Positron Biogenics Pvt. Ltd. vs Uttar Pradesh State Industrial Development Authority and Anr. - The outstanding dues of the property tax relating to period prior to sale confirmation are thus dues that are akin to claim of an unsecured creditor (Bhatpara Municipality in the present case) and should be discharged in terms of the properties regarding distribution of assets given in section 53 of IBC. The auction-purchaser cannot be held liable to pay any such dues relating to period prior confirmation of sale as has been held by the Hon’ble Supreme Court in the matter of AI Champdany Industries Ltd. vs. The Official Liquidator & Anr. (supra).”

  NCLT All. (2026.09.02) in Positron Biogenics Pvt. Ltd. vs Uttar Pradesh State Industrial Development Authority and Anr. [(2026) ibclaw.in 3509 NCLT, IA No. 485 of 2023 in CP(IB) No. 55/ALD/2017] held that; 

• In view of the above, the mere “as is where is” condition or the subsequent transfer of the leasehold interest cannot convert the pre-CIRP liability of the Corporate Debtor into an independent personal liability of the Applicant. The pre-CIRP dues of the Corporate Debtor were required to be dealt with through the liquidation process in accordance with Section 53 of the Code, particularly when the Respondent No. 1 had already lodged its claim in the liquidation proceedings of the Corporate Debtor.

• The outstanding dues of the property tax relating to period prior to sale confirmation are thus dues that are akin to claim of an unsecured creditor (Bhatpara Municipality in the present case) and should be discharged in terms of the properties regarding distribution of assets given in section 53 of IBC. The auction-purchaser cannot be held liable to pay any such dues relating to period prior confirmation of sale as has been held by the Hon’ble Supreme Court in the matter of AI Champdany Industries Ltd. vs. The Official Liquidator & Anr. (supra).”

• Thus, in view of the law laid down by the Hon’ble NCLAT in Bhatpara Municipality Through its Chairperson v. Nicco Eastern Pvt. Ltd. (supra), the outstanding dues pertaining to the period prior to the issuance of the Sale Certificate/handing over of possession are to be treated as pre-CIRP liabilities of the Corporate Debtor and dealt with in accordance with the waterfall mechanism prescribed under Section 53 of the Code, and cannot simultaneously be recovered from the auction purchaser merely because the purchaser required transfer of the leasehold interest in its favour. Accordingly, the Applicant/Auction Purchaser cannot be held liable to pay the pre-CIRP dues of the Corporate Debtor.

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Excerpts of the order;

# 1. The instant application has been filed on 08.10.2023, by M/s Positron Biogenics Private Limited (hereinafter referred as “Applicant/ Auction Purchaser”) under section 60(5) and Section 53(1) of the Insolvency and Bankruptcy Code, 2016 (“IBC/Code”) read with Rule 11 of National Company Law Tribunal Rules, 2016 against Uttar Pradesh State Industrial Development Authority (hereinafter referred to as “Respondent No.1/UPSIDA”) and the Liquidator (hereinafter referred to as “Respondent No.2”) of M/s L.M.L. Limited i.e., Corporate Debtor. The Applicant inter alia seeks the following prayers:

• a) Allow the present application;

• b) Kindly pass an order to the Respondent No.1 Uttar Pradesh State Industrial Development Authority (UPSIDA) to Transfer the Part of Parcel A,B & C, Site-03, Panki Industrial Area, Kanpur and Refund an Amount of Rs 82, 53,013.37 (INR Eighty Two Lakhs Fifty Three Thousand Thirteen and Paise Thirty Seven Only) to Applicant which paid UNDER PROTEST towards the dues of Respondent No 2 i.e. LML Limited to avoid the delay in implementation of the Project;

• c) Pass an order declaring that Respondent No.1 Uttar Pradesh State Industrial Development Authority (UPSIDA) is not entitled to claim any dues of Respondent no 2 over the property of the Applicant;

• d) Pass such other or further order(s) as may be deemed fit and proper the facts and circumstances of the instant case.”

# 2. The brief facts as submitted by the Applicant are as follows:

• a. The Corporate Debtor i.e., M/s L.M.L Limited was admitted into Liquidation on 23.03.2018, on an application filed by the Resolution Professional.

• b. Pursuant to the issuance of Public Announcement in Form-A, the Respondent No.1 has filed a claim to the tune of Rs. 2,77,12,397/-, which has been admitted in toto by the Resolution Professional under the category of ‘Operational Creditor’.

• c. Subsequently, the Liquidator issued an auction notice dated 07.09.2022 for sale of assets of the Corporate Debtor and thereafter, E-auction was held on 04.10.2022. The Applicant herein was declared as the successful bidder for Property No. Parcel A, B and C, Site-III, Panki Industrial Area, Kanpur. A sale certificate was executed ‘as is where is basis’, ‘no recourse basis’ on 28.12.2022, and possession of the aforesaid property was handed over to the Applicant on 30.12.2022.

• d. However, on application for transfer of the aforesaid plot to the Applicant being the auction purchaser, the Respondent No.1 rejected the transfer and raised a demand of Rs. 82,53,013.53 being the rental dues for the year 2000-2008 in order to execute the transfer of the aforesaid plot. Detailed distribution of outstanding demand over the period of 2000 to 2008 as stated in the Application has been reproduced below: . . . . 

• e. The Applicant submits that the demand of Rs. 82,53,013.53 was paid under protest by the Applicant to the Respondent No.1 to register the transfer of land on the understanding that the same shall be repaid by the Respondent No.1 pending the outcome of this application.

# 3. The Applicant submits that it is a bona fide purchaser of the said property conducted through the legally established procedure under the Code, and has already deposited the entire sale proceeds in the liquidation account of the Corporate Debtor. The Applicant also submits that the sale proceeds received by the Liquidator were also duly distributed in accordance with Section 53(1) of the IBC.

# 4. It is further submitted that the creditors of the Corporate Debtor would receive their dues in terms of the waterfall mechanism provided under Section 53(1) of the IBC. In this regard reliance has been placed on the Judgement of Hon’ble NCLAT in Bhatpara Municipality Th. Chairperson v. Nicco Eastern Pvt. Ltd., (Company Appeal (AT) (Ins) No. 714 of 2021).

# 5. The Applicant finally submits that the demand of Respondent No.1 is not maintainable in terms of provisions of the Code and the Applicant cannot be asked to pay the alleged dues for pre-CIRP period.

REPLY OF RESPONDENT NO.1

# 6. The Respondent No.1 /UPSIDA in its reply filed vide diary no. 656 dated 13.03.2024 disputes and denies the relief made in the present application and submits as follows:

a. The Respondent No.1/ UPSIDA submits that the aforesaid property was leased to the Corporate Debtor for a period of 66 years vide lease deed dated 23.12.1994 and the Corporate Debtor being the original lessee should have informed Respondent No.1/lessor that the company is undergoing insolvency proceedings.

b. The Respondent No.1 contends that a Transfer memorandum was issued by UPSIDA on 05.09.2023 only on execution of an affidavit and indemnity bond by the Applicant on 05.09.2023 in favour of Respondent No.1 stating that the Applicant shall immediately pay all demands raised by UPSIDA.

c. Furthermore, as submitted, Clause 2 of the said Transfer Memorandum stipulates as follows:

• “2. Deposits made by ex-allottee against the plot will be adjusted first towards interest and Lease Rent upto payment and balance if any, towards premium. In case a balance playability is found after adjustment as above, the same shall be payable by you.”

d. It is further submitted that the Applicant is bound by covenants of lease deed and thus cannot evade payment of arrears of lease rentals as well as rentals thereon.

e. The Respondent No.1 further submits that sale was made in “as is where is basis”, “As is what is basis”, “Whatever there is basis” and “No recourse basis” as per certificate of sale deed dated 28.12.2022, which in itself creates contractual obligations to discharge the payment of past lease rentals and interest thereon.

REPLY OF RESPONDENT NO.2

# 7. The Respondent No.2 / Liquidator has filed his reply dated 24.01.2024, in which he submits as follows:

a. The Applicant was declared as successful bidder for aforementioned property and it was sold on “as is where is basis”, “As is what is basis”, “Whatever there is basis” and “No recourse basis” as mentioned in clause Q of e-auction process document dated 07.09.2022 as well as certificate of sale dated 19.10.2022.

b. The Respondent No.2 further submits that the claim of Respondent No.1 has been admitted and it will be distributed to stakeholders by the liquidators as per Section 53 of the Code and payment to operational creditors are covered under Section 53(1)(f) of the Code.

c. It is also submitted that he does not have any role in the present matter and all allegations are bought up against Respondent No.1.

WRITTEN SUBMISSIONS

# 8. The Applicant also filed written submissions on 14.03.2024, wherein the submissions already dealt with in the preceding paragraphs have been reiterated.

FINDINGS AND ORDER

# 9. We have heard the learned counsels for the Applicant and Respondents and perused the material on record.

# 10. The instant application has been filed by the Applicant/Auction Purchaser under section 60(5) of the Code against U.P. State Industrial Development Authority (UPSIDA) claiming refund of the amount which has been deposited under protest as per the demand raised by UPSIDA on the property sold through e-auction by the liquidator during liquidation of the Corporate Debtor. The principle issue for consideration is whether the amount paid by the Applicant under protest to the Respondent No.1/UPSIDA is liable to be refunded.

# 11. It is not in dispute that the Applicant was declared the successful auction purchaser of the said properties pursuant to the e-auction held on 04.10.2022. The Certificate of Sale dated 28.12.2022 and the Possession/Delivery Letter dated 30.12.2022 have been placed on record as Annexure-5 and Annexure-6, respectively. Accordingly, the Applicant acquired the leasehold interest in the said properties pursuant to the sale conducted in the liquidation proceedings on 28.12.2022.

# 12. In the facts of the present case, it is also relevant to consider the circumstances in which the Applicant deposited the amount of Rs.82,53,014/- with Respondent No.1. Upon perusal of the letters dated 17.08.2023 and 25.08.2023 addressed by the Applicant to UPSIDA attached as Annexure 10, it is evident that the Applicant had, at the outset, disputed its liability to discharge the pre-liquidation dues of the Corporate Debtor and specifically requested Respondent No.1 to lodge its claim with the Liquidator in accordance with the provisions of the Code.

# 13. In the aforesaid letters, the Applicant further stated that its pharmaceutical project was being stalled on account of the pending transfer of the subject property and, therefore, while reserving its rights and proposing to approach this Adjudicating Authority under Section 60(5) of the Code, deposited the demanded amount of Rs.82,53,014/- vide Demand Draft No.496798 dated 25.08.2023 under protest. The Applicant also expressly recorded its understanding that the said amount would be refunded to it, with interest, in the event of the application being decided in its favour. Also, the affidavit and indemnity executed by the Applicant formed part of the documents furnished in connection with the transfer of the assets, and was given in the context of the payment made under protest. Therefore, the documents furnished for seeking transfer of the assets were consequential to the protest payment and cannot be treated as an independent undertaking or deposit by the Applicant towards the pre-CIRP dues of the Corporate Debtor.

# 14. Further, during the course of hearing held on 03.08.2026, the learned Counsel appearing for the Applicant submitted that, as UPSIDA was not executing the transfer documents, the Applicant was compelled to deposit the pre-CIRP dues under protest. Thus, the payment cannot be construed as a voluntary acceptance of the underlying liability or as an admission that the pre-CIRP dues of the Corporate Debtor were payable by the Applicant.

# 15. Further, on perusal of the E-Auction Process Document it is noted that the asset was sold on “AS IS WHERE IS, AS IS WHAT IS, WHATEVER THERE IS AND WITHOUT RECOURSE BASIS” and required the bidder to make their own independent inquiries regarding “claims/rights/dues” affecting the asset. Thus, while the Applicant was put on notice regarding the dues affecting the asset, the said document does not specifically provide that the Applicant would assume the pre-CIRP debt of the Corporate Debtor towards UPSIDA as its own liability over and above the sale consideration of Rs. 26.73 crore.

# 16. This position is further borne out from the Terms and Condition attached as Annexure-1 to the Certificate of Sale. Though Clause 7 thereof records that the Applicant has conducted due diligence and has satisfied itself regarding the “dues in respect of Asset”, the Certificate of Sale does not contain any express undertaking by the Applicant to discharge the pre-CIRP dues of Corporate Debtor towards UPSIDA. On the contrary, Clause 12 records that the original lease deed dated 04.07.2000 between UPSIDC and Corporate Debtor was handed over as a title document. Thus, what was transferred was the leasehold interest of the Corporate Debtor in the asset pursuant to the liquidation sale and not, in express terms, the pre-CIRP liabilities of the Corporate Debtor.

# 17. The nature of UPSIDA’s claim is also corroborated by the claim record available on the IBBI website, which records a claim of Rs. 2,77,12,397/- lodged by UPSIDA. The said claim was lodged more than one year prior to the auction sale in favour of the Applicant and it has been admitted in full. Although the said amount differs from the subsequent demand of Rs. 82,53,013.37/-, the record establishes that UPSIDA had already asserted its monetary claim against the Corporate Debtor in the insolvency proceedings prior to the Applicant’s acquisition of the property.

# 18. Now, proceeding to examine the nature of the demand, it is evident from the demand letter dated 14.08.2023 that Respondent No.1/UPSIDA demanded an amount of Rs.82,53,013.37/- towards maintenance charges, interest on maintenance charges, lease rent and GST on lease rent. The period-wise computation shows that the maintenance charges relate to the period from 01.07.2000 to 31.03.2009. The Respondent No.1/ UPSIDA has not specifically denied, in its reply, the period to which the aforesaid maintenance charges pertain. Thus, the principal maintenance dues had accrued during the period when the Corporate Debtor was the lessee of the subject properties, much prior to commencement of the CIRP on 30.05.2017 and the subsequent acquisition of the properties by the Applicant pursuant to the liquidation sale in 2022. Accordingly, the liability towards the principal maintenance charges had accrued against the Corporate Debtor, being the lessee during the relevant period, and could not merely by virtue of the subsequent liquidation sale, be treated as a liability originally incurred by the Applicant.

# 19. Further, the amount of Rs. 63,30,997.37/- towards interest on maintenance charges was thereafter calculated on the aforesaid defaults up to 31.08.2023 and the demand also includes Rs. 30,638/- towards lease rent and Rs. 5,515/- towards GST on lease rent. The fact that interest was computed up to a date subsequent to commencement of CIRP or even subsequent to the auction sale does not alter the character of the underlying principal liability. The interest is consequential upon the failure of Corporate Debtor to discharge the maintenance charges which had already fallen due between 2000 and 2009. All these amounts are therefore arising from a pre-CIRP liability demanded from the Applicant on account of Corporate Debtor.

# 20. The subsequent Lease Deed dated 06.11.2023 also does not alter the above position. The said Lease Deed creates continuing obligations upon the Applicant as the present lessee, including payment of lease rent and maintenance/service charges during its own tenure. It does not expressly state that the Applicant has assumed the already accrued pre-CIRP debt of the Corporate Debtor. The condition in the Transfer Memorandum dated 05.09.2023 that dues of the “ex-allottee” found payable in future may be recovered from the “current transferee” also cannot, in the facts of the present case, be treated as an unequivocal novation of UPSIDA’s already lodged and collated pre-CIRP claim, particularly when the Applicant’s payment was expressly made under protest.

# 21. Further, during the course of hearing on 03.08.2026, on the point of distribution in accordance with Section 53 of the Code, the Ld. Counsels representing the respective parties submitted as follows:

• “1. Ld. Counsel representing the applicant states that she is the successful Auction Purchaser and has purchased the assets in an open e-auction as a going concern in the auction process conducted by the Liquidator.

• 2. She states that there was a claim lodged by UPSIDA during the CIRP / liquidation process and the claim has been collated for pre-CIRP outstanding amount. However, UPSIDA was not executing the documents of transfer/ mutation. Ld. Counsel further submits that since the UPSIDA was not executing the documents, therefore it was compelled to deposit the dues of the pre-CIRP under protest.

• 3. The present applications have therefore been filed for seeking refund of the amount paid by the applicants to the UPSIDA on account of the formalities to be completed for the said purpose.

• 4. Ld. Counsel representing the Liquidator states that the liquidation assets have already been sold to the extent of about 280 crore, and out of which, approximately Rs. 259 crore has already been distributed. The remaining amount is also in the process of being distributed in accordance with the provisions of section 53 of Code.

• 5. Ld. Counsel, Mr. Rahul Kr. Jadaun, has put in appearance for UPSIDA and states that he would not have any grievance, if the distribution takes place in accordance with Section 53 of the Code and as per the entitlement of the UPSIDA.”

# 22. In view of the above, the mere “as is where is” condition or the subsequent transfer of the leasehold interest cannot convert the pre-CIRP liability of the Corporate Debtor into an independent personal liability of the Applicant. The pre-CIRP dues of the Corporate Debtor were required to be dealt with through the liquidation process in accordance with Section 53 of the Code, particularly when the Respondent No. 1 had already lodged its claim in the liquidation proceedings of the Corporate Debtor.

# 23. At this juncture, it would be apposite to refer to the law laid down by the Hon’ble NCLAT in Bhatpara Municipality Through its Chairperson v. Nicco Eastern Pvt. Ltd., (2021) (Company Appeal (AT) (Ins) No. 714 of 2021) wherein it was held as follows:

• “14. Thus the liquidator had a duty to prepare an asset memorandum containing the value of the assets. Clause (f) of sub regulation 2 of regulation 34 stipulates the inclusion of “any other information that may be relevant for the sale of the asset”. Regulation 13 of the said Regulations (supra) enjoins upon the liquidator to submit a preliminary report to the Adjudicating Authority with the Asset Memorandum. Therefore, the liabilities with respect to the assets should have been brought to the notice of the Adjudicating Authority by the liquidator.

• 15. Clause (g) of sub section 1 of section 55 of the Transfer of Property Act, 1882 binds the seller as hereunder: –

• “(1) The seller is bound –

• (g) to pay all public charges and rent accrued due in respect of the property up to the date of the sale, the interest on all encumbrances on such property due on such date, and, except where the property is sold subject to encumbrances, to discharge all encumbrances on the property then existing.

• 16. The outstanding dues of the property tax relating to period prior to sale confirmation are thus dues that are akin to claim of an unsecured creditor (Bhatpara Municipality in the present case) and should be discharged in terms of the properties regarding distribution of assets given in section 53 of IBC. The auction-purchaser cannot be held liable to pay any such dues relating to period prior confirmation of sale as has been held by the Hon’ble Supreme Court in the matter of AI Champdany Industries Ltd. vs. The Official Liquidator & Anr. (supra).”

# 24. Thus, in view of the law laid down by the Hon’ble NCLAT in Bhatpara Municipality Through its Chairperson v. Nicco Eastern Pvt. Ltd. (supra), the outstanding dues pertaining to the period prior to the issuance of the Sale Certificate/handing over of possession are to be treated as pre-CIRP liabilities of the Corporate Debtor and dealt with in accordance with the waterfall mechanism prescribed under Section 53 of the Code, and cannot simultaneously be recovered from the auction purchaser merely because the purchaser required transfer of the leasehold interest in its favour. Accordingly, the Applicant/Auction Purchaser cannot be held liable to pay the pre-CIRP dues of the Corporate Debtor.

# 25. In view of the foregoing discussion, the amount of Rs. 82,53,013.37/-, as demanded by UPSIDA vide letter dated 14.08.2023 and paid by the Applicant under protest towards the pre-CIRP dues of the Corporate Debtor, is not liable to be borne by the Applicant merely on account of its purchase of the asset in liquidation. The Applicant is accordingly entitled to refund of the said amount. UPSIDA shall remain entitled to receive its admissible claim against the liquidation estate in accordance with Section 53 of the Code, as also recorded in the order dated 03.08.2026, wherein the Ld. Counsel representing UPSIDA submitted that UPSIDA would have no grievance if the distribution takes place in accordance with Section 53 of the Code and as per its entitlement.

# 26. The Respondent No.1/ UPSIDA is directed to refund an amount of Rs. 82,53,013.53/- to the Applicant.

# 27. Accordingly, the present application bearing IA No. 485 of 2023 is allowed in the aforesaid terms.

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Indojewel Jewellery Private Limited vs. Brihanmumbai Municipal Corporation - Hon’ble Supreme Court has observed that where a property is sold on an "as is where is" basis, the intending auction purchaser is under an obligation to conduct due diligence by inspecting the property and ascertaining all encumbrances, statutory dues and other liabilities attached to it.

   NCLT Mumbai (2026.09.22) in Indojewel Jewellery Private Limited vs. Brihanmumbai Municipal Corporation [I.A. 2513/2025 IN C.P. NO. 2607(IB)/MB/2019] held that;

• A bare reading of the aforesaid provision makes it clear that any property taxes due under the said Act in respect of any building or land constitute a statutory first charge upon such building or land, subject to the prior payment of land revenue, if any, due to the State Government. Consequently, any transfer of such property would not extinguish or override the statutory charge created in favour of the Municipal Authority in respect of the outstanding property tax dues.

• As can be seen from the above provision, Section 203 of the MMC Act empowers the BMC to recover unpaid property taxes by attachment and sale of the immovable property of the defaulter. Thus, the statutory scheme expressly contemplates recovery of outstanding property tax dues through the attachment and sale of the property against which such dues are recoverable.

• The rationale is that a statutory charge attached to the property constitutes an encumbrance running with the property and is distinct from a mere personal claim against the Corporate Debtor, and that there is no inconsistency between the enforcement of such statutory charge and the provisions of the IBC, and therefore the overriding effect of Section 238 of the Code is not attracted.

• In the aforesaid judgment Hon’ble Supreme Court has observed that where a property is sold on an "as is where is" basis, the intending auction purchaser is under an obligation to conduct due diligence by inspecting the property and ascertaining all encumbrances, statutory dues and other liabilities attached to it.

• The Hon’ble Calcutta High Court, in the above judgment, has thus held that when assets are sold during liquidation on an “as is where is” basis, the purchaser acquires the property along with existing liabilities and charges/encumbrances.

• The Court drew a distinction between liquidation and resolution and observed that liquidation is a process of realization and distribution of assets. It further held that where assets are sold on an “as is where is” and “whatever there is” basis, the purchaser acquires the property along with the liabilities attached to it.

Blogger’s Comments; The impugned judgment is legally unsustainable. Its foundational premise - that a statutory charge survives the liquidation process and the ensuing auction under the Insolvency and Bankruptcy Code, 2016 (IBC) - is erroneous. Section 52 of the IBC affords a secured creditor a binary choice: either to enforce its security interest in accordance with the provision, or, failing such election, to relinquish that security interest to the liquidator. Consequently, once the auction is conducted under the IBC framework, the security interest - whether arising from a statutory or contractual charge on the property - does not subsist thereafter. 

Excerpts of the order;

# 1. The present Application has been filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (“Code") read with Rule 11 of the National Company Law Tribunal Rules, 2016 (“NCLT Rules”) with following prayers:

• a) To pass an Order declaring that the demand raised by the Respondent No. 1 vide Billwise Outstanding Report (enclosed in Exhibit-"E") for an amount of Rs. 86,58,080/- (Rupees Eighty-Six Lakhs Fifty-Eight Thousand and Eighty Only) along with any interest/penalty accruing thereon, together with all consequential actions, as illegal, void & in violation of Section 53 of IBC, 2016, since the said amount arises prior to Liquidation Date on 23.09.2022 and hence is not liable to be paid by the Applicant;

• b) To pass an Order directing extinguishment of all claims and liabilities of Respondent No. 1 against the Applicant and its Scheduled Property (given in Schedule-I of this Application) arising prior to Liquidation Date of Corporate Debtor on 23.09.2022;

• c) To pass an Order directing Respondent No 1 to give NOC in the name of “M/s. Indojewel Jewellery Private Limited” (Applicant) in respect of the old dues of the Scheduled Property (given in Schedule-I of this Application) arising prior to Liquidation Date on 23.09.2022;

• d) Pending hearing and disposal of the instant Application, pass an Order granting stay on recovery of outstanding amount arising prior to Liquidation Date on 23.09.2022, as claimed by Respondent No.1 against the Applicant and its Scheduled Property (given in Schedule-I of this Application);

• e) To pass any such other or further order(s) as may be deemed fit by this Hon’ble Adjudicating Authority, in the interest of justice and equity.

Brief Facts as per the Application: 

# 2. This Tribunal vide order dated 25.11.2019 admitted Panache Exports Private Limited (“Corporate Debtor”) into the Corporate Insolvency Resolution Process (“CIRP”). Thereafter, Liquidation was initiated against the Corporate Debtor vide order dated 23.09.2022 (“Liquidation Order”), and Mr. Ajit Gyanchand Jain (“Respondent No. 2”) was appointed as the Liquidator of the Corporate Debtor.

# 3. It is submitted that the Respondent No. 1 (Brihanmumbai Municipal Corporation) as an unsecured operational creditor has already lodged

 

 

 

 

its claim amounting to Rs. 8,21,434/- with the Respondent No. 2 on 20.12.2022.

# 4. It is submitted that the Respondent No. 2 (Liquidator) published an Auction Notice for the sale of under mentioned asset of the Corporate Debtor on 05.06.2023, inviting bids for E-Auction to be conducted on 05.07.2023.

# 5. The Applicant expressed its interest in participating in the e-auction of the Corporate Debtor for bid for Asset given in "Option A1" being Unit No. 3, Ground Floor, Multi-storied Building SEEPZ, Marol Industrial Area, Andheri (East), Mumbai – 400096, vide Application Form dated 16.06.2023.

# 6. The e-auction of above said Property was conducted on 05.07.2023 on the e-auction portal and the Applicant emerged as the Successful Auction Purchaser at the price of Rs. 5,31,00,000/-.

# 7. The Applicant had deposited pre-requisite EMD of Rs. 53,10,000/- with the Respondent No. 2 through NEFT on 30.06.2023. Subsequently, the Applicant had paid the remaining amount of Rs. 4,77,90,000/- on 19.07.2023, being the entire bid and sale consideration.

# 8. It is further submitted that the claim for a sum of Rs. 8,21,434/- was submitted by the Respondent No. 1 with the Respondent No. 2, and the same was reflected in the List of Stakeholders as on 26.07.2023, as unsecured operational creditor. Therefore, the Respondent No. 1 held 0.14% share in the total amount of admitted claims and thus was also a part of the Committee of Stakeholders Consultation Committee (“SCC”).

# 9. It is submitted that the Respondent No. 2 issued Certificate of Sale dated 16.08.2023 in respect of the above said property, which was conducted via “Sale of Assets on Parcel basis” as per Section 35(1)(f) of the Insolvency and Bankruptcy Code, 2016 r/w. Regulation 32(d) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, which was sold on "as is where is basis", "as is what is basis", "whatever there is basis" and "no recourse basis” along with available licenses, permits, approvals and recourse basis" along with available licenses, permits, approvals and registrations to the extent they are transferable under the applicable law.

# 10. It is submitted that pursuant to the Certificate of Sale dated 16.08.2023, the Applicant purchased an allotment of unit, being a registered under Sub-Lease dated 03.12.2010, from sub-lessor President of India, through the Development Commissioner, SEEPZ Special Economic Zone for a period of 95 years having possession with effect from date 17.01.2008. Thus, vide the Sale Certificate, all the right, title, interest, privileges, liberties, easements, leases, obligations, claim and demand of the Corporate Debtor over the said Property has been absolutely and forever been transferred, assigned and conveyed unto the Applicant by the Respondent No.2 for the remaining period of Lease. Thereafter, the Respondent No. 2 vide letter dated 02.11.2023, intimated to the Respondent No. 1 of acquisition of said Property by the Applicant.

# 11. It is submitted that the Corporate Debtor was dissolved by virtue of order dated 04.03.2025 (“Dissolution Order”), passed by this Tribunal. The Respondent No. 1 had already filed its claim before the Liquidator, and the entire claim was duly admitted. The claim was thereafter dealt with and settled by the Liquidator in accordance with Section 53 of the Code, following which the Corporate Debtor was dissolved. In these circumstances, Respondent No. 1 cannot seek recovery from the Applicant of any dues arising prior to the Acquisition Date. Having participated in the liquidation process and obtained settlement of its claim under the Code, Respondent No. 1 cannot simultaneously pursue separate proceedings for recovery of the same amount. Further, Respondent No. 1 was a member of the Stakeholders' Consultation Committee (SCC) holding a 0.14% share of the total admitted claims and was therefore aware of the distribution carried out by the Liquidator among all stakeholders in accordance with Section 53 of the Code. Accordingly, the Applicant seeks appropriate directions from this Tribunal.

Analysis and Findings

# 12. We have heard the Ld. Counsel for the Applicant and perused the documents available on record and appreciated the legal position. It is relevant to take note of the order passed by this Tribunal on 29.07.2025, wherein it observed as under:

• “Learned counsel for the applicant submits that he has no objection if R-2 is discharged. Accordingly, and in the facts and circumstances of the case, R-2 being Proforma Party against whom, no relief is being sought and since the Corporate Debtor has already been dissolved, the R-2 is discharged from this IA.”

# 13. Further, vide order dated 07.09.2026, this Tribunal proceeded ex-parte against the Respondent No. 1 (BMC) and passed the following order:

• “IA/2513/2025: - Vide order dated 12.05.2026, it was noted that the BMC has been served vide email on 02.03.2006 and also by post which was delivered on 05.03.2026. On 12.05.2026, one last and final opportunity was granted to the BMC to file reply within 4 weeks. However, we note that no reply has been filed and no one is present on behalf of the BMC, accordingly, the Respondent herein (BMC) is set ex-parte.

• Heard, learned counsel for the Applicant. Matter is Reserved for Orders.”

# 14. It is the case of the Applicant that all dues and charges arising after the Date of Liquidation, i.e., 23.09.2022, have been duly paid. The Applicant further submits that pursuant to the Certificate of Sale dated 16.08.2023, the assets were sold on a parcel basis, "as is where is", "as is what is", "whatever there is", and "no recourse" basis. Accordingly, the Applicant cannot be held liable for the outstanding amount of Rs. 86,58,080/- pertaining to the period prior to the Date of Liquidation. The Applicant further contends that, since Respondent No. 1 had already filed its claim, which was duly admitted and settled through the liquidation process in accordance with Section 53 of the Code, Respondent No. 1 is precluded from initiating separate proceedings to recover the same dues from the Applicant.

# 15. In facts and circumstances of the present case, the sole issue that arise for our consideration is:

• “Whether the Applicant as a successful auction purchaser of an asset of the Corporate Debtor is liable to pay the outstanding dues claimed by the R-1 (BMC), which pertain to the period prior to the Liquidation Order or not?”.

# 16. In this context it is important to note that, Respondent No. 1 is a Municipal Authority established under the Mumbai Municipal Corporation Act, 1888 (“MMC Act”). Under Section 212 of the said Act, in the event of any outstanding demands or dues, the Municipal Authority has the first charge upon such asset/property. The relevant extract of the said Section is as follows:

• “212. Property taxes to be a first charge on premises on which they are assessed. Property taxes due under this Act in respect of any building or land shall, subject to the prior payment of the land revenue, if any, due to the State Government thereupon be a first charge in the case of any building or land held immediately from the Government upon the interest in such building or land of the person liable for such taxes and upon the goods and chattels, if any, found within or upon such building or land and belonging to such person; and, in the case of any other building or land, upon the said building or land and upon the goods and chattels, if any, found within or upon such building or land and belonging to the person liable for such taxes.”

A bare reading of the aforesaid provision makes it clear that any property taxes due under the said Act in respect of any building or land constitute a statutory first charge upon such building or land, subject to the prior payment of land revenue, if any, due to the State Government. Consequently, any transfer of such property would not extinguish or override the statutory charge created in favour of the Municipal Authority in respect of the outstanding property tax dues. 

 

# 17. Moreover, the method of recovery is specified in sections 203 and 209 of MMC Act which are reproduced below:

• “203. Distress and attachment.

• (1) If the person liable for the payment of the tax for which a bill is served upon him and does not pay the tax together with penalty or interest or both as required under the provisions of this Act to pay the same, and if no appeal is preferred against the said tax, as hereinafter provided, such sum, with all costs of the recovery, may be levied under a warrant in the form of Schedule 3, or to the like effect, to be issued by the Commissioner by distress and sale of the goods and chattels of the defaulter or the attachment and sale of the immovable property of the defaulter, or, if the defaulter be the occupier of any premises in respect of which a property tax is due, by distress and sale of any goods and chattels found on the said premises.

• (2) Where the person liable to pay the tax according to the bill served upon him pays the tax as required under the provisions of this Act but does not pay the amount of penalty or interest or both either in whole or in part as may be due on the unpaid amount of tax, for such amount which has remained unpaid, a warrant in the form of Schedule J, mutatis mutandis, may be issued by the Commissioner in the same manner as if such sums were due on account of the tax.

• (3) When a warrant is issued for the attachment and sale of immovable property, the attachment shall be made by an order prohibiting the defaulter from transferring or charging the property in any way, and all persons from taking any benefit from such transfer or charge, and declaring that such property will be sold unless the amount of tax due penalty or interest or both, if any, due and payable together with all costs of recovery is paid into the municipal office within twenty-one days.

• (4) Such order shall be proclaimed by fixing at some conspicuous part of the property and upon a conspicuous part of the municipal office and also, when the property is land, paying revenue to the State Government, in the office of the Collector.

• (5) Any transfer of or charge on the property attached or any interest therein made without the written permission of the Commissioner shall be void as against all claims of the Corporation enforceable under the attachment.”

# 18. As can be seen from the above provision, Section 203 of the MMC Act empowers the BMC to recover unpaid property taxes by attachment and sale of the immovable property of the defaulter. Thus, the statutory scheme expressly contemplates recovery of outstanding property tax dues through the attachment and sale of the property against which such dues are recoverable.

# 19. In this regard, it is important to take note of the judgment of Hon’ble High Court of Calcutta in Cotton Casuals India Pvt. Ltd. & Ors. Vs. State of West Bengal & Ors. WPO 1235 of 2024, wherein it has held that:

•  “40. Where a statutory first charge is created on the property, such as in respect of property tax under Section 232 of the Kolkata Municipal Corporation Act, 1980, the municipal authority is entitled to enforce such charge independently in accordance with the statutory mechanism provided therein. In such a situation, there is no inconsistency between the provisions of the IBC and the KMC Act, and, therefore, the overriding effect of Section 238 of the IBC is not attracted.

• 41. Where a statutory charge is created on the property, as in the case of property tax under the KMC Act, the Respondent corporation may either submit its claim before the Official Liquidator under the IBC or enforce the charge independently through the statutory mechanism. In such cases, there is no inconsistency between the IBC and the KMC Act, and Section 238 of the IBC is not attracted.”

In the aforesaid judgment, the Hon’ble High Court considered the interplay between the provisions of the IBC and a statutory first charge created under Section 232 of the KMC Act, 1980. The Court held that where a statute creates a first charge on the property itself, the authority in whose favour such charge exists is not confined only to the remedy of lodging its claim before the Liquidator under the IBC. Such authority may either submit its claim in the liquidation process or independently enforce the statutory charge in accordance with the mechanism provided under the concerned statute. The rationale is that a statutory charge attached to the property constitutes an encumbrance running with the property and is distinct from a mere personal claim against the Corporate Debtor, and that there is no inconsistency between the enforcement of such statutory charge and the provisions of the IBC, and therefore the overriding effect of Section 238 of the Code is not attracted. 

 

# 20. Applying the aforesaid principle to the facts of the present case, Section 212 of the Mumbai Municipal Corporation Act, 1888, creates a statutory first charge in favour of the Municipal Authority in respect of its outstanding dues. Once such a charge comes into existence, the Municipal Authority is entitled to enforce the same against the property, notwithstanding that it had also lodged its claim before the Liquidator. Accordingly, the mere fact that Respondent No. 1 participated in the liquidation process does not result in extinguishment of the statutory charge created under Section 212 of the Mumbai Municipal Corporation Act, 1888, nor does it preclude the Municipal Authority from seeking enforcement of the charge against the property.

# 21. Further, it would be relevant to take note of the Auction notice dated 05.06.2023 and Certificate of Sale dated 16.08.2023. Given below is the relevant extract of the said documents:

Auction Notice dated 05.06.2023:

Certificate of Sale dated 16.08.2023:

“i. “SAID PROPERTY” is sold and is further transferred, assigned and conveyed as "AS IS WHERE IS BASIS", "AS IS WHAT IS BASIS", “WHATEVER THERE IS BASIS” and “NO RECOURSE BASIS”.

ii. “SAID PROPERTY” is otherwise free from any charges, mortgages, encumbrances, liability, litigation, lis pendens, claims, adverse claims etc.

iii. All costs of stamp duty, registration fees, additional stamp duty, fees, cess, charges, including all other racially and incidental charges, expenses and cost of transfer, assignment and conveyance of SAID PROPERTY shall be paid, remitted and borne by Purchaser over and above the consideration amount including but only limited to any Municipal Taxes, Dues, GST, TDS as may be applicable at present or way come into existence later on or any present period, presiding period or future in respect of SAID PROPERTY.

iv. The Purchaser shall hence forth comply with all the obligation, covenants, discharges, rules and regulations as are in existence and/or as may be framed and directed by SEEPZ and also as guaranteed by the “Company in Liquidation in the said Registered Sub-Lease Deed”.” 

 

# 22. Upon perusal of the Auction Notice dated 05.06.2023 and the Certificate of Sale dated 16.08.2023, it is evident that the E-Auction and the subsequent sale of the property were expressly conducted on “AS IS WHERE IS, AS IS WHAT IS, WHATEVER THERE IS and NO RECOURSE BASIS”. The Applicant was, therefore, expected to conduct due diligence before submitting its bid and cannot subsequently claim ignorance of the liabilities associated with the property.

# 23. In the aforesaid circumstances it is relevant to take note of the judgment of the Hon’ble Supreme Court in K.C. Ninan Vs. Kerala State Electricity Board & Ors. (2023) 14 SCC 431, wherein the Apex Court has observed as under:

• “146. To conclude, all prospective auction purchasers are put on notice of the liability to pay the pending dues when an appropriate “as is where is” clause is incorporated in the auction sale agreement. It is for the intending auction purchaser to satisfy themselves in all respects about circumstances such as title, encumbrances and pending statutory dues in respect of the property they propose to purchase. In a public auction sale, auction purchasers have the opportunity to inspect the premises and ascertain the facilities available, including whether electricity is supplied to the premises. Information about the disconnection of power is easily discoverable with due diligence, which puts a prudent auction purchaser on a reasonable enquiry about the reasons for the disconnection. When electricity supply to a premises has been disconnected, it would be implausible for the purchaser to assert that they were oblivious of the existence of outstanding electricity dues.”

In the aforesaid judgment Hon’ble Supreme Court has observed that where a property is sold on an "as is where is" basis, the intending auction purchaser is under an obligation to conduct due diligence by inspecting the property and ascertaining all encumbrances, statutory dues and other liabilities attached to it. 

# 24. It is also relevant to take note of the judgment of the Hon’ble High Court of Calcutta in Cotton Casuals India Pvt. Ltd. & Ors (Supra), has also taken similar view:

• “51. In view of the law laid down by the Hon’ble Supreme Court in the aforementioned cases, it is well-settled that a sale conducted on an “AS IS WHERE IS” basis entails that the purchaser acquires the asset along with all existing rights, liabilities, and obligations. When property is sold on such a basis, any encumbrances or charges attaching to the property stand transferred to the purchaser at the time of sale.

• 55. In view of the detailed discussion herein above, this Court is of the considered view that the Petitioner, being the auction purchaser of the premises in question, is liable to pay the outstanding property tax dues. The Official Liquidator through Sale Notice and EOI has made it very evident and clear that all the bidders are supposed to make their respective bids based on their own investigation and due diligence. As discussed herein above, the Hon’ble Supreme Court in Union of India (supra) and K.C Ninan (supra), when assets are sold on ‘as is where is basis’, the purchaser acquires them with full knowledge that they are being sold without any warranties, representations, or indemnities, and that the purchaser alone bears the responsibility of verifying the condition, liabilities, and encumbrances attached to the assets. Further Section 232 of the KMC Act makes the property tax dues as first charge on the property and hence make it an encumbrance attached to the property. Hence, the Petitioner is liable to make the payment towards the outstanding property tax dues for the pre- liquidation period also.”       [Emphasis Supplied]

 

The Hon’ble Calcutta High Court, in the above judgment, has thus held that when assets are sold during liquidation on an “as is where is” basis, the purchaser acquires the property along with existing liabilities and charges/encumbrances. 

# 25. Moreover, the Respondent No. 2 issued Letter of Intent dated 07.07.2023 in favour of the Applicant as Successful Auction Purchaser. The relevant extract thereof is reproduced below:

• “The successful bidder/ Purchaser will also be responsible for evaluating completeness of applicability of taxes in India at the time of closure and will be responsible for paying all such taxes.

• It is expressly stated that the Liquidator does not take or assume any responsibility for any dues, statutory or otherwise of the Company, including such dues, if any, which may affect transfer of the Liquidation assets in the name of the Successful Bidder and such dues, if any, will have to be borne/paid by the Successful Bidder.”

Upon perusal of the Letter of Intent dated 07.07.2023 and the Sale Certificate dated 16.08.2023, it is evident that the said property was sold on an “as is where is” basis. Admittedly, Respondent No. 1 had submitted its claim to Respondent No. 2, and the outstanding dues and liabilities attached to the property were reflected in the List of Stakeholders dated 26.07.2023. Accordingly, the Applicant was required to undertake its own due diligence prior to purchasing the said property.

 

# 26. The Applicant further submitted that the entire claim of Respondent No. 1 has already been dealt with by the Liquidator in accordance with Section 53 of the Code. It was contended that Respondent No. 1 cannot seek recovery from the Applicant of any dues that arose prior to the Acquisition Date i.e. 23.09.2022. The Applicant argued that the demand raised by Respondent No. 1 is contrary to Section 53 of the Code and relied upon various judicial precedents to contend that, where the Corporate Debtor is sold as a “going concern”, the successful auction purchaser cannot be saddled with any dues, liabilities, or claims relating to the period prior to such sale.

# 27. In this regard it is relevant to take note of the judgment of the Hon’ble High Court of Calcutta in Cotton Casuals India Pvt. Ltd. & Ors. (Supra), wherein it held that:

• “39. On the other hand, the IBC envisages that liquidation proceedings are to be carried out in accordance with the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, which prescribe the procedure for submission of claims to the Liquidator, verification thereof, and distribution of the liquidation estate amongst the creditors. In such proceedings, creditors are ordinarily required to lodge their claims before the Liquidator, who, after collating and verifying the same, distributes the proceeds of the liquidation estate in the order of priority laid down under Section 53 of the IBC. For this purpose, the Liquidator sells the assets of the Corporate Debtor and records the liabilities to the best of his knowledge. However, since liquidation is not an exercise of revival but of realisation and distribution, it is possible that certain liabilities may not be fully known or disclosed at the time of sale. Consequently, assets are sold on an “as is where is, whatever there is” basis, meaning that the purchaser acquires the property along with such liabilities or encumbrances as may be attached to it, save and except where the terms of sale provide otherwise.        [Emphasis Supplied]

# 28. The Court drew a distinction between liquidation and resolution and observed that liquidation is a process of realization and distribution of assets. It further held that where assets are sold on an “as is where is” and “whatever there is” basis, the purchaser acquires the property along with the liabilities attached to it.

# 29. The Applicant further argued that he is not liable to pay the dues relating to the Corporate Debtor. Therefore, it is necessary to take note of Section 32A (2) of the Code, which deals with liability of a Corporate Debtor. Given below is the relevant extract of the said provision:

• “32A. Liability for prior offences, etc

• (2) No action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process of the corporate debtor, where such property is covered under a resolution plan approved by the Adjudicating Authority under section 31, which results in the change in control of the corporate debtor to a person, or sale of liquidation assets under the provisions of Chapter III of Part II of this Code to a person, who was not –

• (i) a promoter or in the management or control of the corporate debtor or a related party of such a person; or

• (ii) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court. 

• Explanation.-For the purposes of this sub-section, it is hereby clarified that,-

• (i) an action against the property of the corporate debtor in relation to an offence shall include the attachment, seizure, retention or confiscation of such property under such law as may be applicable to the corporate debtor;

• (ii) nothing in this sub-section shall be construed to bar an action against the property of any person, other than the corporate debtor or a person who has acquired such property through corporate insolvency resolution process or liquidation process under this Code and fulfils the requirements specified in this section, against whom such an action may be taken under such law as may be applicable”

• [Emphasis Supplied]

A bare reading of the aforesaid provision makes it clear that no action can be taken against the property of the Corporate Debtor in relation to an “offence” committed prior to the commencement of the CIRP. Therefore, the immunity granted under this provision is limited to liability arising from such prior “offences” and does not extend to outstanding charges or dues, as involved in the present case. 

# 30. The Applicant has relied on the following judgments to contend that the Successful Auction Purchaser is not liable to pay any dues arising prior to the Liquidation Date. These judgments are considered below:

• i. In the case of Eastern Power Distribution Co. of A.P. Ltd. v. Maithan Alloys Ltd., (2023) 21 Comp Cas-OL 674 and Chinar Steel Segments Centre (P) Ltd. v. Samir Kumar Agarwal, 2023 SCC OnLine NCLAT 2593, the issue before the Hon’ble NCLAT was with regards to the recovery of electricity dues from the Successful Auction Purchaser who had purchased the Corporate Debtor ‘on a going concern basis’. However, in the present case, the Respondent No. 1 has a statutory first charge over the  said property for the unpaid statutory dues and ‘asset’ of the Corporate Debtor was sold on ‘as is where is’ basis after which dissolution order has been passed.

• ii. In the case of State of Gujrat v. OL of kengold (India) Ltd. reported in 2008 SCC OnLine Guj 309, the Hon’ble High Court of Gujarat, while dealing with sales tax dues and taking into consideration provisions contained in the Bombay Land Revenue Code, Companies Act, 1956 and Income Tax Act, 1961, held that dues of the secured creditors shall have precedence over the dues to the Government. In the present case, as noted above the Municipal Authority had statutory first charge over the asset/said property.

• iii. In the case of Melkar TTI Biofuels Limited v. Gulshan Kumar Gupta & Others in ILA. 1040 OF 2023 in C.P.(IB) No. 977/MB/2019, the Corporate Debtor was sold as a going concern and issue for consideration before NCLT Mumbai, Bench -I, was with regards to the electricity and the sales tax dues, wherein, it was specified that the issue relating to the statutory lien was not before consideration. However, in the present case, the statutory first charge over the asset is duly considered.

• iv. Further, reliance is place on the judgment of NCLT Mumbai, Bench-II in JSK Estate Private Limited v. Mr. Sundaresh Bhat, Liquidator of EMCO & Anr. in Interlocutory Application No. 5330 of 2023, to contend that the successful bidder is at liberty to seek certain reliefs on the principle of clean slate. However, in the present case the ‘asset’ of the Corporate Debtor was sold on ‘as is where is’ basis and subsequently, the Corporate Debtor was liquidated. Therefore, the Successful bidder of liquidation assets cannot be placed on a same footing as that the Resolution Applicant.

• v. Further, the Hon’ble High Court of Calcutta in Rashidhan Sales (P) Ltd. v. Damodar Valley Corpn. & Ors., in WPA No. 12683 of 2022, specifically noted that the electricity dues do not pass with the property as a charge thereon and the principle of caveat emptor cannot be applied in the case of the auction purchaser in an asset sale because it is not possible for an auction purchaser to have a prior idea of any existing liability which, in any event, was not there. Whereas, in the present case, the first charge attached to the property has passed on the Applicant as a Successful Auction Purchaser of an asset on ‘as is where is’ basis. 

# 31. In view of the above discussion and legal position, the R-1 Municipal Authority has a statutory first charge over the property in question and the property was sold on “as is where is basis” meaning that, all the liabilities are to be borne by Auction Purchaser and the Applicant was well aware of the claim of R-1 Municipal Authority and Applicant never raised any objection before the Liquidator. Now, the Applicant cannot be allowed to take plea that he is not liable to pay the statutory dues of R-1 Municipal Authority. Therefore, we answer the question framed at para 15 in affirmative.

# 32. The present I.A. has no merit whatsoever and is liable to be dismissed. Hence, the same is dismissed and disposed of accordingly.

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