Selling property of corporate debtor allowed in absence of conflict in IBC and Benami Act: NCLAT

Case Details: P. Eswaramoorthy, Liquidator of Senthil Papers & Boards (P.) Ltd. v. Deputy Commissioner of Income-tax - [2022] 137 taxmann.com 232 (NCLT- Chennai)

Judiciary and Counsel Details

• • S. Ramathilagam, Judicial Member and Anil Kumar B, Technical Member
  • B. Dhanaraj, Adv. for the Appellant. 
  • R. Shankaranarayanan, ASGI and Raj Jabhakh, Adv. for the Respondent.

Facts of the Case

In the instant case, the liquidation period had commenced before the date in which provisional attachment in respect of the corporate debtor’s property was made by the respondent under the Prohibition of Benami Property Transaction Act. It was indicated that the respondent had not acted in violation of the moratorium.

Moreover, the provisional attachment made by the respondent comes under the statute of Prohibition of Benami Property Transaction Act, which itself had stipulated due process with respect to the attachment of property under section 7 of the same.

NCLT Held

The NCLT observed that the contention of the applicant, liquidator that both being special Acts, the Insolvency and Bankruptcy Code, should prevail over the Prohibition of Benami Property Transaction Act as per general principle for construction did not hold in the instant case.

However, there was nothing to stop the liquidator to proceed under the relevant provision to revive the provisional attachment; and, the NCLT had not found any conflict between the two statutes as there was no bar in selling property of a corporate debtor solely on the ground that the corporate debtor was under Liquidation, and that Liquidator was also not barred by IBC to add said property into liquidation estate, the liquidator was open to approach appropriate forum to raise attachment or any other relief as per provisions of the Act.

The Tribunal held that period of moratorium starts with the initiation of CIRP and ends in two circumstances either on commencement of Liquidation or upon approval of a resolution plan.

List of Cases Referred to

• • Embassy Property Developments (P.) Ltd. v. State of Karnataka [2019] 112 taxmann.com 56/[2020] 157 SCL 445 (SC) (para 11)
  • Raj Kumar Rathan v. Dy. Director, Enforcement Directorate [2020] 117 taxmann.com 297 (NCLT – Hyd.) (para 11)
  • Directorate of Enforcement v. Manoj Kumar Agarwal [2021] 126 taxmann.com 210/126 SCL 433 (NCLT – New Delhi) (para 12)
  • Manish Kumar v. Union of India [2021] 123 taxmann.com 343 (SC) (para 13)
  • Solidaire India Ltd. v. Fairgrowth Financial Services (P.) Ltd.[2001] 30 SCL 59 (SC) (para 14)
  • Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta [2021] 125 taxmann.com 150/167 SCL 241 (SC) (para 15)
  • Tata Consultancy Services Ltd. v. Vishal Ghisulal Jain, RP of SK Wheels (P.) Ltd. [2021] 132 taxmann.com 232/[2022] 170 SCL 153 (SC) (para 15)