SINCERE SECURITIES PRIVATE LIMITED & ORS. VS. CHANDRAKANT KHEMKA & ORS CIVIL APPEAL NO. 12812 OF 2024:

DATE: 05/08/2025

COURT: Supreme Court of India

BENCH: Justice Sanjay Kumar and Justice Satish Chandra Sharma

FACTS:

A Memorandum of Understanding (MoU) was executed between Nandini Impex Private Limited, represented by its Director, Chandrakant Khemka, and later declared a corporate debtor under the Insolvency and Bankruptcy Code (IBC) and Noble Dealcom Private Limited along with Jodhpur Properties and Finance Private Limited (Appellant Nos. 2 and 3). Under this MoU, Nandini Impex availed financial assistance of Rs.3 crores, secured by depositing the title deeds of the rear portion of the ground floor of the White House property. A separate MoU was also executed with Sincere Securities Private Limited (Appellant No. 1) for a Rs.3 crore loan, secured against the front portion of the same property. Upon default in repayment, the company executed conveyance deeds transferring ownership of the respective portions of the property to the appellants. However, on the same day, Leave and License Agreements were executed, allowing Nandini Impex to retain possession of both portions on a monthly rental of Rs.6 lakhs per portion. Due to non-payment of rent, the appellants terminated these agreements on 08.05.2020 and filed eviction suits to reclaim possession.

Meanwhile, UCO Bank (Respondent No. 3) filed a petition under Section 7 of the IBC against Nandini Impex, which was admitted by the National Company Law Tribunal (NCLT), thereby initiating the Corporate Insolvency Resolution Process (CIRP). UCO Bank remained the sole member of the Committee of Creditors (CoC). The appellants, as operational creditors, submitted their claims to the Interim Resolution Professional (IRP), which were accepted in full. Later, the CoC directed the Resolution Professional to inspect the White House property to evaluate the necessity of continuing the high rental payments. Following this, the CoC decided that retaining the premises was not essential and requested that possession be handed back to the appellants. This move was challenged by Chandrakant Khemka, the suspended director of the corporate debtor.

ISSUES:

The key issue in this case was whether the possession of a commercial property (White House) occupied by a corporate debtor under a lease could be returned to its owners during the Corporate Insolvency Resolution Process (CIRP), despite the moratorium under Section 14(1)(d) of the Insolvency and Bankruptcy Code (IBC). The question arose in light of conflicting positions, while the Resolution Professional (RP), Committee of Creditors (CoC), and financial creditor UCO Bank supported the return, the suspended director of the corporate debtor, Chandrakant Khemka, opposed it on the grounds that the property was essential for operations and protected under the moratorium.

JUDGEMENT WITH REASONING:

The Supreme Court set aside the National Company Law Appellate Tribunal (NCLAT)’s order remanding the matter for fresh adjudication and restored the earlier order of the National Company Law Tribunal (NCLT), allowing the return of the property to its owners. The Court directed the Resolution Professional to act upon the NCLT's order and return possession of the premises, emphasizing that the moratorium under Section 14(1)(d) did not apply in the present circumstances, where neither the CoC nor the RP sought to retain the property.

The Court’s reasoning was grounded in the commercial wisdom of the CoC, which had determined that the continued occupation of the White House property was financially burdensome and operationally unnecessary. The Court referred to the decision in K. Sashidhar v. Indian Overseas Bank, emphasizing that the adjudicating authority (NCLT) is not expected to second-guess or interfere with the CoC’s commercial decisions, which are non-justiciable under the IBC. The RP had conducted an assessment and confirmed that the corporate debtor’s limited operations did not justify the high rental expenditure. The CoC, consisting solely of UCO Bank, concurred and instructed the RP to relinquish the property. The Supreme Court highlighted that such collective decisions must be respected to ensure efficiency in the insolvency process.

Furthermore, the Court rejected Chandrakant Khemka’s objection that Section 14(1)(d) barred the property’s return. It observed that the provision prevents recovery only where the corporate debtor needs to retain possession during CIRP. However, in this case, it was not the property owners but the CoC and RP themselves who sought the return due to financial impracticality. The Court clarified that the intent of Section 14(1)(d) is to protect essential operational assets—not to burden the insolvency process with avoidable liabilities. Since Khemka neither justified the need to retain the premises nor agreed to bear its cost, and all other stakeholders supported its return, the Court concluded that remand was unwarranted and allowed the appeal.

ANALYSIS:

This case underscores the significance of commercial wisdom in insolvency proceedings under the IBC. The Supreme Court reinforced the principle that the decisions of the Committee of Creditors (CoC), particularly on matters involving financial viability, are sacrosanct and not subject to judicial interference unless found to be perverse or against the provisions of the Code. By siding with the CoC and the Resolution Professional's view that the White House property was no longer required for the corporate debtor’s operations, the Court affirmed that operational sustainability, not mere possession, should guide property retention during CIRP. This aligns with the IBC’s objective of maximizing asset value and reducing unnecessary liabilities, such as high rental costs, which could otherwise deplete the corporate debtor’s limited resources during insolvency.

Moreover, the judgment clarifies the limited scope of the moratorium under Section 14(1)(d) of the IBC. The Court drew a clear distinction between protection of assets essential for running the debtor's business and retention of properties that are financially burdensome or operationally redundant. By holding that the moratorium cannot be misused to obstruct asset return when the debtor itself no longer wishes to retain it, the Court set an important precedent for future cases. The ruling also addressed the concern of suspended directors interfering in CIRP by asserting that objections lacking economic justification, especially when raised by parties without current managerial authority cannot override the collective commercial judgment of the CoC. This strengthens the hands of resolution professionals and creditors in steering insolvency processes efficiently and in line with the Code’s purpose.