IBC Moratorium Bars Sale Of Repossessed Vehicles

Case Details: STCI Finance Ltd. vs. Keshav Khaneja - [2025] 180 taxmann.com 138 (NCLT - Ahd.)

Judiciary and Counsel Details

Shammi Khan, Judicial Member
Sanjeev Sharma, Technical Member
Manish Bhatt, Sr. Adv. & Anip Gandhi, Adv. for the Appellant.
Rishi Singhal, Adv. for the Respondent.

Facts of the Case

In the instant case, the applicant-NBFC had extended a financial facility to the corporate debtor pursuant to a duly executed facility agreement. In consideration thereof, a hypothecation deed was executed, whereby 129 electric passenger vehicles were hypothecated and exclusively charged in favour of the applicant.

The corporate debtor committed repeated and wilful defaults in repayment of the loan facility, thereby triggering events of default under the facility agreement. Thereafter, the applicant declared the corporate debtor’s account NPA.

The applicant instituted a civil suit before the High Court seeking recovery of the outstanding amount. The High Court was pleased to grant interim relief, thereby appointing the Court receivers to assist the applicant in repossessing the hypothecated vehicles.

During the pendency of said suit, CIRP was initiated against the corporate debtor. The applicant filed an instant application seeking permission to sell hypothecated electric vehicles repossessed before the initiation of CIRP, and declaring that such vehicles were not assets of the corporate debtor and were outside the purview of the ongoing CIRP.

It was noted that the hypothecated electric vehicles repossessed by the applicant were assets of the corporate debtor under the IBC. Further, the moratorium under section 14 of the IBC applies to repossessed vehicles and prohibits the applicant from selling them.

NCLT Held

The NCLT held that the IBC overrides the provisions of the Motor Vehicles Act, 1988, with respect to the ownership of hypothecated vehicles in the possession of a financier. Further, reliefs sought by the applicant, including permission for sale, appropriation of proceeds, and reimbursement, were to be declined.

List of Cases Reviewed

STCI Finance Ltd. v. Gensol Engineering Ltd. [C.S. (Comm.) 438 of 2025] (para 2.7)
Tata Motors Finance Ltd. v. Jadoun International Pvt. Ltd. (2019) ibclaw.in 401 NCLAT (para 3.5)
Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365 (SC) (para 3.6)
Sundaresh Bhatt, Liquidator of ABG Shipyard v. CBDT and Customs [2022] 141 taxmann.com 471 (SC) (para 3.7)
Mahindra and Mahindra Financial Services Ltd. v. State of U.P. [2022] 136 taxmann.com 363 (SC) (para 4.11)
Neesa Leisure Ltd. v. Rajasthan State Industrial and Investment Corporation [Company Appeal (AT) (Ins.) No. 510 of 2022, dated 7-12-2022] (para 4.11)
SMAS Auto Leasing India Pvt. Ltd. v. Gensol Engineering Ltd. [Company Appeal (AT) (Ins.) No. 1042 of 2025,dated 2-9-2025]. (para 4.11)
Volkswagen Finance (P.) Ltd. v. Shree Balaji Printopack (P.) Ltd. [2021] 124 taxmann.com 614 (NCL-AT) (para 6.6)
Indian Overseas Bank v. RCM Infrastructure Ltd. [2022] 138 taxmann.com 329 / 172 SCL 533 (SC) (para 6.9)
Anand Rao Korada Resolution Professional v. Varsha Fabrics (P.) Ltd. [2019] 111 taxmann.com 474/[2020] 157 SCL 350 (SC) (para 6.10)
Sincere Securities (P.) Ltd. v. Chandrakant Khemka [2025] 177 taxmann.com 161/189 SCL 788 (SC) (para 6.11)
Encore Asset Reconstruction Company (P.) Ltd. v. Ms. Charu Sandeep Desai [2019] 107 taxmann.com 100/154 SCL 382 (NCL-AT) (para 6.12)
SIDBI v. Sumit Sharma Erstwhile RP [CA/AT/INS/1359/2025] (para 6.16).