Bombay High Court quashes DRT stay on mortgage sale and clears bank registration
→Recovery teams at banks must proceed with registering auction sales despite IBC filings
Change
Bombay High Court quashed the Debts Recovery Tribunal order that had imposed a moratorium on a south Mumbai auction, ruled that a sale certificate issued before insolvency proceedings is not stayed by the Insolvency and Bankruptcy Code moratorium, and directed the bank to proceed with registration of the Rs 6.25 crore mortgaged property's auction sale.
Why it matters
When a sale certificate is issued before insolvency proceedings begin, courts cannot treat an Insolvency and Bankruptcy Code moratorium as a bar to registration of that sale. Borrowers or guarantors who file insolvency petitions after an auction cannot rely on the moratorium to freeze secured-creditor enforcement steps; tribunals must examine the timing facts before staying registration.
Implications
- — Recovery teams at banks and legal teams at successful auction purchasers must immediately resume and complete registration and possession steps for sale certificates issued before insolvency filings — failure to act leaves title unperfected and enforcement blocked until appellate relief from the National Company Law Tribunal (NCLT), the National Company Law Appellate Tribunal (NCLAT) or the Supreme Court is obtained.
- — Legal teams at secured creditors must file immediate appeals against any Debts Recovery Tribunal (DRT) or tribunal orders that invoke an IBC moratorium to stay post-auction registration — otherwise enforcement actions remain paralysed while multi-tier appeals proceed, prolonging recovery.
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Source
View on Economic Times