NCLAT (24.04.2023) In Adinath Jewellery Exports Vs. Mr. Brijendra Kumar Mishra [Company Appeal (AT) (Insolvency) No. 748 of 2022] held that;
We are therefore, convinced that once a property was part of the liquidation state of the Corporate Debtor under liquidation, the provisions of IBC were applicable regarding the assets which were in the ownership of the Corporate Debtor and Section-238 of the IBC prohibited the applicability of any other law which was inconsistent with the IBC.
It is also true that the respondent accepted the monthly compensation offered by the petitioners from time to time. That alone cannot be the basis to inter that the Respondent agreed for change of relationship between the parties from one of licensor and licensee to that of landlord and tenant in relation to the suit premises.
We are of the opinion that the NCLT possesses the correct jurisdiction for considering an application for vacation of the premises in question in the circumstances of the present case, and the NCLT was correct in passing the Impugned Order which would be necessary to place the custody of the premises in question with the Liquidator
Excerpts of the order;
# 1. The present appeal has been filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (in short ‘IBC’) assailing the order dated 06.07.2022 (in short ‘Impugned Order’) passed by the Adjudicating Authority [National Company Law Tribunal, Mumbai] in I.A. No. 1635 of 2022 in C.P. (IB) No. 190(MB)/2018, by which Respondent No. 1 has been directed to put lock and seal on the Plot No. A7, MIDC, Andheri (E), Mumbai – 400093.
# 2. Briefly, the facts of the case as stated and argued by the Appellant are that the Appellant entered into a Leave and Licence Agreement (in short ‘Agreement’) for taking the premises located at Plot No. A-7, MIDC, Andheri (E), Mumbai – 400093 admeasuring approximately 6000 sq. ft. (built up area) at 1st and 2nd Floor for house for a period of three years commencing from 03.08.2016 to 02.08.2019 (both days inclusive). The Appellant has further stated that Corporate Insolvency Resolution Process (in short ‘CIRP’) was initiated against the Corporate Debtor Shrenuj & Co. by an order of the Adjudicating Authority on 12.03.2019 and during the subsistence of the moratorium the Resolution Professional (‘RP’) extended the Leave and Licence Agreement from 03.08.2019 to 02.07.2020 on requirement of the Corporate Debtor.
# 3. It is further stated by the appellant that an order for liquidation of the Corporate Debtor was passed on 12.07.2021, whereafter the Liquidator-Respondent No. 1 (in short ‘R-1) started proceedings for liquidation of the Corporate Debtor.
# 4. During the on-going liquidation proceedings, the Liquidator started the e-auction of the said premises and sent letter dated 04.01.2022 through his legal counsel to the Appellant asking for vacation of the licensed premises and payment of outstanding licence fee within 7 days of the vacation of the said premises, whereafter, the Appellant paid an amount of Rs. 18,83,520/- through a Cheque No. 199479 dated 08.02.2021 as rent for the period of June 2021 to January, 2022, which amount was duly received and the fact of receipt of this amount was acknowledged by the Liquidator vide his e-mail dated 24.03.2022.
# 5. The Appellant has further stated that he again received a notice dated 13.04.2022 for vacation of the said premises from the Liquidator referring to an early e-mail dated 24.03.2022 sent by the Liquidator asking the Appellant to vacate the said premises on or before 22.05.2022 and also stating that the e-auction of the said premises took place on 06.04.2022 and that the property has been successfully auctioned. The Appellant has submitted that another letter dated 13.04.2022 was sent by the legal counsel of the Liquidator stating that the e-auction was duly concluded and the said premises has been successfully auctioned regarding which the Liquidator had intimated the Appellant earlier, and again calling upon the Appellant to vacate the said premises and handover peaceful and vacant possession on or before 22.05.2022 to the Liquidator.
# 6. The Appellant has further stated that he sent letter dated 27.05.2022 addressed to the Liquidator stating that the Appellant was the lawful tenant of the said premises and is in uninterrupted and peaceful use of auction on the premises and therefore he is not required to vacate the said premises. The Appellant further stated that he appeared before the Adjudicating Authority in Interlocutory Application No. 1635/2022 filed by the Liquidator primarily with a prayer for direction to the Appellant to handover the peaceful and vacant possession to the Liquidator.
# 7. The Appellant has further stated that since it was the tenant of the said premises and continued in uninterrupted possession and occupation of the same since the year 2016, it filed R.A.D Suit No. 259 of 2022 in the Small Causes Court at Mumbai, since the jurisdiction to give directions for vacation or eviction lay with the Small Causes Court. This suit was taken up by the Small Causes Court, Mumbai on 28.06.2022, whereupon an order was passed by the Court directing both the parties to maintain ‘status-quo’ till the next date which was fixed as 06.07.2022. The Appellant has stated that despite this order dated 28.06.2022 passed by the Small Causes Court, the Learned Adjudicating Authority went ahead and passed the Impugned Order dated 06.07.2022 without taking into account the ‘status quo’ order passed by the Small Causes Court, Mumbai and it is Appellant’s contention that the Learned Adjudicating Authority (National Company Law Tribunal, Mumbai) did not possess the necessary jurisdiction to pass the Impugned Order but the vacation/ eviction from the said premises could have been done by the Small Causes Court, Mumbai which possessed jurisdiction under the Maharashtra Rent Control Act, 1999.
# 8. We heard the arguments of both the parties and perused the record. The Learned Senior Counsel for the Appellant has initiated his arguments by submitting that the National Company Law Tribunal, Mumbai does not possess jurisdiction in relation to matters relating to landlord and tenant viz. tenant by eviction and payment of rent which are matters to be dealt under the Maharashtra Rent Control Act, 1999 for which jurisdiction vests only with the Court of Small Causes. He has further referred to Section 33 of the Maharashtra Rent Control Act, 1999 to clarify the aspect of jurisdiction of the Small Causes Court, Mumbai and has also referred to Section 47 of this Act to clarify that no other authority can grant any injunction which relate to issues that are within the jurisdiction of Small Causes Court. He has submitted that the Leave and Licence Agreement was signed between the Appellant and the Corporate Debtor for renting the said premises located at Plot No. A-7, MIDC, Andheri (E), Mumbai – 400093 for the period of 03.08.2016 – 02.08.2019 and further after the onset of moratorium during the insolvency resolution of the Corporate Debtor consequent to the initiation of the CIRP on 12.03.2019, the said agreement was extended for the period of 03.08.2019 to 02.07.2020.
# 9. The Learned Senior Counsel for Appellant has referred to Sections 25(2)(b) and 35(k) of the IBC to point out that is the duty of the Resolution Professional/Liquidator to represent the Corporate Debtor in judicial, quasi-judicial or arbitration proceedings and therefore the Liquidator has to contest the suit filed by the Appellant in the Small Causes Court. He has further referred to Section 18 (f) (5) to point out that it is the duty of the IRP to take control and custody of any asset of the Corporate Debtor in which the Corporate Debtor has ownership rights and therefore it was incumbent on the Corporate Debtor to get the possession of the premises after lawful eviction of the tenant/ Appellant.
# 10. He has cited the judgment of the Hon’ble Supreme Court in the matter of Embassy Properties Developments Pvt. Ltd. vs. State of Karnataka and Ors. [(2020) 13 SCC 308] wherein it is held that the custody of the assets of the Corporate Debtor is subject to determination by the competent court or authority, which in this case is the Small Causes Court and not the Adjudicating Authority. Further, he has referred to the Judgment in the matter of K.L. Jute Products Pvt. Ltd. vs. Tirupti Jute Industries Ltd. [(2020 SCC Online NCLAT 426] wherein this tribunal has held that the Adjudicating Authority is not empowered to pass an order for eviction and it is for the aggrieved party to move the appropriate forum for redressal of its grievances in accordance with law.
# 11. The Learned Senior Counsel for Appellant has also cited the Judgment of Hon’ble Supreme Court in the matter of Vishal N. Kalsaria vs. Bank of India and Ors. [(2016) 3 SCC 762] to claim that Hon’ble Supreme Court has gone into the issue of primacy between the SARFAESI Act and Rent Control Laws and held that the provision of SARFAESI Act cannot override the provisions of Rent Control Law in the matter of taking possession of an asset.
# 12. The Learned Senior Counsel for Appellant has referred to the e-mail dated 14.02.2022 of the Liquidator wherein he has confirmed payment of ‘Rent’ for the period of June 2021 to January 2022. He has further referred to the e-auction notice issued by the Liquidator dated 16.03.2022 to point out that the subject property was to be auctioned on “As Is Where Is”, “As Is What Is” and “Whatever There Is Basis” and therefore the bidders were advised to satisfy themselves about the title and occupation and physically verify the site and subject property prior to bidding, which means that the Liquidator was well aware that the Appellant was a tenant under whose lawful and peaceful possession the subject property continued to be in. He has also referred to the e-mail dated 24.03.2022 of the Liquidator to the successful bidder to say that after noticing the conditions of the e-auction document and the fact that the subject property was in the possession of the Appellant as a tenant, the successful bidder decided to bid and deposited the EMD with the Liquidator. He had said that in such a situation the e-auction was carried out and was the Bidder (R-2) has declared as the successful bidder, then it was the responsibility of the successful bidder or the Liquidator to get back the possession of the subject property from the Appellant after following the due process of law and they should subject themselves to the lawful authority of the Small Causes Court which has the jurisdiction under Maharashtra Rent Control Act, 1999.
13. The Learned Senior Counsel for Appellant has further submitted that the Respondent No. 1/ Liquidator filed I.A. No. 1635 of 2022 before the Adjudicating Authority which did not have jurisdiction to adjudicate upon the matter regarding handing over of vacant and peaceful possession of the said premises by the Appellant. He has further submitted that since the Appellant is a ‘tenant’ and any dispute or action for eviction has to take place under the Maharashtra Rent Control Act, 1999, the Appellant filed a R.A.D. Suit No. 259 of 2022 before the Small Causes Court, Mumbai on 27.06.2022, wherein by an order dated 28.06.2022 the Small Causes Court directed that the status quo be maintained between the parties. He has further claimed that the NCLT, Mumbai passed the Impugned Order on 06.07.2022 while the order dated 28.06.2022 was subsisting and any challenge to the ‘status quo’ order passed by the Small Causes Court should have been done before the relevant Appellate Authority, and therefore aggrieved by the Impugned Order passed by NCLT, the Appellant has filed the present appeal.
# 14. The Learned Senior Counsel for Appellant has referred to the Judgment in the case of Jhanvi Rajpal Automotive Pvt. Ltd. vs. R.P. of Rajpal Abhikaran Pvt. Ltd. & Anr. to contend that the judgment of this Tribunal in that case does not apply in the facts the present case since in the Jhanvi Rajpal case a settlement proposal given by the tenant which was accepted and also because the property in Jhanvi Rajpal case was the only property and therefore it was relevant for insolvency resolution of the corporate debtor. He has further contended that in the Jhanvi Rajpal case, the CIRP proceedings were going on and moratorium under Section 14 of the IBC was in operation, whereas in the present case liquidation has been initiated since no successful resolution could be achieved and moreover the renewed Leave and Licence Agreement in the present case came to an end on 02.07.2020, and therefore tenancy of the Appellant commenced on 03.07.2020 which has continued till the time of e-auction.
15. The Learned Senior Counsel for Appellant has also claimed that since the Appellant has admittedly paid “rent” and the Liquidator had received and accepted the said rent when there was no Leave and Licence Agreement subsisting between the parties, the Appellant is a tenant fully covered under the Maharashtra Rent Control Act, 1999. He has further claimed that the Respondent No. 2, the Successful Bidder, was aware of the rights and claims of the Appellant by virtue of the conditions set out in the e-auction document, and the subject property was put to auction on “as is where is”, “as is what is” and “whatever there is basis” and therefore under the provisions of the letter of intent and Transfer of Property Act the Successful Bidder was aware of the Appellant is a tenant in possession of the subject property.
# 16. The Learned Senior Counsel for Appellant has also cited the judgment of Hon’ble Supreme Court in the matter of Tata Consultancy Services Ltd. vs. Vishal Ghisulal Jain, Resolution Professional, SK Wheels Private Limited (Supreme Court Appeal No. 3045 of 2020, Judgment dated 23.11.2021) wherein it is held that the NCLT and NCLAT should bear in mind the narrow exceptions crafted by Hon’ble Supreme Court in the matter of Gujarat Urja even while examining the interim relief and there should be a clear analysis on how determination of any agreement would put the survival on the corporate debtor in jeopardy.
# 21. The Learned Senior Counsel for Liquidator/ Respondent No. 1 has further referred to Section 33 (5) of the IBC to claim that once a Liquidation order has been passed, no suit or other legal proceedings can be instituted by or against the Corporate Debtor and any suit or legal proceeding may be instituted by the Liquidator on behalf of the Corporate Debtor with the prior approval of the Adjudicating Authority. He has thus clarified that the Liquidator filed I.A. No. 1635 of 2022 before the Adjudicating Authority in accordance with the requirement of Section 33 (5) since it was the duty and responsibility of the Liquidator to take into custody and control the assets of the Corporate Debtor.
# 27. The Learned Senior Counsel for Liquidator has cited the judgment in the matter of Jhanvi Rajpal Automotive (Supra) to point out that moratorium under Section 14 which was operative during the CIRP continues even during liquidation and Liquidator has similar rights under Section 35 as the IRP’s rights under Section 18(1)(f). He has also claimed that the Appeal against the Judgment of NCLAT in the matter of Jhanvi Rajpal Automotive (Supra) before the Hon’ble Supreme Court was dismissed and therefore the Judgment of NCLAT has attained finality. The Learned Senior Counsel for Liquidator has also referred to the Judgment in the matter of Hemal Ishwarbhai Patel vs. Veer Narmad South Gujarat University [(2016) SCC OnLine Guj 10037] wherein the powers and duties of the Liquidator have been clarified and it is held that the Liquidator is bound by Section 35(1)(d) of the IBC. The Learned Senior Counsel for Liquidator has also referred to the Judgment in the matter of Parineeta Chaudhary vs. Mohammed Hussain A. Furniturewalla [(2008) SCC OnLine Bom 858] in support of his contentions. The Learned Senior Counsel for Liquidator has referred to the Judgment in the matter of Vijisan Jewels Pvt. Ltd. vs. Cimme Jewels Ltd. [Company Appeal (AT) (Insolvency) No. 204 of 2021] which is given on similar facts as this case where the corporate debtor was in liquidation and the Adjudicating Authority has allowed the Liquidator to proceed with e-auction and the occupier was asked to vacate the said premises. The matter went on Appeal before the Hon’ble Supreme Court and the Civil Appeal was dismissed and therefore the order of the Adjudicating Authority was upheld. Further, he has referred to Section 35(1)(b) where the duties of the Liquidator have been listed to point out that it is the duty of the Liquidator to take in custody the assets of the corporate debtor and by Section 35(1)(d), the Liquidator has to adopt measures to protect and preserve the assets of the Corporate Debtor. He has also claimed that the suit before the Small Causes Court was filed on 27.06.2022 which was almost one year after passing of the liquidation order and such a delay cannot give any right to the Appellant to take recourse to the issue of his tenancy before the Small Causes Court.
# 28. The Learned Senior Counsel for Respondent No. 2/ Successful Bidder has referred to Section 60(5) to claim that the Liquidator was fully entitled to file an application before the NCLT. He has also referred to Section 33 (5) of the IBC to strongly argue that once the liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the Corporate Debtor, and proviso to this Sub-Section (5) of Section 33 gives the right to the Liquidator to file a suit or legal proceeding with the prior approval of the Adjudicating Authority. He has thus contended that the Liquidator took the correct step by approaching the Adjudicating Authority through I.A. No. 1635 of 2022 for vacation of the premises under illegal occupation of the Appellant. He has also referred to Section 238 of the IBC to contend that the provisions of IBC shall have over-riding effect during the proceedings during CIRP and in liquidation and will override any inconsistency contained in any other law.
# 29. The Learned Senior Counsel for Respondent No. 2 has referred to the Judgment of Hon’ble Supreme Court in the matter of Gujarat Urja Vikas Nigam Limited vs. Amit Gupta [(2021) 7 SCC 209] wherein the jurisdiction of NCLT and NCLAT is upheld in case of any contractual dispute which relates to insolvency resolution and liquidation of the Corporate Debtor. He has referred to the Judgment of the Hon’ble High Court of Gujarat in the matter of Biotor Industries Limited vs. Gujarat Industrial Development Corporation [Special Civil Application No. 3688 of 2022] to point out that the NCLT possesses jurisdiction to consider and dispose of any question of law or facts arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor under the IBC. He has also pointed out that this Judgment of Hon’ble High Court of Gujarat considers the Judgement in Gujarat Urja Vikas Nigam Limited (Supra) and Tata Consultancy Services Ltd. (Supra) and takes the view that the residuary jurisdiction of NCLT is correctly invoked by the Respondent Gujarat Industrial Development Corporation in that case. He has also referred to the Judgment of Hon’ble Supreme Court in the matter of Ranjan Kumar & Ors. vs. State of Bihar & Ors. [(2014) 16 SCC 187], wherein it is held that, if necessary, parties are not impleaded, the writ petition would be defective and no relief could be granted in such writ petition. He has sought support from this Judgement in his contention that the successful bidder was a necessary party since it had been given a Letter of Intent in its favour by the Liquidator and the possession of the said premises was to be handed over to the successful bidder and the Appellant was well aware that the Letter of Intent had been issued to the successful bidder. He has vehemently argued that in such a situation the plaint before the Small Causes Court was defective and relief of ‘status-quo’ in this matter could not have been granted.
# 30. In Rejoinder, the Learned Senior Counsel for the Appellant has clarified that he had earlier submitted that the NCLT did not possess jurisdiction to consider any dispute relating to insolvency during liquidation of the Corporate Debtor and the Judgment in Jhanvi Rajpal Automotive (Supra) related to proceedings during CIRP. He has also referred to various sections of the Maharashtra Rent Control Act, 1999 to claim that the Appellant had rights to approach the Small Causes Court as licensee is a party as defined in Section 7(5) of this Act who has the right to approach to Small Causes Court. He has also referred to the Judgement of Madras High Court in the matter of DGFT vs. RP and Sons & Anr. [(2004) 5 CTC 696] whereby the issue of a ‘question of law being left open’ would be available to any other Court and not only the Hon’ble Supreme Court even if the question of law is left open by an order of Hon’ble Supreme Court. He has also cited Judgment in the case of Faujdar Singh vs. State of Uttar Pradesh & Ors. [(2016) SCC OnLine All 3877] where also the Hon’ble Allahabad High Court has held that when a question of law is kept open by an order, that question of law can be looked into by the High Court. He has also referred to the Judgment in the matter of Vishal N. Kalsaria (Supra) to reiterate the point that the jurisdiction under the SARFAESI Act would not be the correct jurisdiction and the provisions of SARFAESI Act will not override the provisions of the Rent Control Act.
# 31. The issues that arise for consideration in this Appeal are two-fold, which are as follows:
(i) Whether the Appellant was a ‘tenant’ or a ‘licensee’ or an ‘illegal occupant’ and whether the jurisdiction for deciding on the eviction vested with the Small Causes Court or the NCLT where liquidation was underway?
(ii) Whether the NCLT was correct in passing the Impugned Order for putting the said premises in Plot No. A-7, MIDC, Andheri (E), Mumbai – 400093 under lock and key of the Liquidator once a status-quo order has been passed by the Small Causes Court, Mumbai on 28.06.2022?
34. We further note that ‘tenant’ has been defined in Section 7 (15) of the Maharashtra Rent Control Act, 1999 as “any person by whom or on whose account rent is payable for any premises” and ‘licensee’ has been defined separately in Section 7(5) of this Act as a person who is in occupation of the premises or such part, as the case may be, under a subsisting agreement for licence given for a licence fee or charge. Further, the various references to ‘rent’ in the Maharashtra Rent Control Act, 1999 are between the ‘landlord’ and ‘tenant’ but when it is in respect of any premises given to licensee, the term ‘licence fee’ or ‘charge’ is used. Thus it is clear that while the term ‘rent’ is used for payment or of use of premises by a tenant, the term ‘licence fee’ is used in respect of use of any premises given under licence agreement by a licensee.
# 35. Admittedly, the Leave and Licence Agreement for the said premises was entered into for a period of 3 years from 03.08.2016 to 02.08.2019, and thereafter CIRP was initiated vide order of the Adjudicating Authority on 12.03.2019 against the corporate debtor. During the subsistence of the CIRP, the Resolution Professional renewed the Leave and Licence Agreement from 03.08.2019 to 02.07.2020 and no further extension or renewal of the Leave and Licence Agreement took place after expiry of the agreement of 02.07.2020. It is noted by us that the Appellant remained in position of the subject premises and continued to pay licence fees for use of the premises. It is also noted that the Liquidator, through his legal counsel, sent a notice dated 04.01.2022 (attached at Page No. 46 to 49 of the Appeal Paper Book) for vacation of the licensed premises and payment of outstanding licence fee. In particular, Para- 8 of this notice is relevant, wherein the Liquidator has asked the Appellant to provide proof of interest fee deposit of Rs. 6 Lakhs and asked the Appellant to pay the outstanding ‘licence fees’ of an amount of Rs. 18,00,680/- plus the amount that is to be calculated on the date of vacation which is mentioned as outstanding licence fees, and has also called upon the Appellant to vacate the licenced premises i.e. Plot No. A-7, MIDC, Andheri (E), Mumbai – 400093. In reply to this notice, the Appellant submits a Cheque No. 199479 dated 08.02.2022 for an amount of Rs. 18,83,520/- but makes the mention that this payment is being made for rent for the period of June 2021 to January 2022 which to us appears to be an incorrect term ‘rent’ used by the Appellant.
# 36. The Learned Senior Counsel for the Appellant has sought support from the reply dated 24.03.2022 sent by the Liquidator to the Appellant, wherein the word ‘rent’ has been used twice. A closer look at this e-mail makes it clear that the Liquidator uses the word ‘licence fee’ that is demanded from the licensee/ Appellant but repeats the word ‘rent’ when it refers to the contents of Appellant’s letter dated 14.02.2022. Thus, it is quite clear that even though the Appellant uses word of ‘rent’ while sending the overdue outstanding payment of licence fee by its letter dated 14.02.2022, the Liquidator has all along in his letters/e-mails dated 04.01.2022, 24.03.2022, 13.04.2022, 30.04.2022, 18.05.2022 and in its I.A. No. 1635 of 2022 used the word ‘Leave and Licence Agreement’ extensively while referring to the arrangement for use of the sub premises by the Appellant. It is, therefore, not clear as to how after admitting that the said premises were used on ‘Leave and Licence’ basis by the Appellant in accordance with the Leave and Licence Agreement, the Appellant does a complete turnaround and mentions that the subject premises were being used and occupied by him as lawful tenant in its letter dated 27.05.2022 and again in its letter dated 10.06.2022 and 11.06.2022.
# 37. While noting the above, we are conscious of the fact that the Appellant vide its letter dated 26.04.2022, (which has been mentioned by the Appellant in passing in the Appeal, but the copy is not attached with the Appeal Memo) states that the subject premises located at Plot No. A-7, MIDC, Andheri (E), Mumbai – 400093 belonging to Shrenuj and Co. is being occupied by them on ‘Leave and Licence’ basis and acknowledged that since the said premises had been sold through auction and they have to vacate it before 22.05.2022, they are looking for an alternate place to shift in order to vacate the property, further seeking time till 31.07.2022 to the vacate property.
# 38. Admittedly, the original Leave and Licence Agreement between the Appellant and Corporate Debtor was for 3 years from 03.08.2016 to 02.08.2019 and this Agreement was extended by the Resolution Professional during the currency of the Moratorium from 03.08.2019 to 02.07.2020. Thereafter, as per the Agreement terms as included in Clause 28, no alteration, amendment or modification of the Agreement could have been done in writing and signed by both the parties. Quite clearly the Agreement was not extended beyond 03.07.2020 and this fact was brought to the notice of the Appellant by the Liquidator through communication dated 04.01.2022, whereby the Appellant was intimated that the Leave and Licence Agreement was only valid up to 02.07.2020 and that the Appellant was required to vacate the licensed premises within 7 days from the date of receipt of the notice. Further, the Appellant was communicated that the e-auction of the said property was to take place on 06.04.2022 and by an e-mail dated 08.04.2022 the Liquidator communicated as follows to the Appellant :-
“Dear Sir,
As you are aware that the E-Auction notice was published for sale of assets of the Corporate Debtor including A7-MIDC property and during the E-Auction held on 06.04.2022, MIDC A-7 property has been successfully auctioned. In this regard, you are requested to kindly vacate the premises of MIDC A-7 within a period of 45 days from today’s mail.
Kindly acknowledge the receipt of this mail and do the needful.”
# 39. Further, we note that the Liquidator issued a Letter of Intent to the successful bidder on 13.04.2022. The Appellant sent a letter dated 26.04.2022, whereby it took note of the e-mail and notice from the Advocate of the Liquidator for the vacation of the premises and admitted that he was looking for an alternate place to shift in order to vacate the property and requested for time till 31.07.2022 to vacate the property. In the light of the fact that the Leave and Licence Agreement terminated on 02.07.2020 and that the Liquidator continued to inform the Appellant that the said premises were being e-auctioned as part of the liquidation proceedings of the Corporate Debtor, it is abundantly clear that the Appellant was in illegal possession and occupation of the said premises and was consciously aware that it had to vacate the said premises, as is evident from the Appellant’s letter dated 26.04.2022 addressed to the Liquidator.
# 40. Thus, in the light of the Leave and Licence Agreement entered between the Appellant and Resolution Professional and a series of communications sent by the Liquidator and in particular the letter dated 26.04.2022 (attached in Reply of R-1, Page-22) sent by the Appellant to the Liquidator admitting that the said premises have to be vacated after having been sold through e-auction. We are of the clear view that the relationship that existed between the Appellant and the corporate debtor is that of a ‘licensee’ and ‘licensor’ and not that of ‘tenant’ and ‘landlord’.
41. We now peruse section 18(1)(f) of the IBC which imposes a duty on the Resolution Professional to take control and custody of any asset over which the corporate debtor has ownership rights. Therefore, the Resolution Professional had to take ownership of the sub-property and he decided to extend the Leave and Licence Agreement till 02.07.2020 in accordance with the requirements of the corporate debtor. On the same lines, the powers and duties of the Liquidator are enumerated in Section 35 of the IBC, and the relevant clause (f) of sub-section (1) is as follows:- . . . . .
42. Further, Section-35(1)(d) imposes a duty on the Liquidator to take such measures to protect and prevent the asset and property of the Corporate Debtor as he considers necessary, and Section 35(1)(n) gives the power to the Liquidator to apply to the Adjudicating Authority for such orders or directions as may be necessary for the liquidation of the Corporate Debtor. It is clear that the said premises at Plot No. A-7, MIDC, Andheri (E), Mumbai – 400093 were in the ownership of the corporate debtor and it was a duty of the Liquidator to protect and preserve this asset of the Corporate Debtor pending its disposal in the liquidation process and further clause (n) of sub-Section (1) of Section (35) gave powers to the Liquidator to the apply to the Adjudicating Authority for such orders as may be necessary for the liquidation of the Corporate Debtor.
47. The Liquidator approached the Adjudicating Authority in the light of Section- 33(5) and Section- 60(5)(c) of the IBC for vacation of the premises which in our view was the correct thing to do. We note that I.A. 1635 of 2022 was preferred by the Liquidator before NCLT, Mumbai on 15.06.2022, and the Appellant filed his Affidavit in Reply on 22.06.2022. The Affidavit in Reply of the Appellant in I.A. 1635 of 2022 is attached at Page- 99 to 108 of the Appeal Paper Book, wherein the Appellant raised the question of it being a tenant of the Corporate Debtor, objecting to the jurisdiction of NCLT to decide the application for vacation of the said premises. In the facts of the case the Appellant, by virtue of signing the Leave and Licence Agreement which was operational till 02.07.2022, was in illegal occupation of the subject premises on the date I.A. No. 1635 of 2022 was instituted. While the Appellant filed the Reply in I.A. No. 1635 of 2022 on 27.06.2022 but without waiting for NCLT, Mumbai to give its decision in the matter, the Appellant went ahead and filed R.A.D Suit No. 259 of 2022 in the Court of Small Causes at Mumbai on the basis of the understanding raising the issue of that he was a tenant of the Corporate Debtor. Whose eviction could be considered only under the Maharashtra Rent Control Act, 1999. It appears surprising that when Appellant was aware that the said premises had been in e-auctioned and the Successful Bidder- Rexnord Electronics and Controls Limited had been issued a ‘Letter of Intent’, why it failed to maintain these reasons based known to the facts in his Affidavit in support of application for interim relief nor did it implead the successful bidder as a party in the suit before the Small Causes Court.
48. We are therefore, convinced that once a property was part of the liquidation state of the Corporate Debtor under liquidation, the provisions of IBC were applicable regarding the assets which were in the ownership of the Corporate Debtor and Section-238 of the IBC prohibited the applicability of any other law which was inconsistent with the IBC.
52. We note that in the matter of Embassy Properties Developments(Supra), the Hon’ble Supreme Court has held that “if asset owned by a third party in possession of the Corporate Debtor held under contractual arrangements, is specifically kept out of the definition of the term “assets” Further, in a situation where a contractual arrangement is ongoing, the Resolution Professional cannot short-circuit the same and bring a claim before NCLT taking advantage of Section 60(5). These judgements are distinguished on the basis of the fact that no contractual arrangement existed between the Appellant and the Corporate Debtor after 02.07.2020, when the extended Leaves and Licence Agreement expired and therefore the ratio in these judgements cannot provide support to the case of the Appellant.
53. The Learned Senior Counsel for Appellant has also referred to the judgment in the matter of K.L. Jute Products Pvt. Ltd. vs. Tirupti Jute Industries Ltd. [(2020 SCC Online NCLAT 426] which is as follows, to claim that the Adjudicating Authority did not possess jurisdiction to pass order regarding eviction:-
“66. Insofar as, the eviction of 2nd Respondent is concerned, the Adjudicating Authority is not empowered to pass an order of eviction and it is for an ‘Aggrieved party’ to move the appropriate forum for redressal of its grievances in accordance with Law. In short, the Committee of Creditors had approved the Resolution Plan in utter regard to the ingredient of Section 30(2)(e) of the I&B Code and as hence the same was rejected by the Adjudicating Authority. Moreover, the Adjudicating Authority had appointed a ‘Liquidator’ other than the ‘Existing Resolution Professional’.
54. The above judgment is in a case where a lease agreement was signed by the corporate debtor after the section 13(2) notice had been issued and further the resolution plan was subject to the termination of all the existing lease agreement. It was held by the NCLAT that such a condition imposed in the resolution plan was not correct and the eviction should have been dealt with under the correct law. On the contrary, in this case, the Appellant had occupied the subject premises under a Leave and Licebec Agreement as a licensee and the agreement had expired when the e-auction took place. Furthermore, the Liquidator had all along, before conducting the e-auction apprised the appellant that it had to vacate the subject premises regarding which the appellant had agreed to as is evident by his letter dated 26.4.2022.
55. The Learned Senior Counsel for Appellant has also cited Judgement in the matter of Vishal N. Kalsaria vs. Bank of India and Ors. [(2016) 3 SCC 762] wherein the following has been held:- . . . . .
56. Insofar as above judgement in case of Vishal N. Kalsaria (Supra) is concerned, it is distinguishable since in the facts of that case tenancy was the issue and, therefore the tenant could have been evicted only after following the due process of law as prescribed under the Rent Control Act. In the present case there is no existence of tenancy in favour of the Appellant and the Applicant it was only a licensee till 02.07.2020, whereafter he was in illegal occupation and possession of the said premises. Therefore, the Judgement in Vishal N. Kalsaria (Supra) case cannot also provide support to the case of the Appellant.
57. The Learned Counsel for the Respondent No. 1/ Liquidator relied upon the following few judgment in the matter of Parineeta Chaudhary vs. Mohammed Hussain A. Furniturewalla [(2008) SCC OnLine Bom 858]. We note that this judgment supports the contention of the Liquidator that mere payment of some amount, which the Appellant incorrectly calls ‘rent’ cannot create the right of tenant in favour of the Appellant :-
“11. In the present case, however, the licence period expired in January 2005. Indeed, respondent did not file application under section 24 with immediate despatch but waited till December 2005. It is also true that the respondent accepted the monthly compensation offered by the petitioners from time to time. That alone cannot be the basis to inter that the Respondent agreed for change of relationship between the parties from one of licensor and licensee to that of landlord and tenant in relation to the suit premises. In the present case, the Courts below have Considered the defence of the petitioners in this behalf and rejected the same. That is the finding of fact which would bind this Court. Merely because another view is possible or that there is some error here or there in the judgement under challenge, cannot be the basis to exercise writ jurisdiction under Article 227 of the Constitution of India. In so far as the finding recorded by the two courts below on the material issue as to whether the petitioners are liable to be evicted from the suit premises, I have no hesitation in upholding the same as just and proper and in accordance with the legal requirement.”
58. The Learned counsel for Respondent No. 2 has placed reliance on the following judgment in the matter of Biotor Industries Limited vs. Gujarat Industrial Development Corporation [Special Civil Application No. 3688 of 2022] to contend that the residuary jurisdiction in relation to issues during CIRP lie with the Adjudicating Authority insofar as insolvency resolution of the corporate debtor is concerned. The relevant part of this judgment is as hereunder:
“7.14 While in the case of Gujarat Urja (supra) and Tata Consultancy Services Limited (supra) the contract was central to the success of CIRP. Reading paras 84 to 91 of the judgment in Gujarat Urja (supra), what is evident is that the residuary jurisdiction of NCLT under Section 60(5)(c) of the IBC provides a wide discretion to adjudicate questions of law or fact arising from or in relation to the insolvency resolution proceedings. Reading the relevant paragraphs in Tata Consultancy Services Limited (supra) as cited by the respondent, the NCLT can intervene when, it is even the case of the petitioner that there is an embargo under the IBC. In the application filed by the respondent which is pending before the NCLT, it is open for the petitioner to take all the contentions raised in this petition. The residuary jurisdiction of the Tribunal therefore to decide this issue had already been invoked by the respondent and the petition therefore, at the hands of the petitioner company which seeks the protective umbrella under the IBC itself can oppose the prayers made in that application.
8. For all the aforesaid reasons therefore, the petition is dismissed. Rule is discharged.”
59. We are of the view that the residuary jurisdiction is relevant during the CIRP when the insolvency resolution of the corporate debtor is taking place, whereas in the present case the liquidation of the corporate debtor is being considered and the liquidator has taken recourse to its powers under section 33(5) to get control and custody of the asset of the corporate debtor.
61. It is noted that during the hearing in I.A. No. 1635 of 2022 the Liquidator/ Respondent No. 1 was present before the NCLT when the above-mentioned order was passed. The NCLT order notes the contention of the Liquidator that Respondent No. 1 had obtained status-quo order from the Small Causes Court, Mumbai by suppressing facts and without making the Liquidator as a necessary party. We therefore, are of the opinion that the ‘status- quo’ order was obtained from the Small Causes Court by the Appellant without placing full and complete facts regarding its occupation and possession of the said premises and without impleading the Liquidator as a necessary party. It is also a fact that the Appellant claimed to be a ‘tenant’ covered under the Maharashtra Rent Control Act, 1999 when it had neither signed any tenancy agreement with the Corporate Debtor and further the Leave and Licence Agreement had also expired on 02.07.2020. We are of the opinion that the NCLT possesses the correct jurisdiction in considering an application for vacation of the premises in question and that the NCLT was correct in passing the Impugned Order which would be necessary to put the premises in question with the Liquidator and pending the final disposed of I.A. No. 1635 of 2020. Therefore, we are clear that the Impugned Order does not need any intervention.
62. In the light of the above-stated discussion, we are of the opinion that the NCLT possesses the correct jurisdiction for considering an application for vacation of the premises in question in the circumstances of the present case, and the NCLT was correct in passing the Impugned Order which would be necessary to place the custody of the premises in question with the Liquidator pending the final disposal of I.A. No. 1635 of 2020 so that the liquidation process is completed timely and in accordance with legal provisions. We are, therefore, of the clear view that the Impugned Order does not need any intervention. The Appeal is, therefore, dismissed with no order as to costs.
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