High Court held that following the NCLT's admission of the Insolvency Application and cancellation of the auction, the bid amount should be refunded to the Successful Bidder.
The Division Bench of Punjab and Haryana High Court comprising Justice Mrs. Lisa Gill and Justice Amarjot Bhatti observed that following the NCLT's admission of insolvency proceedings and the setting aside of the auction, the bid amount deposited by the successful bidder should be refunded, as it no longer pertains to the corporate debtor’s assets. The moratorium under IBC 2016 does not preclude the release of this amount, since the sale was invalidated and has not been contested.
In the present case, the order was passed by the High Court in connection with two writ petitions: CWP Nos. 22367 of 2021 and 11117 of 2022. Both petitions were considered together due to the request and consent of the parties' learned counsels.
In CWP No. 22367 of 2021, the Central Bank of India seeks to challenge the orders dated 25.10.2021 and 28.10.2021 issued by the Recovery Officer of DRT-III, Chandigarh. The Bank requests that these orders be set aside and that the Recovery Officer be directed to proceed with the auction of properties as per the sale notice proclaimed on 07.09.2021. Conversely, CWP No. 11117 of 2022, filed by M/s Kaur Sain Spinners Limited (the corporate debtor), seeks to annul a notice dated 11.05.2022 issued by the Tehsildar-cum-Executive Magistrate, Samrala. This notice demands possession of the property under Section 14 of the SARFAESI Act, 2002. The corporate debtor also seeks a stay on all SARFAESI Act proceedings.
During the pendency of these writ petitions, an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC 2016) was filed by Punjab National Bank (PNB). This application was admitted on 14.05.2024 by the NCLT, Chandigarh, leading to the appointment of an Interim Resolution Professional (IRP). Consequently, the writ petitions are deemed infructuous. Notably, an application has been made by respondent No. 9, the successful bidder from the auction held on 05.11.2021, seeking a refund of the bid amount, poundage fee, and interest of 12%. This auction was set aside by the Recovery Officer on 24.04.2023.
The High Court noted that the petitioner's request for a refund aligns with the Recovery Officer's decision, which was unchallenged. Despite objections from the IRP regarding the release of funds due to the moratorium imposed under IBC 2016, the court found that the bid amount, which was deposited and not challenged, should be refunded. The court clarified that since the sale did not exist as of the Recovery Officer’s order and no right over the property vested with respondent No. 9, the amount was not considered part of the corporate debtor’s assets. Therefore, the court directed the Recovery Officer to release the deposited amount promptly.
Finally, the High Court disposed of both writ petitions as infructuous due to the NCLT's order, without commenting on the merits of the petitions. The parties were advised to pursue remedies available to them under the law before the appropriate forums. Any pending applications were also disposed of accordingly.
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