IBC Overrides Provisions of Andhra Pradesh Revenue Recovery Act: NCLT [Read Order]

The Hyderabad bench of the National Company Law Tribunal ( NCLT ) has held that Insolvency Bankruptcy Code ( IBC ), 2016 overrides provisions of the Andhra Pradesh Revenue Recovery Act, 1864.

The Corporate Debtor is engaged in the business of cane crushing and production of sugar and associated by-products. The Corporate Debtor purchases sugarcane from farmers. The Corporate Debtor committed default in paying the price for the sugarcane supplied by farmers to the units of the corporate debtor. Consequently, respondents no.2 and 3 initiated proceedings under Andhra Pradesh Revenue Recovery Act, 1864, to sell the immovable property to pay the amounts due to farmers.

The chronology, of events right from the commencement of the sale till its conclusion and delivery of the subject property to the 6th respondent, as narrated in the pleadings is mentioned hereunder. A public auction under the sale notice was conducted, wherein 4th respondent was declared as the highest bidder. Earnest Money Deposit ( EMD ) of Rs.3,75,000 was paid by the 4th respondent. An Order dated 24.06.2022 was passed in admitting the Corporate Debtor into CIRP. Said Company Petition was filed by Punjab National Bank ( erstwhile Oriental Bank of Commerce ).

The respondents did not inform that a Sale Certificate has been issued. The applicant was apprised of the above development. The Balance sale consideration of Rs.17,04,25,000/- was deposited post-commencement of CIRP.

The applicant contended that Respondents 1 to 3 had knowledge of CIRP and the effect of the moratorium imposed upon the Corporate Debtor, as can be substantiated from the following letters addressed to the 1st respondent and the personal meetings held with the 1st respondent.

The applicant also addressed a letter dated 21.10.2022 to the Cane Commissioner seeking details of proceeds received from R/4 ( Dhatri Real Estate ). Despite the same the 1st respondent ( District Collector ) having recorded a Vide order that an amount of Rs.10,05,00,000/- was paid by the 4th respondent since the date of order of admission/ moratorium, permitted the 2nd & 3rd respondents to distribute a part of sale price deposited by the 4th respondent to certain farmers.

Section 238 gives an overriding effect to the IBC over all other laws. The provisions of the IBC vest exclusive jurisdiction on the NCLT and the NCLAT to deal with all issues about the insolvency process of a corporate debtor, and the mode and manner of disposal of its assets.

There is no conflict between the provisions of the Code and the Andhra Pradesh Revenue Recovery Act, 1864 and it is the case of the Respondents that the process of the sale as per the provisions of the Andhra Pradesh Revenue Recovery Act, 1864, has been completed on the date of sale by auction i.e., 09th February 2022 as per Section 36(1) of the Andhra Pradesh Revenue Recovery Act, 1864, which is before the Insolvency Commencement Date.

A two-member bench comprising Dr Venkata Ramakrishna Badarinath Nandula, Member ( Judicial ) and Sh Charan Singh, Member ( Technical ) observed that merely because, the impugned sale is for the realisation of the areas of the amount due and payable by the corporate debtor to the suppliers of sugarcane, who are farmers and were reportedly agitating, by resorting to Dharanas and Rasta Roko’s, which allegedly resulted in Law & Order problem, the same cannot be the justification, for bypassing/ violating the order of moratorium under Section 14 of the I&B Code

Further held that the impugned sale of the property of the corporate debtor, which is undergoing CIRP, under the public auction held on 09.02.2022 under the provisions of AP Revenue Recovery Act, is unsustainable, unenforceable besides null and void, hence the same is liable to be annulled.

To Read the full text of the Order CLICK HERE

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