Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), New Delhi has held that secured assets lawfully sold in auction prior to the filing of an insolvency application under Section 94 of the Insolvency and Bankruptcy Code, 2016 (IBC) cannot be treated as part of the debtor’s estate or protected by the moratorium under Section 96 of the Code. A Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) dismissed the appeal filed by Maria Kuresh Rajkotwala, upholding the order of the National Company Law Tribunal (NCLT), Mumbai Bench – I dated September 2, 2025, which excluded the auctioned assets from the insolvency estate of the personal guarantor.

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Background

The appellant, Maria Kuresh Rajkotwala, had executed a personal guarantee in favour of Union Bank of India for loans advanced to the principal borrower. Following defaults by the borrower, the bank initiated recovery proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, and the mortgaged assets were auctioned on December 13, 2024, with the sale being confirmed on December 18, 2024. The auction purchaser paid the full sale consideration, and the bank issued a sale certificate dated December 24, 2024. On the same day, the appellant filed an application under Section 94 of the IBC, seeking initiation of the insolvency resolution process as a personal guarantor.

Subsequently, the appellant moved an intervention application before the NCLT, claiming that the assets sold in auction should be included in her insolvency estate and protected by the moratorium under Section 96 of the IBC. The NCLT rejected the contention, observing that the sale was concluded prior to the filing of the insolvency application, and therefore, the moratorium could not retrospectively invalidate a concluded transaction.

Appellant’s Contentions

The appellant argued that the sale certificate relied upon by the bank was unsigned as of December 24, 2024, and was formally signed on December 26, 2024. Hence, it was contended that the sale could not be deemed complete before the filing of the insolvency application. The appellant further contended that the unsigned sale certificate produced by the bank was invalid, and therefore, the assets could not be excluded from the Section 94 proceedings. It was submitted that since the moratorium under Section 96 commenced immediately upon filing the application, the sale was void and could not be given effect.

Respondent’s Submissions

Opposing the appeal, Union Bank of India submitted that the auction was completed on December 13, 2024, and confirmed on December 18, 2024, in favour of the auction purchaser, who had made full payment before the filing of the Section 94 application. It was argued that the issuance of a sale certificate was a ministerial act and that the rights of the purchaser stood crystallised upon confirmation of sale. The bank further relied on the Supreme Court’s judgment in Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd. [(2023) SCC OnLine SC 1552], to submit that once the auction notice is published and the borrower fails to redeem the mortgage before the auction date, the right of redemption stands extinguished. The bank, therefore, maintained that the moratorium under Section 96 could not invalidate a transaction that had been lawfully completed prior to the commencement of insolvency proceedings.

Findings of the NCLAT

The Appellate Tribunal upheld the NCLT’s reasoning, observing that the auction sale was completed and confirmed prior to the filing of the insolvency application. The Bench noted that even assuming the sale certificate was signed on December 26, 2024, the auction process and confirmation were completed well before December 24, 2024—the date on which the Section 94 application was filed. “Even if we accept the submission of the appellant that the sale certificate was signed on 26.12.2024 and 24.12.2024 was only an unsigned sale certificate, that shall have no effect on the completion of the auction which took place on 13.12.2024 and was confirmed on 18.12.2024 by the Bank,” the Bench held. The NCLAT emphasized that moratorium under Section 96 applies prospectively, and cannot operate to invalidate transactions lawfully completed before the insolvency commencement date. “The sale of the secured asset was concluded and the rights of the auction purchaser were crystallized before the moratorium period came into effect. Accordingly, the right of redemption of the personal guarantor stood extinguished much prior to commencement of moratorium,” the Bench observed.

Precedents and Legal Position

The Tribunal referred to the Supreme Court’s decision in Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd. (2023), wherein it was held that a borrower’s right of redemption under Section 13(8) of the SARFAESI Act stands extinguished upon publication of the auction notice if the dues are not cleared before that date. It also relied on its earlier ruling in Pratibha Industries Ltd. (Through Liquidator) v. Yes Bank Ltd. & Anr. (Comp. App. (AT) (Insolvency) No. 1049 of 2024, decided on April 4, 2025), where it was held that the jural relationship between debtor and creditor terminates upon publication of the auction notice, and the moratorium cannot be used to reopen concluded sales.

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Holding that the auctioned assets stood excluded from the insolvency estate, the NCLAT concluded that the NCLT committed no error in allowing the bank and auction purchaser to proceed with registration of the sale certificate. “The right of redemption of the personal guarantor in relation to the secured asset stood extinguished much prior to commencement of moratorium. The auctioned assets, therefore, shall not form part of the estate of the personal guarantor,” the Tribunal held. Accordingly, the appeal was dismissed, and the NCLT’s order was affirmed.

Appearance

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

For Respondents: Present but appearance not marked.

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

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

Coram: Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member)