Verdict

In the Supreme Court, Civil Appellate
Civil Appeal No. 12812 of 2024

SINCERE SECURITIES PVT LTD & OTHERS .  .  . .  .  .  .  .  .  .  .  .  . APPELLANTS 
Vs
CHANDRAKANT KHEMKA & OTHERS .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  RESPONDENTS

In August 2025, the Hon’ble Supreme Court adjudicated on a case and pronounced a nuanced verdict on a case involving possession of property of a corporate debtor who declared insolvency under the Insolvency and Bankruptcy Code [IBC] 

Background and Facts  

1. In February 2019, Nandini Impex Pvt Ltd [‘Nandini Impex’ or ‘Company’], represented by its Director Chandrakant Khemka [‘Chandrakant’] availed a corporate loan of rupees 3 crores from Sincere Securities Pvt Ltd [‘Sincere Securities’], against the security of the front portion of the ground floor of the company’s  New Delhi property. 
2. Nandini Impex availed another corporate loan of rupees 3 crores jointly from two more companies: Noble Dealcom Pvt Ltd [‘Noble Dealcom’] and Jodhpur Properties & Finance Pvt Ltd, [‘Jodhpur Properties’] this time pledging the rear portion of the ground floor of the same property.
3. Nandini Impex failed to repay the loans and in February 2020, Nandini Impex transferred the titles of the front and rear portions of the property to Sincere Securities, Noble Dealcom and Jodhpur Properties respectively, through two separate title transfer deeds.
4. Simultaneously, Nandini Impex retained possession of both portions of the property through two Leave & License Agreements duly executed with Sincere Securities, Noble Dealcom and Jodhpur Properties as Licensee i.e. for short-term use without any right or interest in the property, for monthly rental of 6 lakhs each for the two portions.
5. Owing to default in payment of rent, in May 2020 Sincere Securities, Noble Dealcom and Jodhpur Properties terminated the leave & license agreements and also filed legal suits for eviction of Nandini Impex from their respective property portions.
6. In September 2022, UCO Bank, in its capacity of a ‘financial creditor’ filed a petition against Nandini impex under IBC for a CIRP – Corporate Insolvency Resolution Process – with National Company Law Tribunal [NLCT].

   Note: (i) IBC defines a ‘financial creditor’ as ‘a person to whom a financial debt is owed, including a person to whom such debt has been legitimately assigned or transferred’ (ii) ‘financial creditor’ shall not be related to the corporate debtor in any manner. 

7. A Committee of Creditors [CoC] was formed as per provisions of the IBC for conducting the CIRP. The sole member of the CoC was UCO Bank, with  Sincere Securities, Noble Dealcom and Jodhpur Properties only being ‘operational creditors’ who filed their claims separately to NLCT. As required under IBC, an Interim Resolution Professional [IRP] was appointed. 
8. As directed by CoC, IRP visited both the portions of the New Delhi property to ascertain if they were  necessary for the business activity of Nandini Impex. The IRP submitted that the property was not necessary for the meagre business of Nandini Impex. Based on recommendations of CoC in April 2023, the NCLT issued order in August 2023 that both portions of the property be surrendered to Sincere Securities, Noble Dealcom and Jodhpur Properties respectively for their possession against the corporate loans taken by him from them.
9. Chandrakant, being a suspended director of Nandini Impex did not surrender the property. Instead, he appealed to National Company Law Appellate Tribunal [NCLAT] which, in November 2024, overturned the NCLT order by citing Section 14 (1) (d) of IBC that imposes  a ‘moratorium’ i.e. temporary halt, on the recovery of property of debtor by the creditors. NCLAT ordered NCLT to adjudicate on the case afresh. 
10.  Aggrieved by NCLAT decision, Sincere Securities, Noble Dealcom and Jodhpur Properties approached the Supreme Court in November 2024. While accepting the appeal, Supreme Court permitted the proceedings before NCLT to continue until the outcome of the appeal.
    

Issues involved

1. Whether Section 14 (1) (d) of IBC, relating to a Moratorium on possession of a corporate debtor’s properties, is applicable to Respondent 1 ?
2. What is the significance of CoC’s recommendations in such cases under IBC ?

Reference Cases    K. Sashidhar v/s Indian Overseas Bank and others (2019) 12 SCC 150

Analysis
A. Whether Section 14 (1) (d) of IBC, relating to a Moratorium on possession of a corporate debtor’s properties, is applicable to Respondent 1 ?

• Section 14 (1) (d) of IBC imposes a Moratorium on creditors from taking possession of a property whose title is still owned by the debtor, that too only until the CIRP proceedings are concluded. 
• In the present case, Nandini Impex had already voluntarily transferred the titles of his properties to Sincere Securities, Noble Dealcom and Jodhpur Properties in lieu of its loans. Nandini Impex no longer owned the titles to the properties. 
• Nandini Impex wrongfully continued to occupy the properties even after the Leave & License Agreements were terminated owing to default of rental amounts.
• All other members of CoC had recommended the property to be surrendered to Sincere Securities, Noble Dealcom and Jodhpur Properties based on the IRP’s report. During the renewed proceedings of NLCT permitted by Supreme Court, the new RP too concurred with the IRP that it was not viable for Nandini Impex to occupy the properties when the business could not afford the rents.
• It was apparent that Nandini Impex was stalling the process for undisclosed and extraneous reasons.

Hence, the Supreme Court held that Section 14 (1) (d) does not apply to Nandini Impex in the present case

B. What is the significance of CoC’s recommendations in CIRP proceedings under IBC ? 

• CIRP essentially involves 5 stakeholders: (i) Adjudicating Authority (ii) Committee of Creditors (iii) Resolution Professional (iv) Resolution seekers i.e. Creditors and (v) the Corporate Debtor.
• When a CIRP is initiated, the CoC is solely responsible for (a) designating an RP (b) conduct discussions with all stakeholders on the recommendations of the RP (c) protect the financial interests of the Creditors (d) maximise the value of the Debtor’s assets for distribution among the Creditors. 
• Though in the present case UCO Bank was the sole member of the CoC with Sincere Securities, Noble Dealcom and Jodhpur Properties also being stakeholders as operational creditors, the CoC gave its recommendations to the Adjudicating Authority without any bias based on the reports of the IRP and the RP.
• In the case of “K. Sashidhar v/s Indian Overseas Bank and others”, the Supreme Court held that commercial decisions of CoC are paramount and cannot be challenged in court.

Hence the Supreme Court held that the decision of the CoC is final and must be complied with by Nandini Impex [Respondent]. 

Based on the above, the Supreme Court set aside the order of NCLAT and restored the NCLT order and directed the RP to proceed with taking possession of the properties of Nandini Impex and delivering them to Sincere Securities, Noble Dealcom and Jodhpur Properties.

For full text of the judgement:
https://api.sci.gov.in/supremecourt/2024/53320/53320_2024_13_1501_63021_Judgement_05-Aug-2025.pdf