In a groundbreaking interpretation of the law, the moment an application for Personal Insolvency is filed, the interim moratorium kicks in, bringing SARFAESI proceedings to a screeching halt—even if the possession of the property has already been taken by the creditor!
This ruling underlines the powerful protection that the Insolvency and Bankruptcy Code provides to individuals, locking creditors out from continuing any recovery proceedings under the SARFAESI Act once the insolvency process begins. The filing triggers an immediate freeze, halting all further actions, including the sale or transfer of seized assets.
In short: No more SARFAESI—No more recovery—Not even with possession in hand!
Appellant contented that prior to the proceedings under Section 95 of the Insolvency and Bankruptcy code 2016, the Appellant had filed proceedings under Section 13(4) of the SARFAESI Act, 2002 and had taken symbolic possession of the subject mortgaged property.
Subsequent to that an application under Section 95 of the Insolvency and Bankruptcy code 2016 was filed to initiate insolvency proceedings against the Personal Guarantor. The Ld. NCLT had initiated personal insolvency against the Respondent and held that the moratorium had commenced in relation to all debts of the appellant upon filing of the Company Petition.
It is alleged by the appellant that it had got a vested right in the subject property upon taking its symbolic possession and thus had become a de-facto owner of such property and thus had a vested right to dispose of such mortgaged property to its intending purchaser.
Considering, recent judgement dated 2nd July 2024 by Delhi High Court in Sanjay Dhingra Vs IDBI Bank Ltd & Ors WP(C) No.8131/2020 wherein it was held that the respondent bank cannot proceed further under the SARFAESI Act, in view of the interim moratorium, operating on account of the Insolvency Proceedings pending against the petitioner, the personal guarantor. Further, it was held that, as and when the interim moratorium is lifted, and the respondent bank proceeds under the SARFAESI Act, the petitioner shall be at liberty to approach the learned DRT and raise all issues.
Hon’ble NCLAT directed that the appellant shall not proceed further under the SARFAESI Act qua the subject property till the moratorium is lifted. The appeal thus stands dismissed.: Indiabulls Asset Reconstruction company Ltd. v. Pawan Kapoor, NCLAT New Delhi.