Dues of Attached Vehicles belonging to Corporate Debtor can only be Recovered under IBC, not from Auction Purchasers: Gujarat HC [Read Judgment]

Dues of Attached vehicles - Corporate Debtor - IBC - Gujarat HC - Taxscan

The Gujarat High Court held that the dues of Attached vehicles belonging to Corporate Debtor can only be recovered under the Insolvency and Bankruptcy Code and cannot be recovered from auction-purchasers.

The petitioners, East India Enterprise Thro had prayed to vacate the Provisional Attachment Order passed by the Deputy Director, Mumbai Zonal Office-II, Directorate of Enforcement, under sub-Section (1) of Section 5 of the Prevention of Money Laundering Act, 2002 whereby, the movable properties, i.e. commercial vehicles of M/s. Siddhi Vinayak Logistic Limited (Corporate Debtor), have been provisionally attached under the provisions of the PMLA for a period of 180 days from the date of the order with the further condition that the said properties shall not be removed, parted with or otherwise, dealt with, without the prior permission from the said authority.

Ms. Kruti M. Shah, the counsel for the petitioners prayed to issue appropriate directions to the respondent, Regional Transport Offices to complete the proceedings of transfer of the vehicles purchased by the petitioners from the Court-appointed Official Liquidator of the Corporate Debtor.

Ms. Shah submitted that the petitioners are not connected with the proceedings initiated against the Company in Liquidation, M/s. Siddhi Vinayak Logistic Limited in any manner whatsoever. The petitioners had purchased the subject vehicles in the E-auction proceedings conducted by the respondent, Official Liquidator in pursuance of the order passed by the NCLT.

The single-judge bench of Justice Gita Gopi the dues relatable to the vehicles belonging to the Corporate Debtor can only be recovered under the provisions of the IB Code, i.e. the waterfall mechanism under Section 53 of the IB Code and not from the petitioners, being the auction- purchasers. The petitioners could be held liable to pay statutory dues in respect of the subject vehicles, which have been claimed by the respondent, Regional Transport Offices after their purchase by the petitioners in April 2019, only from the date when they had purchased the subject vehicles after having exercised their right to raise objections to such claim.

The Court directed the petitioners to make payment of the statutory dues from the date of purchase of the subject vehicles by the petitioners, which would be made subject to other proceedings in relation to the said vehicles since the petitioners, being the auction purchasers, could not be asked to make payment of the statutory dues claimed against the Corporate Debtor in liquidation in respect of vehicles prior to their date of purchase by the petitioners.

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