Ir/.S. Prabhakar v. Sailaja

Order

Pctitioners . [{espondents Heard Sri A. Venkatesh' Iealned Senior Coutlscl rcplesenting St.i f). Narendar Naik, learncd counsel for thc petitiotters and Sri Raja Shckar [{ao Salvaji, learncd Stancling Counscl fbr the resporldents. Perused thc e rr tire record. l ['he wlit petition is lrlecl sc'eking the tblloiiing re licl' "... to issue an otdcr. tlitcctioll tlr rrrit tlore so itr tltc lttttttrc ol'Writ o1'Mandarlus cleclaring thc actiorr ol'thc Resl.ronclcnts itt issuirtg the Noticc of Sale dated I l.ll l0l-'' (lrnpugned Sllc Noticc") untlet Sectiorr 52( l)(b) and 52(4) olthe Iusolvcncl and l]ankruptcl'Code' 20 l6 ('lBC') lor thc auctiort ol propertl' corlprising of' lancl and huilding in Sy.No.32l. i25ii.

321(r, 32llllA. admcasurin-s 'l(r00 sq.yarcls at A-1 and A-2 Elcctlonics Complcx. Ktrshaiguda ttl clerabad ("Schedulc I'ropert1.") as illega[. trniust. arbitrarl' and contrarv to lau' and c()nsequentl\ set aside all prococd ings/actiot.rs (il any. includitrg issttancc ol anl sale ccrtifloates) issued b1' the [{cspontlents pursuant to thc said Inlpugncd Sale Noticc and ' . -'' 3 :- ,\j \----', \ Case of the rvrit rrctitioners: J The brielfhcts ol'the case are that the q'rit pctiti() ors are erstu'hile Managing Director and guat'antor of M/s. Kadevi In.l r,trics Limited, a public lirnited company. 'l'hc said colnpany availed crcrl t lat:ilitics tttlclcr consoftiunr lending in tlic year 2008. Further, in the 1'crrr )()[i. resllonclertts sanctioned a separatc utidtcrnr loan of Rs.20 Crorcs to 1ll!

( ()rlx)latL- (lclrtol lbr capital expcnditure otl plant and tnachinery outsit, thc cotlsortiLllti arrangement. For said rnidtertn loan, the petitioners ltav,r ' ''ett tlte lltttl arltl building as seculity in KLrshaiguda unit of Kadevi Ilrdust. is I irnited. apart from rnachinery t Kushaiaguda unit of said Kader, i I r ltrstlics Lirnitecl Resporrdents-bank dcclared the Kadevi's accoutli as Norr ',:rtirt'tnitrq r\ssct ('NPA') in the ycar 2015 in violation olguidelines ol'tlt. Ii.r'se'r'r'c I]:Lnk trl India ('RBl'). Thete wctc no outstanding interest cluc,. lruetcls ntid-tct'ltt loans or CC lirnits. IIower''er, therc IS uniust classil',:rtiort of Krder i Industries I-imitcd as N I)A. Duc to said classi Ilcation li N['A.

Kadcr i lndustlies Lirnited could I.tot access financial assistancc l'| )ttl ()ther brrlkirr.' and llnancial institutions. ()onsequently, there rvcre cr: t llori issrtes t<r Kadcvi Inclustries Limited, final11' culrninating intt r.:sportdcltts-L]ank initiating proceeding uncler Corporate lnsolvencv llr;rrltrtion Process (CIRP), by the application bearing No.CP.(lB) No.l0,'lt ll)ti/2017 untler Section 7 of Insolvencl, and Bankruptcy Clode, 2016 I ll(l') belbre the \ 4 'fi,1 ll;i r'E}- .lt.i if*'

Narional Company Larv l'ribunal ('NCLT'). The petitioners challenged thc action of respondents vl./e w.P.No.28827 of 202 I belbre tlris court and th is Court prssed interirrr orders dated 1 3. I 2 102 t and 01.01.2014 rcstlaining coercivc' actions agairlst personal guarantees pendirlg ad.iudication. lhe NCI-'t vitle order dated 15.03.20 17, adrnitted said clRP. ancl initiated (-lRP process against Kadei,i lndustries t.imitcd as pcr thc proceclure uncler lBCl.'fhen, an ordel rvas passed on 23.02.10 lti. o|dering liquidation ol' Kadevi Industries Limited. Rcspondents relirrclLrished security intcrest over ccftain cun'ent assets, but retained rights in lixed asscrs. ivhich includes thc land and buildings in Sy.Nos.32l,3l-5/5.321/6. S2llllA admcasuring 4600 Sq.Yds. at Kushaiguda, Ilyderabad ('schedule prtpcrty'). l. On 0-1.12.2025, the liquidation proccss came to arr ctrd under Sccrion 54 0f Iuc and Kadevi Industries Limitcd stood dissolred, i.c. -fhe liquidato| rvas dischargcd li-orri all cclsed to exist as a legal cntity. responsibilitics uncler IB(1. on 3 1.11.2025, the respondcnts issLrcd thc inrpLrgned salc notice datccl 31.12.2025 for auction ol- thc schedulc propcrt).. 'l-he NC_'l.T becorles Coran Non Judice post-dissoltr t iorr process ancl therctbrc, cannot initiate further p|oceedings undcr IBC or its tl.aurework. Subsequent to the dischalge of liquidator, bank cannot assulnc the role of lic}ridator or invoke IBC provisions to sell the schcdule 5 r1 - only resort the St t t r-itisatiotl arrd lntelest "t:curity propeftY. ResPorrderrts-bank Reconstruction ol'l:ir-rancial Assets and Erllbt'cement ol ('SARITAESI Act') Act, 1002' as appticablc law' but not I l(' 'lhe atrctiorr rvas scheduled on I I -0 I .2026. On said datc' petitioncr \ o l Lrnder\vent treatnlcnt and thcrcfirrc, \\jas una\\'al'c ol thc atrction' Ali'' pctitioncr No l got discharged fionr hospital on 22'0 I'2026, crrquiry \'' r:i nrade lbr thc purpose of repaylncllt of loans and rcdernption of tnortga r : At that til-rlc' it is learnt that auctioll q'as cotrdttcted and a bidder rvas s: t ctcd Horvcvcr' the sale certiflcate has not been issr'red' Thc petitioners plead that as per impugned sal'' r'()ticc ancl tcrnrs 5. and conditions, it is issued undcr lBC. but also states i ilt thc pr-occdtlrc under Rule (r and Rulc 8 of the Security lntefest ([.r ir|cernent) Iltrles' 2002, has been aclopted. The respondents, by issuing a l: da1' notice' havc violated thc tnattdator;' 30 day noticc Thc actions of 1'i rcspondents are arbitrary, unjust.arrdtheretbre, lcdtofilingol-thervritl'liti()nseekirrqttr set aside the irrptrgrrcd sale nolice dated i I 12'2025' Case of the res po ndents - Bank:

#6. Thc rcsporrdents lited cotrnter questiolling tlrt nraintainability ol- i pctitioners' It is the writ petitiorl lbr rvant of locus slandi by ths "i'r pleaded that undcr lBC, r'ight to initiate or challenge rroceedings l1orvs GGt;3ry,,;ff :.7 b ,-:! I ilffiffi.=-... - /,. ,l -/ ['orn existing legal interest recognized by statute, but not fi'om past association, status, or equity. Once the CIRP proceedings are initiated, the Board o1- Directors stand suspendcd under Section l7 of the IBC i.c., thc prolnotcrs, dircctors, and shareholders ceased to have representationa I capacitv in relation to thc corporate debtor or its assets, more so, after dissolution of thc colporate debtor u-nder Section 54 of IBC. Thcre is a clear distinction betwcen assets lorming part ol liquidation under Section i(r and secured asscts retained by secured creditors under Section 5l of the IBC. When a seculed crcditor declines to relinquish rights to the liquidator during liquidation proccss. the secured creditor retains independcnt right to realize thc security interest in accordance with applicable lau,. [n such situation. a third palty does not have locus to question such realization. As per Section 29A of tBC. the dircctors or promoters of the corporate debtor do not havc right to challenge the sale on account of disqualitication. [{cgr-rlation i7(lJ) oi IBBI (l.icluidation Process) Regulations, 20 16, prohibit transt'er of-se'cured assets to persons rendered inctigible under the Codc. i.c., the dilcctors, prolnoters, and other connected persons. Tl-re petitioners helein :Lre neither corporate debtol nor aggrieved pa(ies with respect to secured assets and thcreforc, lack locus to maintain the prescnt writ petition. 7

#1. According to the respondents, the impugned sale notice discloses the source of autl'roi:ity retained by responclents uncier S: rtion 52(l)(b) ol- \ the IIIC. Respondents did not relinquish the sectrritl i dissolution of corporate dcbtor under Section 54 of rl.crest aud atiet' FiC. -fherc is a subsisting right lor realizing the seculity asset bv the ;,:cured c reclitor. Therefore, respondents-Bank, in its capacity as sccr-rr: I creditor under- Section 52 of the IBC, proposed to realize the secur': lasset. For said purpose, responclents adopted the plocedure prescribetl t Act and such a c-ourse of action is ir-r conformity with S: IBC. There is no ambiguity about jurisdiction ot' sour( ( -fhe dissolution ol the cotporate dctrlc secured creditor. right under the IBC whilc cxpressly preserlin-r rdcr SARFAESI 'tion 52(4) olthe of power of thc ' cxtinguishes its thc independent enlbrcertent rights of sectrled creditors'

#8. Respotrdents to the allegations made'by the rvr i pctitioners about unjLrst classification of Kadevi lndustries as NPA' tl.re r:spondents claitrl the satne classification was donc in accordancc u it r applicable I{L}l guidelines and statutory nonrrs. With rcspect to applicabi ir-v- of the IBC and the SARFAESI Act, it is pleaded that once the secured t t :Citor elects not to relinquish the security interest, said asset is excltrtltt fiorn liquidation pib".s. by operation of Section 52 (l) (b) of IBC i't. the Iiquidator no longer has donrinion, control. or authority over said a:-' :t. The conclusion 8 // ,l/ -/ of procecdings undet' IBC results in the ceasing of existence of corporate debtor and dischargc ol'liquidator tiorn his responsibility' The respondents denicd right ol tlic' petitioncrs to pafticipate iu the auction mcrely bccausc rhe sale is conducted under the SARFAESI Act. As per Regtrlation 37(8)ol' lBBl (l.iqtriclation l'rocess) Regulations, 20 16, there is prohibition ol sale ol transf'cr ttl'sectrred iutercst to arly person u'ho is ineligible undel Scction l9A of the tBC. Even rvhcn the sale is made under the SARI-AESI Act' the have uo enforceablc right ttr pctitior-rels ivho ntc hit by Section

#291. pal.tiCipatcitrthcauction..[.Ircpersonalhealthdifficultiesfacedbylhe petitioners do not invalidate the statutoly sale conducted in accordance q,ith Sectiorr 52 ol'lB('

#9. l'hc rcsl-roudents denied trlandatory 30-day notice under thc -l-he t-rrst sale requires 30-day notice arrcl SARtrAt-SI Act lts crroltcous. subsccluctrt sales crtr be clone bl issuing notice. of not less than l5 days' 'I-lie imptrgrrecl slrlc is a subscqtrcnt sale and therefore' l5 da1' notice is sulllcient l-he resllondellts lnade boncr ficle efforts to realize the non-

#10. relinqLrished secrttcd assets iu accordance with thc provisions undcr IBC' read ivith pror,'isions ol the SARFAESI Act On 25'04'2023' auction rvas cortductecl with a rescrve price of [{s 52 Crores for combined sale of all 9 assets. Further, aLrctions dated 04.07.2025 and 03.07,101i \\ere cotlclucted \ rvith rescrve price o1- Rs.26.06 Crot'es. r\lso, attctions daLLi 10.09.1015 and

#19. I I 20t5 u'ere condtrctcd rt ith rescrr e price ol Rs.1-1 ('r,l cs. AII tltc said auctions lailed lbr tatlt of biddcrs. Then. the resl-rt ttictlts conduclecl e-auction on 21.0 1.2026 u'ith a reser\/c- pricc of Rs.24.5( . rot'es atrd therc was successlul bidding by Mis. Sri Slirrivasa Ferrotc:ch Pr L-td. lbr a total sale consideratior-r o1- I{s.2,1.55 Clrores. The said srrcces'; ul biddcr paid sum o1' Rs.2.45.00.000/- torvards l0% ol' sale consid '' irtion as earnest rnoney deposit orr 2l .0 I .2026 and a ltrtlher sum ol' Its : .tr8,75,000/- was paid torvards 15% o1'the salc considcration. 'l'he balanc.' : .tle oonsitlctation of Rs- 18,41,25,0()0/- rcpresenting 759lo of thc sale pt'ice r. ttail.ts to be paid l-astly,. it is pleacted that thc sale has trrkcn place uith t'r ' t'rent ol'paft salc consideration b\ the succcsslul bidder and tl-rcrelbrc. th: 'r rit petition has becornc intiuctuous. As such, pleadcd that thc u'rit pctiL rn is liablc to lre dismissed Contentions of thc rvrit petitioncls: I l. l-earned courtscl lbr the rvlit petitioners arg t .'tl that the writ petition is fited challenging the sale auction notice datcc i I . 12.2025 issued by respondents for sale of propefty belonging to Kaclei Industries under Section 52(l Xb) and Section 52(4) olthe lBC The CIItt proccedirtgs have 1 \ 't.0 ' '--/ / /' -/ ended on 03.12.1025 and on said date, the liquidator was discharged of his responsibilities. 'l-hcrc is llo liquidatoI fbl Kadevi Industries ever since

01.11.1025. 'l'herclbre, lirt secured creditors u'ho have not rclinquished their rights r,rrtclcl Section 5l ol lBC. therc is only one option' i.c., to realize the debt b1, lbllow'in-u the procedure under the SARI"AESI Act. For rcalization of scctrrity intcrest unclcl Section 52 of IBC, the liquidation proceedings rnust bc ortgoing. 'fhcre should be a liquidatol in-charge of the 1-rroceeclings undcr thc IBC. Altemativcly, thc secured creditor can enlbrce. lealizc, or dc'al riith the securcd assets in accordance with such law as appticablc to sccuritv intcrest, i.e., thc SARFAESI Act or t[.re Recovery of [)ebts and Bankruptc].Act. l99i ('RDBA'). Since the proceedings under the IBC have concludecl, since the tiquidator was discharged of lris responsib ilitics. thc inrptrgned auction notice under Section 52( l)(b) and 52(zl) ol' thc III(. is rtlegat. As pcr Rcgulation 37 ol IBBI (L.icluidation [)rocess) [tegulatiorrs. ]0lh ('Liquidation llegulations'), there is a separatc plocedutc lirl lcalizatiort ol secured interest. The proposed sale undet' Section 52 ol' lll(' has to bc lead wilh Regulation 37 of Liquidation l(egulations. Whcn there is no liquidator, provisions under Section 52 of IBC and Regulation 37 ol Liquidation Rcgulations cannot be enforced' When the SARITAIT.SI Act or the RDBA are applicable, Regulation 37 of I-icluidation Pr.occss is not applicabte. Ttic impugned notice is issued under 11 ( l Section52ollll(l,rrotundeltheSAI{IrAESlActTherelrtr'ltegulation3T is applicablc *'ht'rr notice is isstred trntler St-ctii I 5l oi IBC Ilowevcr, sincc thcre is llo otlgoinS licltriclatioll proccsi I rrtl no liclrridator' RegulationSTol.I,iqtriclationProccsscatrttotbcinrolicd,r'corrrpIit:drvitlr. Such being thc casc, the ir-r-rpugnecl auction sale tloticc ; liablc to be se1 aside.

#12. Alternativcly. it is argued thar in case the irllp I 1lccl auction sale notice issued urlder Sectton 52 of lllCl czrnnot be si :rsirlc. thert the lespondents havc 1o strictly fbllow contpliance rvith SecL rtr -52 ol IBC and Regulation3Tol. LiquidationProcess.rvhichisnot.)jSil)1e..|.hervrit petitioners claint Violation ol'their lights under Arriclc' I I 'l('onstiLtrtion ol Indiaonaccountol.applyinganon-a1lplicablelltu.,rrll....-'blllrerightsol petitionets to ParticiPate in the auctiort arc restrictcd. St -'tiotr 29A o1'IBC creates a bar on thc protnoters or tlrcir latnil-r, rnet-nbet.: i <lllt |]artlclpatlllg in the auction. $'hereas there is no sur:h bltr ttntlcr th -' llror isiorls ol' the SARFAESI Act

#13. Further, it is argued that when thc procedrrrc Ltt r cr tltc SARFA-E'SI Actisadopted'thereisr, iolationol.rnandatoryreotitltncntol.30dal' notice by issuing only a 15 day notice' 'l'he petitiorr'r s sr'rrnmed trp the arguments claiming tl-rat there is hasty action on the 1-rrt ol'rcspondents 12 I actirlg in ntula.fida nlanner rvithout jurisdiction and therefore, the entire auction ptoccss is vitiatcd. lr4. Ihc lcarnecl counscl tbr petitioners relied upon judgrnent in the casc oI lndian Overseas l]ank v. RCM Infrastructure Limited and anotherr. r'r,hclein, it is hcld that a salc rvould be cotnpleted only when the auction purchaser nrakes the entirc' payment and the authorized officer, excrcising the porvcr of salc, issucs a certificate of sale ol the property in lavoul ot' thc purchascr'. Iruflher, in the casc bctwecn Arrow Business Devclopmcnt Consultants Pvt. Ltd. v. Union Bank of Intlia and others2, it is held that thlor-rgh the provisions of the SARFAESI Act, both'pre'and 'post' the 201(r arnendnrellts to Section 13(8) thereol, the transfer of ownelship o1' securcd asset is courplete only upon issuance ol sale ccrtiflcate. and not at any tirnc prior to that. The arnendment has altered the datc on rvhich the right of le-cle rnptiorr is lost, but does not alter the position that the sale is onlv conrpleted u1.ror.r issuance of sale ceftificate in accordance rvitlr [{ulc 9 (6) S.,\RFAESI Rules. In vieq, of the a lbrerrent ione cl .judgtnents, tlre case of the q,rit petitioners is that the auction salc has not been cornplctcd and thelefore, no rights havc accrued in thvour of thc bidder ar-rd that the auction can always be set aside ... ' 1zozz1 a scc sro v 2025 SCC OnLtn" Bom 4985 13 ,.1 I \

#15. Further, reletence is made to judgrnent i the case ol PaschimanchalVitlyutVitranNigamLtd.v.Raman[l;,:ttl)r't.Limited antl othcrsr, rrlrcrcin, the tlon'ble Suprct.e (loLrrt ,'l I.dia hcld tlat Section 52 ol Il](' provides oplions tbr secured .r( t itors cithet' ttr relinquish their security interest in the Iiquidation procc:: or to pt'oceed to entbrce it. In casc ol- latcr optiorl, the secured creditor h r , to llrst indicatc its option within tlie prescribed tirnc and then the liquid.rrt r rtlay procecd to pennit the securcd creditor to realize sttch dues as arc l--oved 1<l cxist as security debts. ()nly upon clearance is provided b1- tl ': liquidator' the securcd creditor can proceed to entbrce its claim. ln thc insLant case, the respondents-Bank rvhich is a secured credito| did not [tI rrqttish rhc clairn undcr the IBc during Iiquidation process and therefbii' ihet'c catr he ntr cnfbrccability ol'thc secr, rrity interest b1 the licluidator trrr, .f the co<lc. Contcntions ofth e reslrondents: t6.Learnedctrunsellbrtheresporldentsreliedtll](lltlleitrdgnlentol. Iton, ble Suprerrc (lourr of India in the case ofJashhai I Iotibhai l)esai r. Roshan Kumar, Haji Bashir Ahmed and othersr ri r ttre prrrposc of challe nging the locus ol the petitioners to maintain thc 1't rr;e nt rvrit pctition under Article 226 0l the constirutiorr of India. In said : r:;e. it is hcld that '(zbz:) ro scc oo '(rgzs) ; s.c.n 1,4 ,/ ,' a, -.' thc Ilich Court is ernporvered to isstre writs under Articte 226 of Constitution to any person or autlror-ity including Government within its tcrritorial .lurisdictiorr lbr crtfirrcenrent ol' firrtdamental rights and lbr any othel purpose. .T'hcre is an issuc of'who is thc aggricved pcrson and what ale the qualilrcations requisite lbl such status. J'he expression 'aggrieved person' is an elusivc and clastic concept. The fhctors to be considel'cd lor ascertainirrg arr aggrieved pcrsott could be the contraventiotl ol the statute and the specitic citcutnstanccs of the case, thc nature and extent of petitioncr's intcrest at'fbcted. An aggrieved person is nonnally onc who has been denicd or dcprived of sonrcthing to rvhich he is lcgally etltitled. In that context, it is argued by the lcarncd counsel lbr the respondents that the petitioners do not have locus stunJi to invoke re-i urisdiction, as there is a bar undcr Section l9A ol IBC cxcluding the participation ol promoters and their relativcs or lclated pcrsorrs in the auctiort sale

#17. Fulthcr'. uitlt respect to status of auctiort sale, reliance is placed rupon judgntent in the case ol Cclir LLP r'. Bafna Motors (Mumbai) Pvt. Ltd.', wherein the Hon'ble Suprcnre Court o1'lndia hcld as tbllows: "104 . (iii) [n irccorclancc uith thc unanrendod Scction l3(8) ol- SAI{I;nLSI Act, thc right of the borrorver to redcetn the securcd asset \\'as arailable till thc sale or translcr ofsuch secured asset ln s Civil Appeal Nos 5542 5543 of 2023 15 othcr $'ords, the Borror,,,er's right of' r'edemption [errninatccl on the datc o,'auction o['thc salc ol'sce rr but rcmained alive till transfer u,as cotnpleted ir auction purchaser br rcgistration of salc ce[tillcat,-.i p()ssessi()n olseculcrl assct. [[o\\e\cr. as l)cr alltelr(( Scction I-l(8) ol' SARI;At:St Act. rnake it clcar rlr horrotver tcl redccrn thc sccurcd asscts stands c\tit l vcrv dittc of publication ol'notico f or puhlic irrrctiotr r ol'thc Ru lcs of 2002." .lid nol stlnil :d asset ilsc ll. t rvorrr of'thc rd dr'lrrcrr ot -l pror is io n ,, 1 i lltc rigltt ol L ishccl orr thc r,.lcr Iltrlc ()( l)

#18. On the basis of albrernentioned legal ratio, ii is argue<l [r_v thc learncd counsel for the t'espondents that the wlit 1r-, itioners' r'ight redeern thc securcd asset stood extinguished once the t,.ttict lirr irrtction was issucd on 3 I .12.2025

#19. Lastly, reliance is placed upon judgnrent of th: Ilorr'blc Suprenre Courl iu Paschimanchal Vidyut Vitran Nigam [,td. (s rpra). ri hcre in, it is held that the rationale of placing the secured.crcdir()ri rr, ho rcIirr..;Lrishccl their riuhts in higher priority is found in conioint rcadinl rf'Scctiorr 5l and Scction -i3 It is argued that in spite ol'not r:clinqLrishin. the riqhrs trndcr Section 52( I ) (a) of IBC, under Section 5l ( I ) (b) ol :al L-ode, tlrc rishts of'thc secured crcditol' continue to sun'ive. I{esponrlcr L il fe rlcri r inq lts right to conduct the auction sale with respect to the sccri ed intercst lvhich is sub.iect mattcr of a proceeding under CIRP on accor-nlt , ,1' sulr, ir, al ol'said intelest under Section 52(l Xb) ol'lBC. It is denied that c,r :e thc liq ridation proceedings have concludcd, the NCt.l' becomes Cort t Non .httlit.a and 16 ---. t( - the tiquidator's responsibilities stand discharged. lt is argued that the basis fbr. rcalizing the security interest is the authorization cmerging from Scction 5l( 1)(b) ol IBC. I Iowever'. the procedure under SARFAESI Act is adopted. It is argucd that there is no conllict in apptication of IBC provision and the SAI{FAESI provisions while conductirlg the auction.

#20. It is the casc of the l.cspondents- bank that tl're power to conduct the attctionisderivedtl.omSectior-r52(l)(b)oflBC,buttheprocedure adopted is undcr SARF-AESI Act and therclbrc, tlrc writ petitiorrers who arc theguaranlorsofthecorporatedebtorarenotentitlcdtoparticipateinthe auction on accounl ol'opcration ol'Section 29A ol lBC. It is vehen-rcntly argucd by the r.espondents that the petitiolrers do not havc locus staruli lo flte the wr.it petition as they are disentitled to participatc in the auction, in addition to the lact that tl-reir right to redcetll the secured interest stood extinguished on the day ol issuance of auction notice as per judgmcnt of Celir LLP (supra). Findins s of the Cou rt: 2l.Uponperusalol-therecordandcontentionsoftherivalparties, there are two major issues of contention. Firstly, it is seen that there is a serious disputc about the tenabllity of the auction notice dated 31.12.2025 u,hich is issued undet Section 52(l)(b) and 52(4) of the IBC' u'hile L'/ l ! adopting the procedure under SARFAESI Act. Next, lhere is serious contcst aboutthc locus standiofpetitioners to tllc the rr r i pctition 1-) Corring to the llrst issue, according to thc pertitir rers, tltcre can be no applicabilitl, oi ItsC once the CIRP proccedirrgs I : r c couclucled on

03.12.2025 and the liquidator has been discharged. Sirrr:, the applicabilitl' ol the IBC ceasecl. the only option available fbr thc :ri cuLed creclitor 1o realize the secured interest is to follow procedurc unde -thc SAIII'AESI Act. The grievance of the pctitioners is that in casc the a.L:l-iott salc is rriade undcr Section 52(lXb) and 52(4) of the IBC, undet Se,; i,trr 29A, they'dtr not have an1'right to participate in the auction proceediri s.'fhe petitioners intencl to pafiicipate in the auction proceedings to saI agc the security' intcrcst ra, hich holds cmotional and seutimental value t r account of the samc being acqr-rircd lrom their ancestors. 'l-he petitioncr: (att lurti( iprtc ill the auction only rvhen applicable laiv is the SARITAESI I ct independerrtly. devoid ol any applicabitit,v

2.3. In that context, there is a need to peruse telt'' i:nt clauses fl-or.t.t Section 52 o1'the IBC. r.vhich are reproduced belo\\, "52. Secured creditor in liquidation proceedinss. ( 1) A secured creditor in the liquidation proceedings rnEl 18 M 17t (a) relincluish its securitf intcrcst to the liquidation estatr: and receive proceeds liorn thc salc of assets b1' the liquidator in the nlanner spccificd in scction 53; or (h) rcalisc its securitl, intcrest in the manner spccif-rctl in this scction. (2) Whcre the scculcd crcclilot rcaliscs sccuritl, intercst under clause (b) ofsub-scction (l). hc shall infirrrn thc liquidator ol such sccuritr ilttcrest and idcntili the asset sub.icct to such security intercst to be r-ca liscd. (l) Bc-tirre an1 sccuritf intcrcst is rcalised b1 thc sccurcd credilor runrlcr this scctiotr. thc litluidator shall rcrifl such securilr intcrcst and pcrrnit the sccurcd crcditor to realise only such security intcrest. the cxistcncc of ri'hich rna1" bc provcd either- (a) bl thc rccorcls ol'such sucurit\ iulcrest nraintained b1' an inlcrnnation utilitl'l or (h) br such ()ther rncans as lllal- he speci fied bl the Board. (-+) n sccured creditor may crrlirrcc" rcalisc, settlc. contprorr.tisc or-cleal riith tlic secured assets in accordancc rvil-h such larr as applicablc to thc securit)' interest bcing rcalisccl and to thc sccurcd creditor and tuppl,r'the proceeds to rccovcr thc dcbts duc to it."

#1. [n thc above context, in case the seculed crcditor irrtcrrds to realize the security intcrcst undcr Scction 52 ( I ) (b), the samc has to be infbrmed to tlrc liqLridator of such security intcrcst lor the purposc ol'idcntil1,ing this assct sub.iect, to such security intcrest to be realizcd. 'l'hc vcry l'eading ol Section 52(l) ol IBC shorvs that in case the realization has to be under Scction 5l( l)(b), the sanre has to be u,hile the liquidator is still in charge of ('lRP ploceedings, sLrch that the securcd creditor has [o approach the licluidator and infbrm hirn about the security interest which is to bc sold for thc purpose ol lealizing the intelest. Section 52 rvhile providing two options to the securcd creditor is also providing the procedure ol manner in 79 \ \l which the securit) interest is to be realized under bot. optior-rs. [Jnder - Scction 52( I )(a), the responsibility ol' rcalizing the secr r tv is corrlrletelr 'l vestcd in the licluidator. wheleas under Section 5f( 'r). the securctl crcclitor while lbllorr, ing his owrr coursc of action is exptr t,:d to infirrrrr thc liqLridator about thc sectrritl, intcl'est that is the sLrbject .1 rough rvhich thc security interest is sought to be realized. Furthcr, befir such a securit_r interest is realized r-rrrder Scction 52(3 ), the liquidator r r:; to veril-v such interest and perrrit thr' seculed cleditol to rcalizc such sccuut) r lr [cIcs t -l-his course olaction o1'vcrification of the security interrr t ancl pcrnrission to realize is possible only befbre the liquidator IS ,l sclralge d o1' his responsibilities undcr the IBC.

#25. [.astlv. as per Section 52(4), a secured creditor miLlnfblce his rights ovel the secured:tssets in accordarrce rvith sr-rch lau, us rttplicablc to the securitv intcrcst bcir-rg realized. 'l hc language emplol, ec in Section 5 2(rl ) shows that thc scculed creclitor has to lealize its secu'rv interest \\'hilc dea I ing r.r,ith secr.rred asscts accordance with applicab t lari. Thc rvorcls 'in accordance with such larv as applicable'clearly tnea I soltte other law. but not IBC. ln case. thc inlentiorr ol- the legislature was I r apply lllC, thc words 'in accordance rvith such larv as applicable to thr ;,:curity interesl' woulrl not have been ernployed. rather the legisla r le ri, ould havc ernployed. The r.i ords ''in accordance rvith the lBC". 'l-1i i'elv lactunr ol 20 t/ :i4\ - cnrploynrcnt ol' thc words 'such larv as applicable' shorvs that thc lcgislaturc nevcr intcnded IBC to be applicabte, rvhen the secured creditor ;.)rocccrlccl t() enli)tcc its right to sccurc the iuterest with the secured assets.

#16. lrr vie rr' ol' thc fbregoing discussiorr as to structul'c and iurplcurentrtion ol'scction 52 of IBC, this Coult is of the opinion that u'hcn ir sccur.cd cr.tclitol cnlirrccs his rights undcl section 52( l)(b) olthe tllC, thc santc clrn be Lrncler ttlC belo|c culmination of the CIRP proceedings lor thc sinrple r.cilsorr that rcalization of security intelcst under Scctiotr -52( I )(b). coLrplerl rvith Scction 52(2) and Section 52(3), show the liquidator's rolc r.r,hich is acti\ c altd responsive, which is possible only bcfbre he is ciischargecl filrrn his rcspons ibilities. 'Iherefbre, 1br the IBC to be applicable ibr an1,. sale unc.lcr. Scction 52(l)(b), the sarne has to be belb|e cuhnination ol- the ('ll{l' procceclirrgs undel IBC. Only, then the secured creditor u'oultl be able ro inlolrrr lhc licluidator abotrt the security interest which is rncant to he rcalizccl urrtl gnll then the liquidator u'ould be able t6 ve lif-l such sr, curirr inrcrcsl. .l-his kind of activity on the part of liquiclator cannot be contcntl)llre(l alicr closing ol CIRP proceedings and atier the liqLridator is dischargctl.'l'hcrclbrc, this Court does not see any reason to inf-er that IBC rvould bc apltlicable to sale of a secured asset which is in the custody ol a securcd creditor fbr the purpose of realizing the sccurity intcrest, i.e., post terminatiou ol' ('ll{P . 2t 27 . Last but not lcast. the language en-rployed in Sec ' havc casily ref'crlccl to applicabilitt ol IBC lather tharr rigl-rts o1'a sccLtrcd ct'cclitrlr itl ltccot-dttrce rvith such lau 'l ' said languagc. in cr1 stal clcat'ternrs' irrdicates that i1 is rr'' is applicable, but strch othe t larv u hich is applicable ri r rn 52(4) could : rr lbt ccnte trt o l' rpplicablc. r\nd rhe tBC rrlrich ..l.tc put Ptlse o I- rea lizing the sccuritf itrtcresl'

#28. Ilt a tllntler irlrolvirlg realization of secured itrterc; Pegasus Asscts llcconstruction P' I-td' v' [laryana'(it s in the t:asc o1- ncast Lttl.(', thc Hon'blc Supretne Court ol' India considered the stand t r Court of Delhi and thc I Iigh ('otrrt of I'uniab and Harvanl ' .cn by the I ligh 'lhe IIigh ('ottrt of Punjab ancl l{arar rtrta had held that there are certain fu t :-s p!accd on the secured cre(iitor ancl pernrittetl c'xcrcise ol porvcrs as secI I SARFAtTSI Act. Wlrclcrrs. thc tJiglr ( or-rr1 of Delhi difltr in a sirnilar casc als to tr he thcr a colllpan\' (lourt catl ri ic respect of sale ol' sccttrccl asset b\ sr'cLll'ed creditol' ilr t' availablc to crcditor utrdcr the SAI{F'\ESl Act' Thc :,1 creditor trnde r :l u,ith llrc r icri (.1 an\ corttrol in elcise of powcrs Iorr'h le S uprc trlc Court he ld that that thc Cornparries Act, 20 [ 3 canuot t't used ttt lltlt allv fetters on thc salc b1' sccured creditor because the sectt :,1 creditor.uncler Seition 13 of the liARFnESl Act has been granted ri1 security intcrest rvithout illterventiou of the CotrrL ht to enfirlce the or Tribunal in I I 6 MANU/sc/1489/201s 22 uE accordance with provisiorts ol the SARFAESI Act. It is held that the Palliarnent clcarlr intendcd under Section l3 of the SARFAESI Act that a secured creditor has the right to enforce its security interests de lnrs intcrvention o1' Court or a Tribunal. It is held that porvers under the Cornpanies Act catrnot be wielded by the cornpany Judge to interfere with thc procccdings ola sccured creditor to realize its secured interest, as per provisions ol'the SARI-'AESI Act. To put it simply, IBC and SARI"AESI operate indepcndentl-"- but uot conjointly simultaneously to any I iquidation pr-ocecdi trgs

#29. fhe atirrementionccl legal latio laid down by the Hon'ble Supreme Courr of India also throu,s light on the issue to the extent that whenever the proceedings arc initiatcd under the SARFAESI Act, the Cornpanies Act is not applicablc. 'l'he companl'Judge car-rnot interfcre with thc proceedings, ruruch less thc liclLridator'. '1'hus, the secured creditor is empowered under Section l3 ol' thc SAI{IAESI Act to realize the sccurity interests without any l-ettels o f the ('ornpanies Act.

#10. When tl-re lcgal ratio in case ol Pegasus Assets (supra) is n-rade applicablc to the prescnt case, respondents should not have issued the notiflcation undcl Section 52(1Xb) and 52(4) ofthe IBC. The procedure undcr Cornpanies Act is not applicable on account of very facturn of the 23 \ '..'- 'l impracticability of following the procedtrre contemplatec the fact that no f-ettcrs can bc placed on thc securl .lrerein as well as - I creditor in its ..] entbrcement of rights Lrnder the SAltFn IrSI Act. 1'lrrrs ,,ieu, ed tiorn any angle. the resportdettts canrtot claim that it is deriving ri llt to auction thc secured interest uncler Section 52( I Xb) [t rnay be true tl i t the rights of thc secured cre<Iitor are protected rrnder Sectiou 52(l)( t ) Ilor'l'cver, the procedure available lbr auction of the sccured irttcrt ;1 under Section 52(l Xb), coupled rvith the procedutc contctuplated utrd': Section 52(2) to (4) is not possible once the CIRP proceedings staud crlr': uded.'l'helc is no liquidator to whot.tt a rcf-erence can bc tnadc. l'here cl t be no liquidator' who will verify the intcrcst etc. Only c,n account t.l1- n( n-applicabitity of Section 52 (l) (b),52(2)and 52 (3), the legislaturc clearll contemplated the realization ol the secuteci interest b1 a secuted crediit r ,,rnder applicablc law which is the SARI-AESI Act. as lrcr Section 52('1). i-hus, thcre is no merit in the contentiort of the responclL'nls aboltt thel(' t,eing no flarv in issuing the impugned auction notice ttttcler Scction 5lt t(b) and 52(a) ol the IBC and theretbre. the said notice is trntenable.

#31. Respondents ol1 one hand supported the issuanc: of'arrction tlotice under Sections 52 (l) (b) and 52 (4) of the IBC and rn tl're other hand vehemently questioned Lhe locu.s sttmtli of tlie petitior c rs ro fl le the rvrit -l-here IS cmphasis on who is the aggrievc,l 1lerson. u ho can lpetition. t 24 k M,.|-: / ii. r approach a Writ Court seeking directions and in that context relied upon thc judgment of .lasbhai Motibhai Dcsai and Celir LLP (both supra). Whilc retf ing upon thc legal ratio laid down in the aloremcntioned .judgmcnts. respondcnts - bank contends that the petitioncrs. rvho are guarantors of thc corporatc debtor- Kadevi Industries Lirnited are discntitlccl to parricipate in the auction, on account of bar under Section 29A ol the lBC. Sir.rce therc is a trar precluding the petitioners from pafticipatirrg in the auctiort. it is contended that they do not have /oclrs .\lLtnLli ltt Iilc the rrrit Petiliorr.

#32. As per discussion at palagraph No.29, this Courl has held that auction undcr Sections 52( I Xb) and 52(4) of the lBC, is untenable and that auction cannot be conducted as pcr the power derived fiom Section 52( I Xb) ol the IBC, as thc proceedings undcr said statute stood tcrrninated. That being the casc, tl're opcration of Section 79A of the IBC also would not be applicablc to lhe pctitior.rers. Once the bar under Section 29A of the IBC clocs not operate agairrst the petitioncrs, they can no longer be any question about thcir cntitlettlcnt to entbrce their rights under any other law including the SAITF AESI Act. As contended by the petitioners, the vety application of wrong statute to auction violates their right under Articles 14 and2tof the Constitution ol lndia. On accountof wt'ong application of the statute a valuablc right of the petitioners would be denied that is to pafticipate in auction to make attempt to satvage the irr .rperty fbr u'hich they have sentimental attachnlent. i

#33. Fu(her, the goal of responclerrrs is to lealizc tire i secr-rtitf irltcrest fiorn whichevel. corner possiblc and not preclude anl b-' ly on accouut of any bar, mol'e-so, $,hen there is no bar under anv statttte . I'he Ie spondents do not stand to lose anylhing on account ol participatiorr r,f the petitioners in the auction, if conducted under SARFAESI Act.

#34. It appears that the sole reason fbr applying l[-](' s to preclude the persons associated u,ith corporatc debtor- KadcYi Indrrst ies I-inlited f|orn parlicipating in the auction. I lorvever, applicatiorr t I said lari' after ten-nination of proceedings under ttsC is not tctlahli Consecluently, Section 29A of the IBC is not applicablc to an-r pet-s.' t rlssociated u'ith corporate debtor- Kader,'i Industries Lirnitecl incltrdirl . the petitioners Therefbre. there can be no question about tl're ktcLr.t sttttt,l .r1'1he pctitioners to file the writ pctitiort.

#35. In view of the lbregoing discussion, it is held that l-c u'r'it pctition is maintainable by the petitioners and the auctiot-t notice is s tcd trnder Section 52(1Xb) and52(4) ofthe IBC is untenable.

#36. [n view of the foregoing discussion, the iupugrr,, ltuctiotr rrotice is liable to be declared as iltegal and artritrary. Consequen l,', the plocccdings I [ t 26 \"... " f/;L' -/ thal took place undcr said ir, pugred auction notice are also to be declared as nu ll and void

#37. I* thc r-esulr, the u,rir periti(). is allorvetl by, setting aside the notice of salc datccl I I . I l.l()15 issued b} rcspgrrdclts and consequently, declaring thc procecdings that took place srbscclucnt to thc said notice as nulI and r.oid. l'herc shall be no orrler as to costs. Miscellancous applications, if any, pending shall stand closcd. SD/- C. DEEPIKA ASSISTANT REGISTRAR //TRUE COPY// SECTION OFFICER One fair copy to THE HON'BLE SMT JUSTICE RENUKA YARA (For Her Lordship's Kind Perusal) To

#1. 11 L.R. Copies. 2. The Under Secretary, Union of lndia, [/inistry of Law, Justice and Company Affairs, New Delhi.

#3. The Secretary, Telangana Advocates Association Library, High Court Buildings, Hyderabad

#4. Asst. General lt4anager, lndian Bank, Stressed Assets Management (SAI\/) Branch, 5-1-679, Surabhi Arcade, Bank Street Koti, Hyderabad, 500 001

#5. Authorised Officer, lndian Bank Stressed Assets Management (SAtt/) Branch 5-1-679, Surabhi Arcade. Bank Street Koti, Hyderabad, 500 001

#6. One CC to SRI D NARENDAR NAIK. Advocate [OPUCI 7. One CC to SRI RAJA SHEKAR RAO SALVAJI, Advocate [OPUC] 8. Two CD Copies \,0, PVL GJP 21 f ( r:) '..) i:.-* t\, \.\ _ --:''::=ii ir.trit sfi;^r\ - 'o^.\'' e\ 1g | \ ?tttfi .ill ' ,c,,. ,\i.,i, i rgearct,..+;]';' "-:=:-_:--::' HIGH COURT DATE D: 1 210212026 ORDER WP.No.3492 o12026 ALLOWING THE WRIT PETITION WITHOUT COSTS a\ Ot'