The National Company Law Tribunal (NCLT), Bengaluru Bench has held that an agreement of sale and an amendment agreement, even if executed prior to commencement of CIRP, do not by themselves confer any right, title or interest in immovable property of the corporate debtor in favour of the applicant, since title passes only through a duly executed and registered conveyance deed.
Accordingly, where the applicant seeks enforcement of such pre-CIRP agreements in respect of a corporate debtor’s asset, and the transaction is already under challenge in avoidance proceedings as preferential, undervalued or fraudulent, the applicant cannot claim conveyance as of right merely on the basis of those agreements, particularly when payments were made during moratorium and no cogent proof of possession is produced.
The Tribunal thus dismissed the application seeking enforcement of the 2019–20 agreements and execution of the sale deed in favour of the applicant. In addition, while noting the discharge deed issued by TGMC Bank after implementation of the resolution plan, the Tribunal stated that TGMC Bank needed to be summoned to explain the entire scenario and its conduct in receiving money both from the applicant and again under the approved resolution plan.
The Division Bench comprising Sunil Kumar Aggarwal (Judicial Member) and Radhakrishna Sreepada (Technical Member) identified as undisputed that the agreement of sale and amendment agreement had been executed before commencement of CIRP, that TGMC Bank was the secured creditor in respect of the schedule property, that CIRP commenced, that the applicant made payment to TGMC Bank during moratorium, that application seeking avoidance of the impugned sale transactions was pending, and that the applicant was seeking enforcement of the sale transaction by execution of the sale deed in its favour.
The Tribunal observed that the applicant had not filed any document showing physical possession of the schedule property except the recital in the amendment agreement, and further held that since payment was made by the applicant during CIRP, possession could not have been delivered earlier. It also observed that the agreement of sale and amendment agreement by themselves did not confer title or convey interest in favour of the applicant in the schedule property. The Tribunal also reiterated that an agreement to sell is only a promise of future transfer and does not itself create any interest in or charge upon immovable property; transfer of right, title and interest occurs only upon execution and registration of the sale deed.
The Tribunal further took note of the memo filed by the successful resolution applicant enclosing the discharge deed executed by TGMC Bank, under which the bank acknowledged satisfaction of its claims and discharged the equitable mortgage over the schedule property after payments under the approved resolution plan. On that basis, the Tribunal recorded that this reflected a possible dubious role of TGMC Bank in receiving money from the applicant while keeping the CoC in the dark, and again receiving amounts under the approved resolution plan, thereby warranting explanation from the bank regarding the entire scenario and its conduct as a public institution. The Tribunal also observed that the application, which sought enforcement in 2024 of agreements of 2019–20 without cogent explanation for the delay, was barred by limitation.
Briefly, the application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 was filed by Fortuna Integral Projects Private Limited seeking a direction to the liquidator / erstwhile resolution professional to receive the balance sale consideration of Rs. 2.17 crores and execute and register the sale deed of the schedule property in its favour. The applicant’s case was that, prior to commencement of CIRP, the corporate debtor had entered into a registered agreement of sale and an amendment agreement in relation to the schedule property for a total consideration of Rs. 8.75 crore, after TGMC Bank, the secured creditor over the property, issued a no-objection certificate permitting sale subject to adjustment of its dues.
The applicant asserted that substantial payments had already been made, that TGMC Bank’s dues were cleared, that possession had been handed over under the amendment agreement, and that only the balance amount remained to be paid for completion of the transaction.
The respondent opposed the application on the ground that the transaction was already under challenge in separate avoidance proceedings as a preferential, undervalued and fraudulent transaction entered into within the look-back period and between related parties. It was contended that the agreement of sale was collusive, grossly undervalued, unsupported by actual flow of substantial consideration to the corporate debtor, and suppressed from the CoC for a considerable period. The respondent and the successful resolution applicant also emphasised that an agreement of sale did not confer any right, title or interest in the immovable property absent a registered conveyance deed.
