SCI (15.11.2019) in Municipal Corporation of Greater Mumbai (MCGM) Vs. Abhilash Lal & Ors. [Civil Appeal No. 6350 of 2019] held that;
The principle that if a statute requires a thing to be done in a particular manner, it should be done in that manner or not at all, articulated in Nazir Ahmad v. Emperor, AIR 1936 PC 253, has found widespread acceptance. In the context of this case, it means that if alienation or creation of any interest in respect of MCGM’s properties is contemplated in the statute through a particular manner, that end can be achieved only through the prescribed mode, or not at all.
This court is of opinion that Section 238 could be of importance when the properties and assets are of a debtor and not when a third party like the MCGM is involved. Therefore, in the absence of approval in terms of Section 92 and 92A of the MMC Act, the adjudicating authority could not have overridden MCGM’s objections and enabled the creation of a fresh interest in respect of its properties and lands.
The resolution plan therefore, would be a serious impediment to MCGM’s independent plans to ensure that public health amenities are developed in the manner it chooses, and for which fresh approval under the MMC Act may be forthcoming for a separate scheme formulated by that corporation (MCGM).
In this regard, the court notices the well known principle that there can be no estoppel against the express provisions of law.
Excerpts of the order;
# 1. The Municipal Corporation of Greater Mumbai (hereafter “MCGM”) appeals under Section 62 of the Insolvency and Bankruptcy Code, 2016 (hereafter “IBC” or “the Code”) against the order of the National Company Law Appellate Tribunal (hereafter variously “NCLAT” and “the Appellate Tribunal”), rejecting its plea with respect to a resolution plan approved by the National Company Law Tribunal (“NCLT”) under the provisions of that Code.
# 2. MCGM owns inter alia, Plot Nos. 155, 156, 162 and 168 (all plots hereafter called “the lands”) in village Marol, Andheri (East) Mumbai. By a contract (dated 20th December, 2005) SevenHills Healthcare (P.) Ltd. (the company facing insolvency proceedings, hereafter “SevenHills”) agreed to develop these lands (which were to be leased to it for 30 years) and construct a 1500 bed hospital. MCGM stipulated several conditions, including that 20% of the beds had to be reserved for use by the economically deprived, and that SevenHills had to complete the construction in 60 months (excluding monsoons). The sixty month period ended on 24th April, 2013; the project however, was not completed. In terms of Clause 15(g), the lease deed had to be executed within a month after completion. However, the deed was not executed as the project was not completed. Further, SevenHills had to pay lease rent at the annual rate of ₹10,41,04,000. MGCM alleges that there were defaults in these payments. In these circumstances, MCGM issued a show cause notice on 23rd January, 2018, proposing termination of the contract/agreement. It is submitted that SevenHills owed MCGM an amount of ₹ 76,05,07,780.
# 4. The resolution plan projected infusion of over ₹1000 crores by SNMC. That amount was to be borrowed; for this purpose, SevenHills’ properties movable and immovable, were proposed to be secured by hypothecation and mortgage respectively. Operational creditors were to be paid off to the extent of 75%. Further, the plan proposed payout to the tune of ₹102.3 crores to MCGM as against its total claim of ₹140.88 crores, and also committed to honouring the terms of the agreement entered into by Seven Hills and providing 20% of the beds (of the hospital to be constructed) to the poor and weaker sections of society. The networth certificate furnished by SNMC indicated that it possessed sufficient funds.
# 5. MCGM filed an application (I.A. No. 207/ 2018) claiming that it ought to be declared as a Financial Creditor and a Member of the Committee of Creditors. It made several submissions, which indicated that subject to stipulations with respect to completion of the hospital project in a time bound manner, and subject to SNMC providing 20% beds in the completed hospital, for use by the economically weaker sections (and at the disposal of MCGM) and, lastly subject to clearing its (MCGM’s) claims to the tune of ₹140.88 crores, it was agreeable to the resolution plan. However, later during the proceedings, it opposed the resolution plan, arguing that being a public body as well as a planning authority, it had to comply with the provisions of the Mumbai Municipal Corporation Act, 1888 (“MMC Act”), which meant that all action and approval had to be taken by the Improvement Committee of the Corporation. It was also stated that the show cause notice (“SCN”) dated 23rd January, 2018 had been already issued by MCGM proposing to terminate the contract (with Seven Hills) to which there was no response and that in the absence of a lease, the provisions of Section 14(1)(d) of the Code could not prevent the MCGM from terminating the agreement. Another argument made was that the period of CIRP in the case began on 13th March, 2018 when the petition was admitted and the period of 270 days expired on 8th September, 2018; an extension of 90 days provided in Section 12(3) was granted by the Adjudicating Authority on 4th September, 2018 and the extended period came to an end on 7th December, 2018; thus the CIRP has lapsed by efflux of time.
# 9. The NCLAT in its impugned order, took note of a memo filed on behalf of the MCGM on 20th April, 2019 (before the NCLT), that the revised resolution plan had been accepted and all terms specified in its written submissions, were to be incorporated. As a result, the NCLAT was of the opinion that there was no scope for interference with the order of the Adjudicating Authority/NCLT.
# 16. It is also argued alternatively, that assuming for the purpose of argument that no leasehold rights were created in favour of the Corporate Debtor, the resolution plan does not create any leasehold rights in favour of the respondent applicant/SNMC. Learned senior counsel argued that the resolution plan merely envisages a change in the shareholding of the Corporate Debtor but does not transfer any of MCGM’s assets to SNMC. Therefore, it is false to suggest that the resolution plan transfers MCGM’s assets to SNMC.
# 21. It was argued, furthermore, that the reliance on Section 92 of the MMC Act is misguided as it seeks to superimpose provisions of the MMC Act on the provisions of the Code. This is clearly impermissible in terms of the non obstante provision contained in Section 238 of the Code
# 24. In the present case, Section 92 of the MMC Act has no bearing on the validity of the resolution plan, the approval order or the impugned order. Section 92 of the MMC Act mandates and prescribes the manner in which disposal of land belonging to the appellant would take place. However, the resolution plan does not contemplate any disposal of the said land or creation of any additional rights and obligations of MCGM or the Corporate Debtor in relation to the lands. It is merely the shareholding of the Corporate Debtor which undergoes a change pursuant to the resolution plan. MCGM cannot place any embargo on such shareholding changes by resorting to proceeding under the Code.
# 25. It was urged that SNMC does not acquire any interest in the said land and only acquires managerial control over the Corporate Debtor by way of holding equity shares in the Corporate Debtor. Therefore, there arises no question of Section 92 of the MMC Act being violated through the resolution plan.
Discussion regarding the insolvency process and relevant provisions of the MMC Act
# 32. A cumulative reading of the stipulations reveals that the contract/agreement contemplates that the lease deed was to be executed after the completion of the project. The contract reveals that (a) the project period was for 60 months starting from the date excluding the monsoon period; (b) by Clauses 5 and 17, SevenHills could mortgage the property for securing advances from financial institutions for the construction of the project and thereafter towards its working. Such mortgage/charge or interest was subject to approval by MCGM. In the event the contract was to be terminated, it was agreed that MCGM would not in any manner be liable towards the mortgaged amount and all its rights and ownership would continue to vest in it free from encumbrances (Clause 17).
# 33. The show cause notice in this case preceded admission of the insolvency resolution process. In view of the clear conditions stipulated in the contract, MCGM reserved all its rights and its properties could not have therefore, in any manner, been affected by the resolution plan. Equally in the opinion of this Court, the adjudicating authority could not have approved the plan which implicates the assets of MCGM especially when SevenHills had not fulfilled its obligations under the contract.
# 39. The principle that if a statute requires a thing to be done in a particular manner, it should be done in that manner or not at all, articulated in Nazir Ahmad v. Emperor, AIR 1936 PC 253, has found widespread acceptance. In the context of this case, it means that if alienation or creation of any interest in respect of MCGM’s properties is contemplated in the statute through a particular manner, that end can be achieved only through the prescribed mode, or not at all.
# 41. The material placed on record by MCGM before this Court also reveals that the meeting held by the Corporation on 14th December, 2018, referred back to the resolution proposal given by SNMC. The minutes of the meeting records that three members were unanimous in their view that since SevenHills had not complied with the terms and had even sought to encumber the property by mortgage, SNMC, a UAE based company, ought not be granted approval to take over the plot and proceed with its project.
# 42. Now, this court proposes to deal with the contention that the provisions of the Code override all other laws and hence, that the resolution plan approved by the NCLT acquires primacy over all other legal provisions. Facially, this argument appears merited. Section 238 enacts that:
“238. Provisions of this Code to override other laws. — The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.”
# 45. In Macquaire Bank Ltd. v. Shilipi Cable Techologies Ltd. (2018) 2 SCC 674, one of the issues was the interplay between Section 9 of the Code and provisions of the Advocates Act. It was argued that a demand notice issued through an advocate was not permissible and that the provisions of the Code overrode all other laws. This court negative the contention, holding that it is only in the case of inconsistency, that by reason of Section 238 of the Code would its provisions prevail. On a harmonious construction of the seemingly inconsistent provisions, if the court could give effect to both, it would do so.
# 47. In the opinion of this court, Section 238 cannot be read as overriding the MCGM’s right – indeed its public duty to control and regulate how its properties are to be dealt with. That exists in Sections 92 and 92A of the MMC Act. This court is of opinion that Section 238 could be of importance when the properties and assets are of a debtor and not when a third party like the MCGM is involved. Therefore, in the absence of approval in terms of Section 92 and 92A of the MMC Act, the adjudicating authority could not have overridden MCGM’s objections and enabled the creation of a fresh interest in respect of its properties and lands. No doubt, the resolution plans talk of seeking MCGM’s approval; they also acknowledge the liabilities of the corporate debtor; equally, however, there are proposals which envision the creation of charge or securities in respect of MCGM’s properties. Nevertheless, the authorities under the Code could not have precluded the control that MCGM undoubtedly has, under law, to deal with its properties and the land in question which undeniably are public properties. The resolution plan therefore, would be a serious impediment to MCGM’s independent plans to ensure that public health amenities are developed in the manner it chooses, and for which fresh approval under the MMC Act may be forthcoming for a separate scheme formulated by that corporation (MCGM).
# 48. The last contention of the respondents, that MCGM was bound by the statement made by its counsel, in the opinion of this court, cannot prevail. As held earlier, there is no approval for the plan, in accordance with law; in such circumstances, the written plea accepting the plan, by a counsel or other representative who is not demonstrated to possess the power to bind MCGM, is inconclusive. In this regard, the court notices the well known principle that there can be no estoppel against the express provisions of law. (Ref. Kasinka Trading v. Union of India (1995) 1 SCC 274, Darshan Oils (p) v. Union of India (1995) 1 SCC 345, Shrijee Sales Corporation v. Union of India (1997) 3 SCC 398, Shree Sidhbali Steels Ltd. v. State of U.P. (2011) 3 SCC 193, Pappu Sweets and Biscuits v. Commr. of Trade Tax, U.P. (1998) 7 SCC 228 and Commr. of Customs v. Dilip Kumar & Co. (2018) 9 SCC 1.)
# 49. In view of the foregoing reasons, this court holds that the impugned order and the order of the NCLT cannot stand; they are hereby set aside. The appeal is accordingly allowed, without orders on costs.
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