Sale Of Secured Assets Completed Before Filing Of Insolvency Application Can't Be Invalidated By Moratorium: NCLAT New Delhi

A Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) dismissed the appeal filed by Maria Kuresh Rajkotwala, upholding the an order dated September 2, 2025 passed by National Company Law Tribunal (NCLT) Mumbai, which excluded the auctioned assets from the insolvency process of the personal guarantor.

Maria Kuresh Rajkotwala had filed an application under section 94 of the IBC seeking initiation of an insolvency resolution process as a personal guarantor to the principal borrower. Meanwhile, the Union Bank of India as a secured creditor had conducted an e-auction sale of the mortgaged assets under the SARFAESI Act. The sale was confirmed and a sale certificate was issued in favor of the auction purchaser.

The Appellant filed an application on the same date stating that the sale certificate in favor of the purchaser should not be issued as the auctioned assets formed part of the estate of the personal guarantor. The NCLT rejected the application stating that the sale had completed before the moratorium came into effect and the personal guarantor had lost its right of redemption on the date of publication of the sale notice. Aggrieved, the personal guarantor had filed an appeal before the NCLAT.

The Appellant submitted that since the sale certificate was signed and issued two days after the sale, the assets could not be excluded from the section 94 proceeding. It was further submitted that an unsigned sale certificate produced by the bank was invalid and hence the sale could not be treated as complete before filing of the application under section 94 of the IBC.

Per contra, the Bank submitted that as the sale was confirmed and the certificate was issued before the sale, all rights over the property stood transferred before the insolvency application. It was further submitted that issuance of the sale certificate was merely a ministerial act and the signature was immaterial once the sale stood concluded. Lastly, it was submitted that the personal guarantor's right of redemption had extinguished once the auction notice was published.

The Tribunal observed that as the sale was confirmed and the certificate was issued before the insolvency application, the rights of the auction purchaser were crystallised before the filing of the application under section 94 of the IBC.

“Even if we accept the submission of the appellant that sale certificate was signed on 26.12.2024 and 24.12.2024 was only unsigned sale certificate, that shall have no effect on the competition of the auction which took place on 13.12.2024 and confirmed on 18.12.2024 by the Bank. ,” the Bench observed.

The Tribunal further observed that the moratorium applies prospectively and therefore it cannot invalidate or reverse transactions completed before the insolvency proceedings were initiated.

The Tribunal upheld the NCLT's reliance on the Supreme Court's judgment in Celir LLP where it was held that the right of redemption of the personal guarantor stands extinguished upon publication of the auction notice if the dues are not cleared before that date.

“The right of redemption of the personal guarantor in relation to the secured asset stood extinguished much prior to the commencement of the moratorium,” the Tribunal said.

Accordingly, the Tribunal dismissed the appeal holding that since the sale was concluded before the commencement of insolvency proceedings, the assets could not be included in the personal guarantor's estate.

Case Title:Maria Kuresh Rajkotwala Versus Rozina Firoz Hajiani & Ors.

Case Number:Company Appeal (AT) (Insolvency) No. 1644 of 2025 & I.A. No. 6465 of 2025

Judgment Date: 31/10/2025

For Appellant : Ms. Eshna Kumar, Mr. Jenil Shah and Ms. Akshita Sharma, Advocates.

For Respondents : Present but appearance not marked.