NCLT Allahabad Rules, Transfer Of Asset After Commencement Of CIRP, Even With NOC From Lender, Illegal
Sangeetha Prathap
The National Company Law Tribunal (NCLT), Allahabad Bench, Prayagraj, has held that any transfer of assets after commencement of the Corporate Insolvency Resolution Process (CIRP) is illegal and in violation of the moratorium under Section 14 of the Insolvency and Bankruptcy Code, even if the transfer is supported by a No Objection Certificate issued by a secured creditor. The Tribunal clarified that such acts cannot be characterised as mere procedural consequences and amount to unlawful alienation of assets during CIRP.
The ruling came on an application filed by the Resolution Professional (RP) of Hind Agro Industries Limited seeking restoration of ownership and possession of vehicles — including a Porsche Cayenne — that were transferred to a related entity after initiation of the insolvency proceedings. The CIRP was admitted on 03 March 2023, and the moratorium came into effect immediately. It was undisputed that the registration of the Porsche Cayenne was transferred on 27 April 2023 in favour of Eatcco Foods Private Limited, a related entity of the suspended promoters.
The suspended directors relied on an agreement dated 01 February 2023 to argue that the sale took place prior to the commencement of CIRP. The Tribunal, however, rejected this defence after examining the document and finding it legally unenforceable. The order observed that the alleged agreement “was neither stamped nor notarised nor registered” and had never been furnished to the Resolution Professional at any earlier stage, suggesting that it was created only as an afterthought to legitimise the post-moratorium transfer.
The Tribunal further noted that on the date of the alleged agreement, the Porsche was still under hypothecation to Tata Capital Financial Services Limited. The One-Time Settlement (OTS) amount was paid only on 31 March 2023, and the NOC issued by Tata Capital was subsequent to this date. Therefore, the company did not possess absolute ownership on 01 February 2023 and lacked the legal authority to sell or transfer the vehicle at that time.
Rejecting the defence that transfer registration was a procedural outcome of loan closure, the Bench emphasised that the moratorium under Section 14 barred any asset alienation by the suspended board after commencement of CIRP. The Tribunal underscored: the change in registration in favour of a third party after 03 March 2023, even if following issuance of a lender’s NOC, constitutes alienation of assets in violation of Section 14.
The Tribunal also found that the respondents failed to produce evidence of the alleged consideration of ₹34,00,000, such as bank records or accounting entries, and that the amount was never disclosed to the RP or reflected in the company’s financials. It held that the circumstances demonstrated concealment and diversion of assets by the suspended management.
The NCLT further noted that another vehicle, a Toyota Corolla Altis, also registered in the name of the corporate debtor, had not been handed over to the Resolution Professional. The conduct of the suspended directors in withholding possession reinforced the conclusion of deliberate and wilful breach of the moratorium.
Allowing the application filed by the Resolution Professional, the NCLT declared the transfer and registration of the Porsche Cayenne null and void, directed that ownership be restored to the corporate debtor and ordered the suspended directors to hand over possession of both vehicles — the Porsche and the Toyota Corolla Altis — within seven days, warning that failure to comply may attract consequences under the Insolvency and Bankruptcy Code.
Appearance
For RP: Advocate Shubham Agarwal
For Respondents: Advocates Sameer Kumar and Vaibhav Pachauri
Cause Title: Paramjeet Singh Bhatia (RP) Vs. Sirajuddin Qureshi and Ors.
Case No: IA No.549/2024 IN CP No. (IB) 04/ALD/2019
Coram: Judicial Member Praveen Gupta, Technical Member Ashish Verma
