.