NCLAT Upholds Auction Sale Amidst Insolvency Proceedings

Tribunal Rules Moratorium Under IBC Prospective, Validating Pre-Commencement Transactions

In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) has upheld the auction sale of a secured asset, clarifying the application of the moratorium under the Insolvency and Bankruptcy Code, 2016 (IBC). The Principal Bench in New Delhi, headed by Justice Ashok Bhushan and Member (Technical) Barun Mitra, delivered the judgment on October 30, 2025, in the matter of Maria Kuresh Rajkotwala v. Rozina Firoz Hajiani and others.

The case arose when Maria Kuresh Rajkotwala, the appellant and a personal guarantor, filed an application under Section 94 of the IBC on December 24, 2024, seeking to initiate an insolvency resolution process. However, the assets in question had been auctioned on December 13, 2024, with the sale confirmed on December 18, 2024. The sale certificate was issued on December 24, 2024, the same day the insolvency application was filed.

The appellant contested the exclusion of the auctioned assets from the insolvency proceedings, arguing that the sale certificate was signed only on December 26, 2024, thus bringing the assets under the purview of the moratorium. The NCLAT, however, ruled that the moratorium under Section 96 of the IBC applies prospectively and does not invalidate actions completed before its commencement.

The tribunal emphasized that the rights of the auction purchaser were crystallized before the moratorium period began. It further noted that the proceedings under the SARFAESI Act are governed by a separate legal framework, enabling financial creditors to enforce their security interest independently.

The NCLAT also referenced a precedent, Pratibha Industries Ltd. through its Liquidator v. Yes Bank Ltd., underscoring that the relationship between the debtor and the secured creditor terminates upon the publication of the auction notice.

The tribunal concluded that the rights of redemption for the personal guarantor were extinguished on November 28, 2024, well before the moratorium's effect. Consequently, the auction purchasers and the secured creditor were entitled to proceed with the registration of the sale certificate, excluding the auctioned assets from the personal guarantor's estate.

This judgment reaffirms the autonomy of completed transactions prior to the initiation of insolvency proceedings, providing clarity on the interplay between the IBC and SARFAESI Act.

Bottom Line:

Insolvency and Bankruptcy Code, 2016 - Moratorium under Section 96 does not invalidate actions or transactions lawfully completed before its commencement.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 94, 96, SARFAESI Act, 2002

Maria Kuresh Rajkotwala v. Rozina Firoz Hajiani, (NCLAT)(Principal Bench, New Delhi) : Law Finder Doc Id # 2806202