IMPORTANT POINT
Auction sale of secured asset – Once CIRP is commenced, there is complete prohibition for any action to foreclose, recover or enforce any security interest created by Corporate Debtor in respect of its property.

JUDGMENT :

B.R. GAVAI, J.

1. This appeal challenges the judgment dated 26th March 2021 passed by the National Company Law Appellate Tribunal, Principal Bench, New Delhi (hereinafter referred to as “the NCLAT”) in Company Appeal (AT) (Insolvency) No. 736 of 2020, thereby dismissing the appeal filed by the present appellant-Indian Overseas Bank, which was in turn filed challenging the order dated 15th July 2020 passed by the National Company Law Tribunal, Hyderabad Bench, Hyderabad (hereinafter referred to as “the NCLT”) in I.A. No. 832 of 2019 in C.P. (IB) No. 601/10/HDB/2018, vide which the learned NCLT had allowed the application filed by the respondent No. 2 herein, former Managing Director of the respondent No. 1 herein-M/s RCM Infrastructure Ltd. (hereinafter referred to as the “Corporate Debtor”) and set aside the sale of the assets of the Corporate Debtor.

2. The facts in brief, giving rise to filing of the present appeal, are as under:

The appellant Bank had extended certain credit facilities to the Corporate Debtor. However, the Corporate Debtor failed to repay the dues and the loan account of the Corporate Debtor became irregular. As such, on 13th June 2016, the loan account of the Corporate Debtor came to be classified as “Non-Performing Asset” (NPA).

3. The appellant Bank issued a Demand Notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the “SARFAESI Act”), calling upon the Corporate Debtor and its guarantors to repay the outstanding amount due to the appellant Bank. Since the Corporate Debtor failed to comply with the Demand Notice and repay the outstanding dues, the appellant Bank took symbolic possession of two secured assets mortgaged exclusively with it. The same was done by the appellant Bank in exercise of powers conferred on it under Section 13(4) of the SARFAESI Act read with Rule 8 of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the “said Rules”). One of the said properties stood in the name of Corporate Debtor and the other in the name of Corporate Guarantor. An E-auction notice came to be issued on 27th September 2018 by the appellant Bank to recover the public money availed by the Corporate Debtor.

4. In the meantime, on 22nd October 2018, the Corporate Debtor filed a petition being CP(IB) No. 601/10/HDB/2018 under Section 10 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the IBC”) before the learned NCLT. In the first E-auction held on 6th November 2018, no bids were received. As such, the second E-auction notice came to be issued on 27th November 2018, which was scheduled to be held on 12th December 2018. In the second E-auction, three persons became successful bidders by offering jointly a price of Rs. 32.92 crore for both the secured assets. On 13th December 2018, the sale was confirmed in favour of the successful bidders/auction purchasers in the public auction. The successful bidders deposited 25% of the bid amount, i.e. Rs. 8.23 crore including the Earnest Money Deposit of the said amount and the appellant Bank issued a sale certificate to them. The auction purchasers were directed to pay the balance 75% of the bid amount within 15 days, i.e. prior to 28th December 2018.

5. It appears that the auction purchasers, on 28th December 2018, addressed a letter to the appellant Bank seeking handing over of peaceful and vacant possession of the secured assets and also prayed for extension of time to pay the balance 75% of the bid amount till 8th March 2019. The request made by the auction purchasers was accepted by the appellant Bank on 29th December 2018. It is the case of the appellant Bank that in exercise of its powers under Rule 9(4)(a) of the said Rules, it extended the period till 8th March 2019 for payment of the balance 75% of the bid amount.

6. The learned NCLT, vide order dated 3rd January 2019, admitted the petition filed by the ex-