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2024 Supreme(Online)(NCLT) 1428
NATIONAL COMPANY LAW TRIBUNAL
DR. VENKATA RAMAKRISHNA BADARINATH NANDULA, SH. CHARAN SINGH, JJ
K. Sivalingam Resolution Professional of NCS Sugars Limited – Appellant
Versus
District Collector Nishant Kumar, IAS – Respondent
IA (IBC) 410 & 1879/2023 | IA (IBC) 1433/2022 | CP(IB) No.299/7/HDB/2018
Shri O.Manohar Reddy, Senior Advocate, Shri O.P. Subash, Shri K. Dilip Naik, Advocates
Shri D.V. Seetharam Murthy, Senior Advocate, Shri Bendi Ravi Teja, Advocate
Shri M. Sunil Kumar, Advocate
The provisions of the Insolvency and Bankruptcy Code, 2016, have overriding effect over the Andhra Pradesh Revenue Recovery Act 1864, and any sale conducted during the moratorium period is null and void.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 14 - Sale of immovable property of the corporate debtor during moratorium period - Moratorium prohibits all actions to foreclose, recover or enforce any security interest - Earlier sale under Andhra Pradesh Revenue Recovery Act, found invalid post commencement of CIRP - Sale certificate dated December 3, 2022, and other related documents declared null and void. (Paras 52-53)
(B) Compliance with moratorium - Observations on the responsibilities of state authorities in adhering to judicial directives during insolvency proceedings. (Paras 51, 52)
(C) Statutory Interpretation - IBC 2016 prevails over state laws; no parallel proceedings allowed during ongoing Corporate Insolvency Resolution Process. (Paras 46-47)
Facts of the case:
The corporate debtor defaulted in payments to sugarcane farmers, leading to the initiation of proceedings under the Andhra Pradesh Revenue Recovery Act prior to the commencement of CIRP. A public auction was conducted, resulting in the sale of the corporate debtor's immovable property. The Tribunal found that the sale process violated the moratorium established under the IBC, declaring the sale proceedings invalid.
Findings of Court:
The Tribunal annulled the sale of property, emphasizing the overriding effect of the IBC and the necessity of adherence to its provisions during insolvency proceedings.
Issues: The primary issues were whether the sale conducted under the Revenue Recovery Act during the moratorium period was valid and whether the provisions of the IBC supersede those of the Recovery Act.
Ratio Decidendi: The court concluded that the sale was invalid as it violated the statutory moratorium under the IBC, which prohibits any actions against the corporate debtor during the insolvency process.
Result: The sale was annulled, and respondents directed to return possession of the property to the resolution professional.
ORDER
1. This Interlocutory Application is filed by the Resolution Professional of the Corporate Debtor/ NCS Sugars Limited praying for the following reliefs:
(a) Annul the sale of the immovable property belonging to the Corporate Debtor illegally permitted by respondent nos.1 – 3 in favour of respondent nos.4 and 6;
(b) Declare the sale certificate dated December 3, 2022 with respect to the Immovable Property of the Corporate Debtor issued by respondent no.1, in favour of respondent nos.4 and 6 as illegal and/ or invalid and/ or improper.
(c) Declare the sale deed having Reg. No.8512 of 2022, executed by and between the respondent no.1, 4 and 6 with respect to the Immovable Property of the Corporate Debtor, as illegal and/ or invalid and/ or improper;
(d) Declare the proclamation of sale dated December 4, 2022 published by respondent nos.1 – 3 as illegal and/ or invalid and/ or improper;
(e) Order and grant a permanent injunction restraining respondent nos.4 and 6 from acting upon and/or giving effect to, directly or indirectly, in any manner whatsoever, the sale certificate dated December 3, 2022 illegally issued in favour of respondent nos.4 and 6 by respondent nos.1-3.
2. This Tribunal vide order dated 20.04.2023 has permitted impleading of the sale certificate holder of the impugned sale as 6th respondent and accordingly this petition has been amended and the neat copy of this IA, has been filed on 27.04.2023.
3. As per the averments of this application, the Corporate Debtor is engaged in the business of cane crushing and production of sugar and associated by-products. The Corporate Debtor purchases sugarcane from farmers. The Corporate Debtor committed default in paying the price for the sugarcane supplied by farmers to the units of the corporate debtor. Consequently, respondents no.2 and 3 initiated proceedings under Andhra Pradesh Revenue Recovery Act, 1864 , to sell the immovable property in order to pay the amounts due to farmers.
The chronology , of evets right from the commencement of sale till its conclusion and delivery of the subject property to the 6th respondent, as narrated in the pleadings is mentioned hereunder. 04.01.2022 Sale notice No.01/2022/ A8 was issued by R/2, viz. Tahsildar, Bobbili and Sale Notice No.02/2022/A8 was issued by R/3, Tahasildar, Seethanagaram qua immovable properties. 18.01.2022 Public auction pursuant to the said sale notice was conducted, wherein 4th respondent was declared as the highest bidder for its offer of Rs.20,05,00,000/-. 09.02.2022 Public auction was conducted. R/4 (Dhatri Real Estate) was declared as the highest bidder. 14.02.2022 Earnest Money Deposit (EMD) of Rs.3,75,000 was paid by 4th respondent. 24.06.2022 Order dated 24.06.2022 was passed in CP (IB) No.299/7/ HDB/ 2018 admitting the Corporate Debtor into CIRP. Said Company Petition was filed by Punjab National Bank (erstwhile Oriental Bank of Commerce). 13.07.2022 Letter was addressed by the applicant to 1st respondent informing him about commencement of CIRP. 29.06.2022 Copy of said order was received. Accordingly, CIRP has commenced against the Corporate Debtor on 29.06.2022. 19.11.2022 Total consideration was Rs.20,05,00,000/-. EMD was Rs.3,00,75,000/-. Total consideration minus EMD, viz. balance amount of Rs.17,04,25,000/- was deposited by R/4 on 19.11.2022. 03.12.2022 Sale Certificate was issued in favour of respondents no.4, 5 and 6. 05.12.2022 This Tribunal vide order dated 05.12.2022 (Annexure ‘C’, page 244 of this IA) in IA (IBC) No.1433 of 2022 in CP (IB) No.299/7/ HDB/2018 has restrained R/1 to 3 from proceeding further with disbursement of amount deposited by R/4 pursuant to two sale notices dated 04.01.2022.
The respondents did not inform that Sale Certificate has been issued. 02.02.2023 The applicant was apprised of the above development vide Reply dated 02.02.2023 (Annexure ‘B’ of this IA) filed by respondents no.1, 2 and 3 in IA (IBC) No.1433 of 2022 in CP (IB) No.299/7/HDB/ 2018 (Annexure ‘A’ of this IA). Bal
