Tribunal holds Section 14 moratorium does not confer ownership rights; directs Resolution Professional to hand over vehicles after verification, while investigation into fund diversion and dual financing continues.
In a significant order dated August 20, 2026, the National Company Law Tribunal (NCLT), Ahmedabad Bench, partially allowed the application filed by Mahindra & Mahindra Financial Services Limited (MMFSL) seeking restoration of possession of 17 electric vehicles leased to Gensol Engineering Limited (Corporate Debtor). The case, IA/1294(AHM)2025 in C.P.(IB)/195(AHM)2025, arose from a dispute over ownership and security interests in vehicles amidst the ongoing Corporate Insolvency Resolution Process (CIRP) against Gensol Engineering Limited.
MMFSL had sanctioned lease facilities amounting to Rs. 85 Crores under three sanction letters between December 2021 and March 2023 and leased 419 electric vehicles to Gensol Engineering Limited and Blu-Smart Mobility Limited. Due to defaults, MMFSL issued termination notices in March 2025, prior to the initiation of CIRP on June 13, 2025, and repossessed 291 vehicles. However, 128 vehicles, including 17 allegedly in possession of Gensol, remained unrecovered, prompting MMFSL to approach the NCLT for relief.
The primary legal question before the Tribunal was whether the vehicles in dispute formed part of the insolvency estate and whether the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) protected the Corporate Debtor’s possession against MMFSL’s claims. The Indian Renewable Energy Development Agency Limited (IREDA) also claimed a prior hypothecation charge over the vehicles, asserting that they were financed by IREDA under Project No. 2583 and thus part of its secured assets.
After thorough examination of lease agreements, purchase orders, tax invoices, payment proofs, delivery documents, registration certificates (RCs), and evidence from the authorized vehicle dealer Go Auto Private Limited, the Tribunal found that MMFSL established a clear proprietary and contractual entitlement over 10 of the 17 vehicles whose physical records were verified by the Registering Authority. The Tribunal noted that the moratorium under Section 14 does not create ownership rights for the Corporate Debtor over assets belonging to others, especially where lease agreements were terminated before CIRP commencement.
Regarding the 7 remaining vehicles, whose physical records were not traceable despite repeated efforts, the Tribunal refrained from issuing any direction for their handover, ordering continued tracing and verification. The Resolution Professional was directed to hand over possession of the 10 verified vehicles to MMFSL within 15 days after proper identification and inventory, ensuring no third-party rights were infringed.
Significantly, the Tribunal acknowledged competing claims of dual financing by MMFSL and IREDA over the same vehicles. It observed discrepancies in documents presented by IREDA, including registration certificates dated before the vehicles’ manufacture, and noted that IREDA failed to establish a superior charge over the specific vehicles. Concurrently, the Tribunal recognized ongoing proceedings under Sections 241, 242, 246, and 339 of the Companies Act, 2013, initiated by the Ministry of Corporate Affairs alleging diversion of funds by Gensol group entities and dual financing irregularities.
Consequently, the NCLT directed the Registry to forward a copy of its order to the Director General of Corporate Affairs and IREDA for necessary action in investigating the fund flow and financing chain involving Gensol group companies. The Tribunal clarified that its order did not constitute a final adjudication of ownership or security rights beyond the scope of the CIRP but was confined to deciding whether the vehicles were assets of the Corporate Debtor for the CIRP.
This ruling underscores the principle that insolvency moratoriums cannot be used to appropriate ownership rights unlawfully and affirms the importance of documentary evidence in resolving asset possession disputes during insolvency. The case also highlights the complexities arising from overlapping financings and the need for regulatory oversight to prevent financial improprieties.
Bottom Line:
Entitlement to leased vehicles during CIRP - Determination of ownership and security interest in vehicles claimed by competing parties, Section 14 moratorium under Insolvency and Bankruptcy Code, 2016 does not create ownership rights over assets belonging to another person.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Section 14, Section 60(5); Companies Act, 2013 Sections 241, 242, 246, 339
