Mere Possession Of Assets Of Corporate Debtor U/S 13(8) Of SARFAESI Act Does Not Confer Title On Creditor: NCLT Kochi

The present application has been filed under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC) seeking to recall an order passed on 14.08.2024. It is further prayed that the Resolution Plan submitted by the Respondent No. 1 should also be rejected.

The Applicant submitted that they remained completely unaware of the reinstatement of the Corporate Insolvency Resolution Process (CIRP) or the approval of the Resolution Plan, despite being in lawful possession of the subject property under the SARFAESI Act, 2002.

It was further submitted that the order dated 14.08.2024 approving the Resolution Plan proceeds on the assumption, as recorded in para 17 of the order, that the total financial outlay under the Plan amounts to Rs. 1804 Lakhs (Rs. 18.04 Crores). However, the Resolution Plan reveals that the actual secured recovery totals only Rs. 12.56 Crores. There is a lack of clarity as to how the balance amount is proposed to be mobilised.

Per contra, the Respondent submitted that the Tribunal is not vested with any jurisdiction to recall the order approving the resolution plan by reviewing its judgment; the grounds raised by the Applicant pertain to review, which falls exclusively under the jurisdiction of the Hon'ble NCLAT, not this Tribunal.

It was further submitted that Ownership arises only upon successful auction, issuance of a sale certificate, and its registration under the Registration Act, 1908. As such, mere possession is not equivalent to ownership, especially when CIRP has commenced, and all other proceedings stand stayed under Section 14 of the Code.

The Tribunal observed that in the present case, no grounds have been established based on which the impugned order can be recalled. The basic facts like fraud, misrepresentation or alleged lack of jurisdiction based on which an order can be recalled are missing in this case. While the applicant states that he became aware of the insolvency proceedings only upon receiving a caveat notice, the Respondent has proved with evidence the prior communication which the Applicant has also acknowledged.

It held that “the Applicant has not approached this Tribunal with clean hands and has made a false and misleading statement, which disentitles it to any equitable relief even otherwise.”

The Tribunal further observed that the proceedings under the SARFAESI Act does not confer any title or interest on the creditor. Sale or possession is taken under this Act without the intervention of the court and title is conferred on the purchaser only after a valid sale. Therefore, mere possession under section 13(8) of the SARFASESI Act over the assets does not entitle the Applicant to claim any interest.

It concluded that this Tribunal is not empowered to re-evaluate the case on merits as that would amount to reviewing the case which is beyond the remit of this Tribunal. The Applicant consciously stayed away from the insolvency proceedings and relied solely on the SARFAESI proceedings. This conduct amounts to waiving its right to participate in the CIRP. Accordingly, the present application was dismissed.

Case Title:Muthoot Fincorp Limited Versus Orchid Valley Buyer's Association Apartment and Ors.

Case Number:IA (IBC)/57/KOB/2025 IN IA (IBC)/215/KOB/2023 IN CP(IBC)/05/KOB/2021

Order Date: 24/06/2025

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