# In the matter of Paramount Mills Pvt. Ltd. MA-381-2019 in IBA-199-2019

> NCLT judgment dated 2019-07-17. Citation: TCN-2019-NCLT-02465. The case involves an MA filed by the IRP under Section 19(2) of the Insolvency and Bankruptcy…

- **Court:** NCLT
- **Order date:** 17 Jul 2019
- **Citation:** TCN-2019-NCLT-02465
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/paramount-mills-pvt-ltd-ma-381-2019-in-iba-199-2019-756fd787

## Summary

### Background

The case involves an MA filed by the IRP under Section 19(2) of the Insolvency and Bankruptcy Code, 2016 against a financial creditor (R6), an Asset Reconstruction Company, which had taken possession of the corporate debtor's assets (34 acres of land with factory, building, plant, and machinery) under SARFAESI proceedings. The application also involves R5, another company allegedly involved in an Assignment Agreement and Custodian Agreement with the Financial Creditor (R6) for the custody of the Corporate Debtor's asset. The RP seeks immediate custody and control of the asset from R5.

## Facts

The IRP filed an MA under Section 19(2) of the IBC against Financial Creditor R6 and R5. R6, an Asset Reconstruction Company, had taken possession of the Corporate Debtor's assets (34 acres of land with factory, building, plant, and machinery) under SARFAESI proceedings on 2015-09-08. R5 is allegedly involved in an Assignment Agreement and Custodian Agreement with R6. The RP seeks immediate custody and control of the asset from R5. The court notes that the asset's ownership still lies with the Corporate Debtor. The erstwhile directors (R1 to R4) claim to have donated their shares to a trust and lack company records. However, they were still filing tax returns and maintaining bank accounts until January 2019. The RP is unable to trace the records of the Corporate Debtor

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## Issues and analysis

### Issue 1: Whether the RP is entitled to take custody and control of the Corporate Debtor's asset despite …

**Ratio:** The CIRP initiated under the Code takes precedence over SARFAESI proceedings unless the

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**Reasoning:** The court reasoned that since the asset's ownership still lies with the Corporate Debtor,

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**Interpretation:** This interprets Section 25(2) of the IBC to mean that the RP has the right to

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**Application:** The court applied this ratio to the facts by directing R5 to deliver possession

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## Parties

- **Judges:** B.S.V. Prakash…
- **Appellants:** G.GUNASEKA…
- **Respondents:** PARAMOUNT MILLS…; Thiagarajan…

## Timeline

- **2015-09-08 — SARFAESI Proc…**: Asset Reconstruction Company (R6) took possession of the Corporate Debtor's assets under…
- **2019-01-01 — Directors' Ac…**: Erstwhile directors (R1 to R4) were filing Income Tax Returns, GST Returns, and…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 19(2) — Personnel to extend co-operation to interim…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-19)

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