NCLT Not Empowered To Adjudicate Disputes Concerning Auction Sale Of Property Not Forming Part Of Corporate Debtor's Assets: NCLT Indore

The National Company Law Tribunal (NCLT) Indore bench of Shammi Khan (Judicial Member) and Sanjeev Kumar Sharma (Technical Member)has held that the Adjudicating Authority is not empowered to adjudicate disputes relating to auction sale of the property which does not form part of the Corporate Debtor's assets. The present application has been filed under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC) seeking declaration that sale certificate, auction sale, registered sale deed of the mortgaged property are illegal and void. It is further prayed that directions should be issued to compensate the Corporate Debtor for the losses occurred from the undervalued sale. The Tribunal observed that the Applicants including Sheela Bhatnagar who is the owner of the Mortgaged Property do not have locus to file the present application as the property is not part of the Corporate Debtor's assets and do not affect the Corporate Insolvency Resolution Process (CIRP). The reliefs that have been sought in the present application relate to personal property rights and allegations of fraud which fall outside the jurisdiction of the NCLT. Such issues can be addressed under the SARFAESI Act and by the Civil Courts as held by the Supreme Court in Embassy Property Developments. It further observed that the auction was challenged earlier before the Debt Recovery Tribunal which was dismissed. No timely appeal was filed before the Debt Recovery Appellate Tribunal (DRAT). Belated application is still pending before the DRAT, Allahabad. It also held that since the Applicants' claims of procedural lapses such non-service of notices, suppression of lien, undervaluation and exemption of agricultural lands were already decided by the DRT, the present application is hit by the Res Judicate under section 11 of the CPC. It concluded that as the mortgaged property is not part of the CIRP, the role of the Resolution Professional is irrelevant. Given the lack of locus standi of the Applicant to file the present application under section 60(5), prior adjudication by the DRT on the similar cause of action and the limited jurisdiction of interference under this section, the reliefs sought such as declaration of auction sale void or seeking compensation cannot be granted. Accordingly, the present application was dismissed. Case Title:Aditya Bhatnagar & Ors V/s Bank of Baroda & Ors Case Number: IA/195(MP)2025 in CP(IB)/18(MP)2024 Order Date: 23/06/2025 Click Here To Read/Download The Order

NCLT Not Empowered To Adjudicate Disputes Concerning Auction Sale Of Property Not Forming Part Of Corporate Debtor's Assets: NCLT Indore

Mohd Malik Chauhan

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