Corporate Debtor Cannot Reclaim Property Sold Under Unregistered Slump Sale Agreement: NCLT Hyderabad

The National Company Law Tribunal (NCLT) at Hyderabad has held that when a corporate debtor has received full consideration and acted upon a slump sale transaction, he cannot later reclaim the property on the ground that the agreement was unregistered, as such conduct is barred by the doctrine of estoppel. A coram of Judicial Member Rajeev Bhardwaj and Technical Member Sanjay Puri dismissed a set of applications filed by the liquidator of Handum Industries Ltd, which has been under liquidation since June 11, 2021. It observed: “Having accepted the full benefits flowing from the contract and having induced SMPL to alter its position irreversibly, the CD (presently through its Liquidator) cannot now be permitted to approbate and reprobate by contending that the property continues to belong to him merely on account of the slump sale agreement being unregistered. Such a contention is hit by the doctrine of estoppel and runs contrary to the settled principle that a party cannot retain the fruits of a transaction while repudiating its corresponding obligations.” The liquidator sought directions against Splendid Metal Products Limited (SMPL) to hand over possession of an industrial property, contending that ownership continued to vest with the corporate debtor because the slump sale agreement executed between the parties was unregistered. Handum Industries had availed a term loan of Rs.15 crore from IDBI Bank on March 12, 2001, and created a mortgage over the property on October 10, 2001. The debt was subsequently assigned to the Stressed Assets Stabilisation Fund in 2004. As on February 29, 2012, the outstanding dues stood at over Rs. 21.68 crore, when the debtor sold its disputed land, building, and plant to SMPL through a slump sale agreement for a total consideration of about Rs. 61.08 crore. After adjusting liabilities, a net amount of Rs. 39.40 crore was paid to Handum Industries and property was handed over to SMPL. Rejecting the liquidator's plea, the tribunal recorded that the debtor had accepted the entire sale consideration, enabled discharge of its secured liability, and induced SMPL to alter its position irreversibly. The property was reflected only in SMPL's financial statements and not in the books of the debtor. The tribunal noted that the debtor, acting through its liquidator could not be permitted to approbate and reprobate by asserting ownership merely due to non-registration of the agreement. It clarified that although an unregistered agreement may not attract protection under Section 53A of the Transfer of Property Act after the 2001 amendment, it is admissible for collateral purposes, including proof of possession and payment of consideration. The tribunal accordingly held that the property did not form part of the liquidation estate and dismissed the applications. Case Title: Ramachander Rao Bikumalla and Splendid Metal Products Ltd Case Citation: 2026 LLBiz NCLT (HYD) 13 Case Number: IA (IBC) No. 124 of 2022 in CP (IB) No. 504/10/HDB/2018 For Applicant: Advocate K Poorna Chandra Rao For Respondent: Advocate T Ravichandran Click Here To Read/Download Order

Corporate Debtor Cannot Reclaim Property Sold Under Unregistered Slump Sale Agreement: NCLT Hyderabad

Kirit Singhania

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