One of the Operational Debtor of Q Sea Industries Limited (Corporate Debtor) has filed an application for initiating Corporate Insolvency Resolution Process (CIRP) before the Adjudicating Authority and CIRP was ordered b

CS Professional · Insolvency - Law and Practice · PYQS · December 2024
One of the Operational Debtor of Q Sea Industries Limited (Corporate Debtor) has filed an application for initiating Corporate Insolvency Resolution Process (CIRP) before the Adjudicating Authority and CIRP was ordered by the Adjudicating Authority. Corporate Debtor has also availed various credit facilities from three Banks. Out of which BOA Bank is one of the financial creditors to whom immovable properties of one manufacturing Unit was exclusively provided as a security. One of the properties of that Unit is located in the State of Jammu and Kashmir. At the time of formation of Committee of Creditors, BOA Bank has opted out of Committee of Creditors as it has exclusive charge on immovable properties of one of the Units of the Corporate Debtor. Hence, the BOA Bank has decided to proceed under SARFAESI Act, 2002 and the Rules made thereunder. Accordingly, it has appointed one Authorized Officer to carry out the recovery process. The Authorized Officer served 21 clear days' notice to the Corporate Debtor for the sale of secured immovable assets of the Unit and also uploaded the detailed terms and conditions of the sale on the website of the BOA Bank in the appropriate page as per the Rules. Following are the details provided with respect to the sale of the properties: (i) The description of the immovable properties of the Unit of Corporate Debtor. (ii) The secured debt for recovery of which the properties to be sold. (iii) Time of public auction. (iv) Deposit of earnest money as per the policy of the BOA Bank and as per Rules. (v) Other important terms and conditions including the value and nature of the properties. Referring to the applicable Act and Rules framed thereunder, answer whether the Authorized Officer has followed appropriate Rules in serving notice, website display and also state what are the special provisions to be followed for sale of properties located in the state of Jammu and Kashmir?

Answer & Explanation:

Rule 8 of the Security Interest (Enforcement) Rules, 2002, which deals with the Sale of Immovable Secured Assets under the SARFAESI Act, provides that the authorized officer shall serve to the borrower a notice of thirty days for the sale of the immovable secured assets. Every notice of sale shall be affixed on a conspicuous part of the immovable property, and the authorized officer shall upload the detailed terms and conditions of the sale on the website of the secured creditor, which shall include: (a) the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor; (b) the secured debt for recovery of which the property is to be sold; (c) reserve price of the immovable secured assets below which the property may not be sold; (d) time and place of public auction or the time after which sale by any other mode shall be completed; (e) deposit of earnest money as may be stipulated by the secured creditor; (f) any other terms and conditions, which the authorized officer considers it necessary for a purchaser to know the nature and value of the property. However, the Authorized officer has given notice only for 21 days instead of 30 days as stated in the Rules. Further, the following details are missing in the website disclosure: the details of the encumbrances known to the secured creditor; reserve price of the immovable secured assets below which the property may not be sold; place of public auction or the time after which sale by any other mode shall be completed. Accordingly, the notice and publication have not complied with the Rules and may be challenged. In case of sale of immovable property in the State of Jammu and Kashmir, the provisions of the Jammu and Kashmir Transfer of Property Act, 1977, shall apply to the person who acquires such property in the State. Alternate Answer to Above Paragraph: After the abrogation of Article 370 & 35A of the Constitution of India and the enactment of the Jammu and Kashmir Reorganisation Act, 2019, the sale of immovable property in the Union Territory of Jammu and Kashmir, the provisions of the Jammu and Kashmir Transfer of Property Act, 1977, shall not be applicable to the person who acquires such property in the State.

Topics: SARFAESI Act, 2002

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