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Judgment
Per: Justice Rakesh Kumar Jain: (Oral)
06.05.2025: This order shall dispose of two appeals bearing CA (AT) (Ins) No. 1674 of 2023 (hereinafter referred to as the first appeal) and CA (AT) (Ins) No. 519 of 2024 (hereinafter referred to as the second appeal) as the issue involved in both the appeals is common. However, for the sake of convenience, the facts are being extracted from the first appeal.
Briefly stated, the Appellant extended the loan facility to the Corporate Debtor, namely, Dutta Agro Mills Pvt. Ltd.. M/s Dutta Agro Mills Pvt. Ltd. slipped into CIRP w.e.f. 04.07.2022 and Pankaj Tibrewal was appointed as the IRP and later on RP.
Since, the Appellant had taken possession of the property of the CD on 22.07.2016 by virtue of its powers in terms of Section 29 of the State Financial Corporation Act, 1951 (in short ‘Act’), therefore, the RP of the CD filed an application under Section 19 (2) read with Section 60 (5) of the Insolvency and Bankruptcy Code, 2016 and Rule 11 of the National Company Law Tribunal Rules, 2016, inter alia, seeking the following reliefs “i. Allow the present application. ii. Direct the Respondent to assist the Applicant to complete the Corporate Insolvency Resolution Process of the Corporate Debtor in a time bound manner. iii. Direct the Respondent to handover the possession of the movable and immovable properties/assets of the Corporate Debtor to the Applicant. iv. Pass any other Order or relief as this Hon'ble Tribunal deems fit and proper in the interest of justice”.
The main prayer of the RP is regarding direction to the Respondent (Appellant) to handover the possession of the movable and immovable properties/assets of the CD to him.
The application was contested by the Appellant on various grounds but the Tribunal allowed the application holding that the provisions of IBC shall prevail over the provisions of the Act and ultimately allowed IA(IB)No.1267 /KB/2022 filed by the RP.
In order to reach to this conclusion, the Tribunal relied upon a decision of the Hon’ble High Court of Patna rendered in the case of Bihar State Financial Corporation & Ors. Vs. Parmanand Kumar etc., 2008 SCC Online Pat 105 and has referred to paras 14, 17 and 21 of the said judgment which may also be referred again as under:-
“14.In the context of the present controversy, sub-section (4) also assumes importance inasmuch as it provides that all the expenses incurred for taking steps for transfer of the property are the liability of the owner of the assets and to be deducted from the recovery made from such assets. It is only after deducting or adjusting the expenses or cost of expenses of transfers, the remainder is adjusted against the outstanding dues to Corporation. " After outstanding of Corporation is satisfied the balance is to be applied to satisfy the other debts of the loanee. Residue if any, goes to the promoters or its successors. Under the statutory scheme the Corporation while transferring the assets of debtor. acts only as a person authorized by law to deal with assets of debtor and acts only as such in applying the proceeds of transfer for discharging the liabilities of owner o[ assets so transferred. This provision conclusively establishes the statutory scheme of continued ownership of debtor promoters until assets vest in transferee as transferees from the owners."
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17.Whenever the assets of debtor is sought to be transferred for realization of dues, whether under statutory power as under Section 29 of the Act or in execution of a decree of the Court under Code of Civil Procedure, it is now well accepted norm that before the sale is concluded and debtor's rights in property to be transferred are extinguished, an opportunity is required to be given to the defaulter to pay the realizable sale price as has been offered for it by the prospective buyer and retain the same for himself is only after this exercise that the sale can be concluded by the Corporation and the cost of conducting such transfer may be first adjusted against the realization. Only remainder can be appropriated towards the outstanding of the creditor Corporation in the first place. and thereafter towards other debts. The action of attempting to sale or transfer the asset of debtor is not depended on the debtor's will but is the action of Corporation vested with statutory authority to take such action.”
Similar order was passed in the second appeal as well, therefore, the Appellant common in both the appeals, has preferred these two appeals in which it is submitted that since the possession was taken in the first appeal on 21.07.2016 and in second appeal on 05.10.2016 much prior to the CIRP and that as per Section 29(5), the financial corporation after having taken possession becomes the owner of the such concern, the Tribunal has committed an error in allowing the application of the Respondent. In support of his submissions, he has also referred to a decision of the Hon’ble Supreme Court in the case of ARUNA OSWAL V. PANKAJ OSWAL & ORS., (2020) 8 SCC 79.
On the other hand, Counsel for Respondent has submitted that there is no error in the impugned order which requires any interference by this court and has reiterated the decision of the Patna High Court in the case of Bihar State Financial Corporation (Supra). It is contended that Section 29 has been interpreted by the Patna High Court and it has been held that under the statutory scheme the Corporation while transferring the assets of debtor. acts only as a person authorized by law to deal with assets of debtor and acts only as such in applying the proceeds of transfer for discharging the liabilities of owner of assets so transferred. It further held that this provision conclusively establishes the statutory scheme of continued ownership of debtor promoters until assets vest in transferee as transferees from the owners."
Since, the property has not been transferred further by the Appellant by way of sale, therefore, it was only a custodian.
We have heard Counsel for both the parties and after perusal of the record are of the considered opinion that there is no error in the impugned order passed by the Tribunal as the controversy in the present case is fully covered by the decision of the High Court of Patna in the case of Bihar State Financial Corporation (Supra).
The decision in the case of ARUNA OSWAL (Supra) is not applicable to the controversy in hand.
In view of the aforesaid discussion, we do not find any merit in both these appeals and hence the same are hereby dismissed. No order as to costs.
I.As, if any, are hereby closed.