Bombay High Court quashes moratorium used to stall secured-creditor recovery under Insolvency and Bankruptcy Code
Invocation of IBC moratoriums to obstruct secured creditors' enforcement is being treated as abusive conduct subject to judicial scrutiny. That treatment constrains use of moratoriums to stall Securitisation Act enforcement and auction processes.
Change
The Bombay High Court quashed a Debts Recovery Tribunal (DRT) order that stayed registration of a sale certificate from a south Mumbai auction and directed that Union Bank of India may resume steps to complete the auction sale.
Why it matters
Filing insolvency proceedings to trigger an interim moratorium will no longer automatically freeze registration of auction sale certificates issued before the filing. Secured creditors and successful bidders must therefore push to complete registration and possession instead of relying on moratorium filings to indefinitely delay enforcement.
Implications
- — Banks' secured-asset recovery and legal teams must move to re-register auction sale certificates and apply for possession where registrations were stayed — failure to do so will leave them unable to enforce title and regain physical possession.
- — Auction purchasers' conveyancing and registration teams must file or press pending registration applications to secure legal title now that tribunal stays can be quashed — failure to act will prolong inability to take possession.
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