The Supreme Court of India in Indian Overseas Bank v M/s RCM Infrastructure Ltd. & Anr. held that a sale under section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act"), would be regarded as complete only upon receipt of full consideration towards the sale properties. Further, it was held that an application for the corporate insolvency resolution process ("CIRP") of RCM Infrastructure Ltd ("Corporate Debtor") would prevail even after the process for sale of the properties of the Corporate Debtor had been initiated under section 13 of the SARFAESI Act.


Indian Overseas Bank ("Appellant") had extended credit facilities to the Corporate Debtor, which was classified as a non-performing asset. Thereafter, the Appellant issued a demand notice under Section 13(2) of the SARFAESI Act, calling upon the Corporate Debtor to pay. On failure to pay, the Appellant took symbolic possession of two secured assets under Section 13(4) of the SARFAESI Act (read with Rule 8 of Security Interest (Enforcement) Rules, 2002 ("Rules")) and subsequently issued an e-auction notice.

In the meantime, the Corporate Debtor filed a voluntary insolvency petition before the National Company Law Tribunal ("NCLT") under Section 10 of the Insolvency and Bankruptcy Code ("IBC"). The Appellant pursuant to the e – auction process declared the offer made by three bidders jointly, as the successful offer. On 13 December 2018, the sale was confirmed and a payment of 25% of the bid amount was made by the successful bidders, pursuant to which the Appellant issued a sale certificate to them. The successful bidders were directed to pay the balance 75% of the bid amount within 15 days i.e. by 28 December 2018. However, on request they were allowed to make payment by 8 March 2019.

While the above payment was pending, on 3 January 2019 the NCLT admitted the CIRP petition filed by the Corporate Debtor and accordingly moratorium was notified under Section 14 of the IBC. The Appellant filed its claim under Form C and as the 75% bid amount was yet to be paid, included the same in its claim. During the pendency of CIRP, the balance 75% bid amount was paid by the successful bidders. Accordingly, the Appellant filed a revised claim and informed the interim resolution professional ("IRP") of the payment of sale consideration in relation to the properties.

Pursuant to the above, the promoter of the Corporate Debtor filed an interim application challenging this sale and prayed that it be set aside. The NCLT allowed the same, and being aggrieved, the Appellant challenged the NCLT order setting aside the sale before the National Company Law Appellate Tribunal, Principal Bench ("NCLAT"). The NCLAT dismissed the appeal.

Submissions before the Supreme Court

Submissions of Appellants:

The Appellants contended the following:

  • The initiation of voluntary insolvency proceedings was with the mala fide intent to stall the sale and hence is hit by Section 65 of the IBC.
  • It was further submitted that Section 14(1)(c) of the IBC interdicts any action to foreclose, recover or enforce any security interest including any action under the SARFAESI Act. However, it does not undo actions which have already been completed.

Submissions of Respondents:

The Respondents contended the following:

  • The title of the secured assets cannot be conveyed merely upon confirmation of sale, even before receiving full sale consideration.
  • Continuation of any proceeding is totally illegal in view of Section 14(1)(c) of the IBC and receipt of balance sale consideration was violative of the same. Further, all financial creditors are entitled to a share in the amount received upon realisation of the assets and the Appellant cannot keep it in entirety.

Findings and Observations (Judgment)

Outlining the constituents of a valid sale under section 13(4) of the SARFAESI Act

  • The Supreme Court observed that the sale of the properties pursuant to the SARFAESI Act and the Rules would require to fulfil the following constituents: (a) intention of the parties to convey the security interest towards the outstanding payment obligations; (b) the proposed purchaser making payment of the entire amount towards the transfer of the properties; and (c) the authorised officer under the SARFAESI Act issuing a certificate of sale in favour of the purchaser.
  • Considering that complete payment of the sale consideration had not been received prior to the initiation of CIRP of the Corporate Debtor, the sale was not a complete sale and as per the moratorium issued under section 14 of the IBC any further action towards the sale of the properties would be prohibited.

The IBC will prevail over all other legislations including the SARFAESI Act

  • The Supreme Court observed that, pursuant to section 238 of the IBC, the provisions of the IBC would prevail notwithstanding anything inconsistent with any other legislation.
  • Accordingly, as previously upheld by the Supreme Court inter alia in the matters of Principal Commissioner of Income Tax v. Monnet Ispat and Energy Limited1 and Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited2, the legislative intent was to prohibit any enforcement action once CIRP has been initiated.

KCO Comment

The above judgement has once again highlighted that the IBC, is a complete legislation prevailing even during the pendency of ongoing recovery proceedings under the SARFAESI Act.

The Supreme Court further observed that a valid sale under the SARFAESI Act and Rules, would require that the parties intend to convey the properties towards discharge of the debtor's payment obligations. Pursuant to the provisions of section 13 of the SARFAESI Act and Rules, a sale would be complete only if the purchaser makes the entire payment in relation to the properties, only upon receipt of which an authorised officer would be required to issue a certificate of sale of the property.


1. (2018) 18 SCC 786.

2. (2021) 9 SCC 657.

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