INDIAN OVERSEAS BANK versus M/S RCM INFRASTRUCTURE LTD. AND ANOTHER

Citation: [2022] 7 S.C.R. 1090 · Decided: 18-05-2022 · Supreme Court of India · Bench: L. NAGESWARA RAO · Disposal: Dismissed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 7 S.C.R.
   [2022] 7 S.C.R. 1090
1090
INDIAN OVERSEAS BANK
v.
M/S RCM INFRASTRUCTURE LTD. AND ANOTHER
(Civil Appeal No. 4750 of 2021)
MAY 18, 2022
[L. NAGESWARA RAO AND B. R. GAVAI, JJ.]
Insolvency and Bankruptcy Code, 2016: ss. 238, 10, 14 –
Provisions of the Code to override other laws – On facts, corporate
debtor filed an insolvency petition u/s. 10 on 22.10.2018 – NCLT
admitted the petition on 03.01.2019, moratorium was notified and
Interim Resolution Professional was appointed – Meanwhile the
appellant bank issued the second E-auction notice on 27.11.2018,
to recover the public money availed by the corporate debtor –
Thereafter, E-auction was held by the Bank, the properties were
sold, sale certificate was issued and the sale was completed on
8.03.2019 – Promoter of the corporate debtor filed an application
before NCLT to set aside the security realization during the CIRP
period carried out by the Bank or in alternative cancel the impugned
transaction – NCLT set aside the sale of the property owned by the
corporate debtor – Appeal thereagainst rejected by the NCLAT –
On appeal, held: After the commencement of the CIRP, there is
complete prohibition for any action to foreclose, recover or enforce
any security interest created by the Corporate debtor in respect of
its property including any action under the SARFESI Act in the view
of s.14(1)(c) rw s.238 which have overriding effect over any other
law – On facts, the balance amount was accepted by the appellant
Bank on 8.03.2019 – Sale under the statutory scheme as
contemplated u/rr. 8 and 9 would stand completed only on 8.03.2019,
which falls much after 03.01.2019, i.e., on which date CIRP
commenced and moratorium was ordered – As such, it cannot be
accepted that the sale was complete upon receipt of the part payment
– Appellant Bank could not have continued the proceedings under
SARFESI Act once the CIRP was initiated and the moratorium was
ordered – Thus, the orders of NCLT and NCLAT does not call for
interference –Securitization and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002 – s. 13 – Security
Interest Enforcement Rules – rr. 8, 9.
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Dismissing the appeal, the Court
HELD: 1.1 It is clear that after the CIRP is initiated, there
is moratorium for any action to foreclose, recover or enforce any
security interest created by the Corporate Debtor in respect of
its property including any action under the SARFAESI Act. It is
clear that once the CIRP is commenced, there is complete
prohibition for any action to foreclose, recover or enforce any
security interest created by the Corporate Debtor in respect of
its property. The words “including any action under the SARFAESI
Act” are significant. The legislative intent is clear that after the
CIRP is initiated, all actions including any action under the
SARFAESI Act to foreclose, recover or enforce any security
interest are prohibited. [Para 24][1100-E-G]
1.2 In view of the provisions of s. 238 IBC, the provisions
of the IBC shall have effect, notwithstanding anything inconsistent
therewith contained in any other law for the time being in force
or any instrument having effect by virtue of any such law.
[Para 26][1101-A]
1.3 The instant case arises out of a statutory sale. The sale
would be governed by Rules 8 and 9 of the said Rules. The sale
would be complete only when the auction purchaser makes the
entire payment and the authorised officer, exercising the power
of sale, shall issue a certificate of sale of the property in favour of
the purchaser in the Form given in Appendix V to the said Rules.
[Para 32][1102-F-G]
1.4 In the instant case, the balance amount has been
accepted by the appellant Bank on 8th March 2019. The sale under
the statutory scheme as contemplated under Rules 8 and 9 of the
said Rules would stand completed only on 8th March 2019.
Admittedly, this date falls much after 3rd January 2019, i.e., on
which date CIRP commenced and moratorium was ordered. As
such, it cannot be accepted that the sale was complete upon
receipt of the part payment. [Para 34][1103-B-C]
1.5 In view of the provisions of Section 14(1)(c) of the IBC,
which have overriding effect over any other law, any action to
foreclose, recover or enforce any security interest created by
INDIAN OVERSEAS BANK v. M/S RCM INFRASTRUCTURE
LTD. AND ANOTHER
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SUPREME COURT REPORTS
[2022] 7 S.C.R.
the Corporate Debtor in respect o

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