NCLAT (08.04.2021) in Victory Iron Works Limited & Anr. Vs Jitendra Lohia & Ors. [Company Appeal (AT)(Insolvency) NO.508 & 377 of 2020] held that;
Hence, the Corporate Debtor remained in possession of the properties for the purpose of their development. Upon Corporate Debtor’s admission in CIRP , RP came in possession therein by virtue of statutory provisions under the I&B Code, 2016. Hence, respondents cannot disturb/obstruct RP’s possession in those properties.
Unless the Respondent cancel/revoke MOU dated 24.01.2008, they cannot claim possession of those properties. Now there above right to do stands foreclosed by virtue of moratorium under Section 14 of the Code.
It is also undisputed fact that the Corporate Debtor (In CIRP) is holding the development right and the Development Agreement dated 16.06.2008 has not been terminated before the commencement of CIRP. In all such situations Section 14 of the ‘Code’ is applicable till it reaches the stage of approval of resolution Plan or Liquidation.
Excerpts of the order;
# 1. That the instant appeals have been preferred by two different Appellants viz. M/s. Victory Irons Works Limited (Appellant in Company Appeal (AT)(Ins) No. 508 of 2020) and M/s. Energy Properties Limited (Appellant in Company Appeal (AT) (Ins) No. 377 of 2020 under Section 61 of the Insolvency and Bankruptcy Code, 2016 (in short ‘Code’) against the Impugned order dated 12.02.2020 passed by the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench) in CA(IB) Nos. 1807/KB/2019 and 146/KB/2020 in CP(IB) No. 372/KB/2018. Since both the appeals have been filed against the same impugned order dated 12.02.2020, the appeals have been clubbed for better appreciation and taking a holistic view.
# 2. In these two appeals as stated above one appeal – CA(AT)(Ins) No. 508 of 2020 has been filed by M/s. Victory Iron Works Ltd who is the Licensee for an area of 10,000 Sq. ft. on a payment of Rs. 5000/- per month by the Licensor – Avani Towers Pvt. Ltd and Energy Property Pvt Ltd confirming party in terms of Leave and License Agreement dated 11.08.2011. The Appeal - Company Appeal (AT) (Ins) No. 377 of 2020 has been filed by M/s. Energy Properties Pvt Ltd the Original owner of the property who has entered into an agreement for the Development Agreement dated 16.06.2008 with M/s. Avani Towers Pvt. Ltd, (Corporate Debtor in CIRP) Developer for the Development of said land measuring more or less 10.19 acres and the owner has appointed the Developer for the Development of said land and the Agreement shall remained valid and enforceable till the Development and sale is completed in all respects (vide clause 6.1 and 6.2 of the said Agreement). As the MoU dated 24.01.2008 has been entered into between Energy Property Pvt Ltd, Avani Towers Pvt Ltd and certain specified shareholders determining the modus operandi for purchase of the said 10.19 acres of land. Even this agreement deal with terms of Escrow, Management of the Company, Obligations of the Company, essential terms of Development Agreement etc.
# 3. The Adjudicating Authority has disposed of both CA(IB) Nos. 1807/KB/2019 and 146/KB/2020 in CP(IB) No. 372/KB/2018 with following orders/ observations:
“Para 8 – From materials on record, it can safely be concluded that till admission of the Corporate Debtor in CIRP, MOU dated 24.01.2008 was not cancelled/ revoked by the Respondents. Hence, the Corporate Debtor remained in possession of the properties for the purpose of their development. Upon Corporate Debtor’s admission in CIR , RP came in possession therein by virtue of statutory provisions under the I&B Code, 2016. Hence, respondents cannot disturb/obstruct RP’s possession in those properties.
Para 9- We make it clear that the judgment in Supreme Court in Embassy Property Development Pvt. Ltd. Vs. State of Karnataka cannot be made applicable herein. We further make it clear that if at all the same is made applicable to the instant that this authority does not have jurisdiction to decide civil rights of the parties, still the same goes against the respondents also. Unless the Respondent cancel/revoke MOU dated 24.01.2008, they cannot claim possession of those properties. Now there above right to do stands foreclosed by virtue of moratorium under Section 14 of the Code.
Para 10 – Corporate Debtor is having development rights to the properties. It is intangible assets of the corporate Debtor. RP holds same development rights relating to those properties. He has to proceed with the CIRP of the Corporate Debtor and invite resolution plan on the basis of those rights. The respondents cannot obstruct his possession and activities in any manner. Hence, we allow this application i.e. CA(IB) No 807/KB/2019.
Para 11- CA(IB) No. 146/KB/2020 is filed by one M/s. Victory iron Works Ltd for modification of our order dated 09.01.2020 by that order, we directed all parties to maintain status quo as far as materials lying in above properties, as we were to decide as to who is in rightful possession of those properties. While disposing off CA(IB) No.1807/KB/2019, we held that RP is in legal and rightful possession of the properties. The applicant is affected by order dated 09.01.2020 because admittedly the corporate debtor and Energy Properties Pvt. Ltd. (Respondent in CA(IB) No.1807/KB/2019) put the applicant in possession of 10,000 sq. ft. land to carry on its activities/business.
Para 12- In fact, our order dated 09.01.2020 shall not affect the applicant’s possession and activities in that piece of land. It is brought to our notice that term of leave and licence agreement dated 11.08.2011 of the applicant is already expired, as it was only for 11 months. Be that as it may, the original owner of the properties i.e. Respondent in CA(IB) No.1807/KB/2019 have to take call on that aspect. Corporate Debtor’s development activities were not extended in relation to that piece of land. Hence, corporate debtor and RP do not have any say thereto. In view of this, we make it clear that our order dated 09.01.2020 shall not affect the applicant’s right to carry its business in that piece of land. In view of above, we pass the following orders:
Order
The Respondent (or any other person acting through them in CA(IB) o.1807/KB/2019) shall not obstruct RP’s possession and his activities relating to CIRP of the Corporate Debtor, until further orders, failing which the local police are directed to give every assistance to the RP for completion of CIRP of the Corporate Debtor effectively. ii. Our order dated 09.01.2020 shall not affect the activities of Victory Iron Works Ltd., in piece of land in their possession on the basis of leave and licence agreement dated 11.08.2011 until the original owner of the property decided further course of action as far as leave and licence agreement is concerned. Hence, this Applicant i.e. CA(IB) No. 146/KB/20220 stands disposed off. iii. Hence, CA(IB) No.1807/KB/2019 and CA(IB) No. 146/KB/2020 stand disposed off.
# 12. We have gone through the various judgments cited by the Appellants and Respondents and our observations applicable to the present appeal of those judgments are follows:
a. Embassy Property Developments Pvt. Ltd Vs. State of Karnataka and Ors. In Civil Appeal No. 9170 of 2019.
b. Rajendra K Bhutta Vs. Maharashtra Housing and Area Development Authority and Anr., in Civil Appeal No. 12248 of 2018 decided on 19.02.2020.
# 14. What we observed from the aforesaid judgments that in case of Embassy Properties (as stated supra) that the Adjudicating Authority did not have jurisdiction to entertain an application against the Govt. of Karnataka for a direction to execute Lease Deeds for extension of mining lease. However, the Adjudicating Authority would have jurisdiction to enquire into question of fraud to adjudicate upon disputes. While in case of ‘Rajendra K Bhutta’ (as stated supra), it has been made clear that Section 14(1)(d) of the ‘Code’ does not deal with any of the assets or legal right in such assets of Corporate Debtor but deal with recovery of ‘Property’.
# 15. There are certain facts which are very clear from the deliberation of submissions including the pleadings by the parties that M/s. Energy Properties Pvt ltd is the owner of the property and the Corporate Debtor (in CIRP) is a Developer of the Property in terms of the Development Agreement dated 16.06.2008 and they will be governed by inter - se agreements. Here the Adjudicating Authority has not gone into the issue of ownership of the property, he has restricted its role as provided in Section 14 of the ‘Code’ vide Section 14(1)(d) including its explanations. It is also undisputed fact that the Corporate Debtor (In CIRP) is holding the development right and the Development Agreement dated 16.06.2008 has not been terminated before the commencement of CIRP. In all such situations Section 14 of the ‘Code’ is applicable till it reaches the stage of approval of resolution Plan or Liquidation. However, the RP is to appropriately disclose the status of the ‘Property’ in the Information Memorandum and other documents as required in the IBBI (Insolvency Resolution for Corporate Perrons) Regulations, 2016.
# 16. As far as M/s. Victory Iron works limited is concerned, they have been provided space of 10,000 sq ft approximately on the said land by virtue of leave and license agreement dated 11.08.2011 and it is their privilege to use the land in terms of same leave and license agreement and this is also not disputed by Corporate Debtor in Resolution through RP.
# 17. All these suggest that there is no infirmity in the impugned order dt. 12.02.2020 and the appeal deserves to be dismissed and is dismissed with above observations.
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