The Supreme Court recently held in Indian Overseas Bank v. RCM Infrastructure Limited [Civil Appeal No. 4750 of 2021], that, proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”) cannot continue after the initiation of the corporate insolvency resolution process (“CIRP”) under the Insolvency and Bankruptcy Code, 2016 (“IB Code”).
Issue:
Validity of a transaction initiated but not completed, as per the Security Interest (Enforcement) Rules, 2002 (“Rules”), prior to the commencement of CIRP.
Facts:
Findings/ observations of the Court:
Argus View:
From this judgment it appears that if a party is submitting a bid under the SARFAESI Act to purchase a property, the consideration should ideally be paid upfront. If the consideration is to be paid in installment(s) or there is any delay, the bidder runs the risk of proceedings under the IB Code being admitted against the mortgagor, and that could lead to setting aside of the bid and the concluded auction.
Please find a copy of the judgment, here.
This update has been contributed by Yuvraj Choksy (Principal Associate).
Argus Knowledge Centre is now on WhatsApp! Send us a message on +91 8433523504 to receive updates from our Knowledge Centre.
7A, 7th Floor, Tower C, Max House,
Okhla Industrial Area, Phase 3,
New Delhi – 110020
The rules of the Bar Council of India do not permit advocates to solicit work or advertise in any manner. This website has been created only for informational purposes and is not intended to constitute solicitation, invitation, advertisement or inducement of any sort whatsoever from us or any of our members to solicit any work in any manner. By clicking on 'Agree' below, you acknowledge and confirm the following:
a) there has been no solicitation, invitation, advertisement or inducement of any sort whatsoever from us or any of our members to solicit any work through this website;
b) you are desirous of obtaining further information about us on your own accord and for your use;
c) no information or material provided on this website is to be construed as a legal opinion and use of this website will not create any lawyer-client relationship;
d) while reasonable care has been taken in ensuring the accuracy of the contents of the website, Argus Partners shall not be responsible for the results of any actions taken on the basis of information provided in this website or for any error or omission in the website; and
e) in cases where the user has any legal issues, the user must seek independent legal advice.