Execution of Sale Deed Upheld Under IBC: NCLAT Confirms Completed Transaction Leaves Legal Heir With No Rights
- REEDLAW
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REEDLAW Legal News Network reports: In a pivotal ruling, the Appellate Tribunal affirmed that once a property transaction stands concluded through registered instruments, delivered possession and full payment, no subsequent heir can reopen the transaction during resolution plan implementation. The Tribunal upheld the direction issued under Section 60(5) for execution of the Sale Deed, reiterating that completed conveyances under the Insolvency and Bankruptcy Code cannot be undone through belated inheritance claims.
The Appellate Tribunal observed that the documentary trail—including registered Powers of Attorney, full consideration and established possession—conclusively demonstrated that the transfer had been completed long before initiation of the insolvency proceedings. It held that these steps divested the original owner of all residual rights, leaving no inheritable interest capable of being asserted by the legal heir. Consequently, the Tribunal found no error in the Adjudicating Authority’s direction for execution of the Sale Deed as part of the approved resolution plan, and the appeal was dismissed as meritless.
The appeal was filed under Section 61(1) of the Insolvency and Bankruptcy Code, 2016 and arose from the order dated 01.07.2025 passed by the Adjudicating Authority directing the Appellant and another legal heir to execute the Sale Deed in favour of the Successful Resolution Applicant. The dispute stemmed from a series of transactions beginning in 2010, when the predecessor of the Appellant and his co-owners executed separate Memorandums of Understanding and Agreements to Sell in favour of an entity that later assigned its rights to the Corporate Debtor. Registered Powers of Attorney and possession documents were executed in 2011, and the Corporate Debtor remained in actual possession until the commencement of CIRP. After approval of the resolution plan, the Successful Resolution Applicant sought execution of the Sale Deed to perfect title, which the attorney holder refused, prompting proceedings before the Adjudicating Authority.
The Appellant asserted that the impugned order was passed in violation of natural justice because he, being a legal heir of the deceased executant, was never impleaded before the Adjudicating Authority. It was argued that the Power of Attorney stood automatically terminated on the death of the original executant, rendering the attorney holder incapable of executing any Sale Deed thereafter. It was further contended that the Agreements to Sell and Deed of Assignment were unregistered documents incapable of conferring any right or title, particularly in view of the principles laid down in binding precedent requiring registration for transfer of immovable property. The Appellant also argued that the Adjudicating Authority lacked jurisdiction to direct execution of a Sale Deed, as such relief fell within the exclusive domain of the civil court under the Specific Relief Act, and that the underlying Agreements to Sell had become unenforceable owing to expiry of limitation.
The Successful Resolution Applicant, however, maintained that the Adjudicating Authority possessed jurisdiction under Section 60(5) of the Code to adjudicate any issue arising out of or in relation to the insolvency resolution process. It was contended that the Corporate Debtor had acquired complete rights and possession of the subject land through the chain of transactions, including registered Powers of Attorney, Deeds of Possession, and receipt of full consideration acknowledged in the documents executed by all sellers. It was argued that the Appellant had not established his locus as a legal heir through any supporting documentation and that the actions of the Appellant appeared collusive, aimed at depriving the Successful Resolution Applicant of an asset already paid for under the approved resolution plan. Reliance was placed on judicial authority holding that a Power of Attorney granted for the benefit of the agent or a third party in a commercial transaction continues to subsist even after the death of the executant.
On the issue of limitation, the Tribunal noted that the impugned order was pronounced on 01.07.2025, triggering the limitation period. Although the appeal was filed on 11.08.2025, beyond the initial 30-day period, the delay of 11 days remained within the statutorily condonable 15-day window under the proviso to Section 61(2). The Tribunal held that the Appellant’s explanation—particularly his non-participation in the original proceedings and delayed knowledge of the impugned order—constituted sufficient cause for condonation, despite the settled principle that the date of knowledge is irrelevant. Observing that the appeal was filed within the overall 45-day permissible period and that justice is better served by adjudication on merits, the delay was condoned.
On merits, the Tribunal examined the contention that the Power of Attorney ceased upon the death of the original executant. It noted that where the Power of Attorney is part of a commercial arrangement in which consideration has already passed, and possession has been delivered, the authority may survive the death of the executant in order to give effect to the underlying transaction. The Tribunal also noted that the documents executed by the sellers—including registered Powers of Attorney and a registered Deed of Possession—acknowledged full payment of consideration and transfer of possession to the assignee of the Corporate Debtor. In these circumstances, the legal heir of the deceased seller no longer possessed any surviving right, title, or interest in the subject land, as the predecessor had already divested ownership through completed transactions well before his demise.
The Tribunal further observed that the Appellant, having no subsisting interest in the property and not being an affected party, could not claim a violation of natural justice for non-impleadment. The direction issued by the Adjudicating Authority to execute the Sale Deed was considered an integral part of implementing the approved resolution plan and, therefore, well within the jurisdiction vested in the Adjudicating Authority under Section 60(5) of the Code. The objections relating to unregistered Agreements to Sell were held to be untenable in light of registered Powers of Attorney, delivery of possession, and acknowledgement of full consideration. The plea that the Successful Resolution Applicant ought to have pursued civil proceedings for specific performance was rejected, as the direction sought was directly linked to the implementation of the resolution plan.
Based on the above findings, the Tribunal concluded that the Appellant had no legal basis to resist execution of the Sale Deed and upheld the order of the Adjudicating Authority. The appeal was accordingly dismissed.
Mr. Anil K. Airi, Sr. Advocate, Mr. Mudit Ruhella, Mr. Vishal Tyagi and Mr. Harsh Gautam, Advocates, represented the Appellant.
For the Respondent/ Defendant: Mr. Abhijeet Sinha, Sr. Advocate with Mr. Shashank Agarwal, Mr. Saikat Sarkar, Mr. Abhishek Taneja, Mr. Sahil Sharma and Mr. A. Raghav, Advocates, appeared for Respondent No. 1 to Respondent No. 6.
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