The Mumbai Bench of the National Company Law Tribunal has held that an auction purchaser of a corporate debtor’s asset in liquidation under the Insolvency and Bankruptcy Code cannot be made liable for pre-sale dues of the corporate debtor, particularly where the concerned creditor has already lodged its claim in the insolvency/liquidation process. Recovery of such dues must be pursued only through the statutory framework of the Code, including distribution under Section 53, and not directly against the auction purchaser after issuance of the sale certificate and transfer of title.
The NCLT also made it clear that a society or similar claimant cannot obstruct transfer of the property or insist on payment of earlier dues as a precondition to transfer where those dues pertain to the period prior to the sale certificate and are already part of the liquidation claims process.
The Tribunal therefore directed the liquidator to duly consider and process the society’s claim in accordance with law and to communicate the status of that claim to the society. It clarified that the society would remain at liberty to apprise the liquidator if it possessed any statutory lien in respect of the outstanding dues. The Tribunal also directed that the society should not withhold, obstruct, or delay transfer of the subject property, flat, and corresponding membership or share certificate in favour of the applicants merely because of alleged outstanding dues.
The Division Bench comprising Sushil Mahadeorao Kochey (Judicial Member) and Prabhat Kumar (Technical Member) observed that once the sale of an asset of a corporate debtor is concluded during liquidation and a sale certificate is issued in favour of the successful auction purchaser, followed by transfer of possession and title, claims relating to dues, liabilities, or arrears for the period prior to such sale cannot ordinarily be enforced against the auction purchaser. Such claims must be dealt with strictly in accordance with the mechanism prescribed under the Insolvency and Bankruptcy Code.
The Tribunal further observed that, in the present case, the society had already lodged its claim before the resolution professional and the liquidator, and therefore could not be permitted to bypass the insolvency framework by independently seeking to recover the same dues from the auction purchasers. The Tribunal held that such an attempt would run contrary to the scheme and object of the Code, under which creditors’ claims are to be settled in accordance with the waterfall mechanism under Section 53 out of the liquidation estate.
The Tribunal additionally observed that creditors whose claims are lodged and admitted in liquidation are required to await distribution in accordance with Section 53, and if claims remain unsettled, such claims stand extinguished. On that basis, the Tribunal held that alleged maintenance arrears for periods prior to the sale could not be foisted upon the auction purchasers, who derived title through a liquidation sale conducted under authority of law.
Briefly, applicants had participated in the e-auction conducted by the liquidator, were issued a letter of intent for a consideration of Rs. 3.01 lakhs, paid the full sale consideration, and thereafter obtained a duly stamped and registered sale certificate in their favour. After completion of the sale, the co-operative housing society in which the subject property was situated demanded payment of past maintenance dues allegedly pertaining to periods prior to the applicants’ acquisition of the property, including arrears and interest aggregating to Rs. 28.24 lakhs as on January 2026, and also sought execution of a declaration-cum-deed of indemnity requiring the applicants to undertake payment of even pre-transfer society dues.
The applicants therefore approached the Tribunal seeking declarations and directions that they were not liable for dues relating to the period prior to the sale certificate, that the society be restrained from recovering such dues from them, that the transfer and membership be recorded without insisting on such payment, and that the society pursue its claim only before the liquidator in accordance with the Code. The society had already lodged its claim in the insolvency process, that such claim had been considered by the liquidator during liquidation, and that the society’s claim had been admitted to the extent of Rs. 25.99 lakhs under the category of operational creditors.
