Corporate Debtor's Property Cannot Be Recovered By Owner/Lessor During Moratorium Period U/S 14 Of IBC: NCLAT

The NCLAT New Delhi bench of Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member) and Mr. Indevar Pandey (Technical Member) affirmed that properties occupied by the corporate debtor cannot be recovered by owner/lessor during the moratorium period under section 14 of the IBC. In this case, the NCLT had handed over the possession of the property of the CD to the respondents on the submission of RP that the property was no longer required. This submission of the RP was not backed by the decision of the CoC. Brief Facts Respondent Nos. 2 to 4 agreed to provide loans totaling Rs. 6 crores to CD under two Memoranda of Understanding (MOU), with each loan amounting to Rs. 3 crore, secured by mortgaging the part of White House Property which is the corporate office of the CD. The first MoU was executed on 13.02.2019 between the CD and Respondents Nos. 3 and 4, and the second MoU on 15.02.2019 between the CD and Respondent No. 2. Following alleged defaults in repayment by the CD, two conveyance deeds dated 27.02.2020 were executed, resulting in the sale of portions of the White House Property to Respondent Nos. 2 to 4 for a total of Rs. 6 crores. On 27.02.2020, two separate Leave and License Agreements were executed, leasing the White House Property to the CD for an 11-month term, with Respondent No. 2 leasing the front portion and Respondent Nos. 3 and 4 leasing the rear. On 08.05.2020, Respondent Nos. 2 to 4 issued legal notices terminating these agreements and demanded that the CD vacate the premises. On 04.09.2020, two civil suits were filed against the CD and its director, Mr. Suraj Kumar Gupta, in the District Judge, Commercial Court at Tis Hazari, New Delhi. The cases involved claims for recovery of possession of the White House Property and lease arrears. The Commercial Court denied a summary judgment for dispossession. The Ld. Commercial Court, on 09.12.2021, ordered the CD to pay Rs. 6 lakh per conveyance deed as interim lease rental, with an interest return policy if the plaintiffs were found not entitled. The CD challenged this in two revision petitions. The Delhi High Court ordered the CD to deposit Rs. 12 lakh for arrears from June 2020 on 21 and 22 March 2022, but dismissed the petitions for non-compliance on 08.08.2022. Subsequently, on 30.08.2022, the Commercial Court allowed an amendment recognizing the White House Property's value exceeding Rs. 6 crore. In the meantime, UCO Bank filed a petition for initiating CIRP against CD under Section 7 of the Code which was admitted on 20.09.2022 by NCLT. Accordingly, CP (IB) No. 1377/KB/2020 was admitted by AA and Respondent No. 1 was appointed as Resolution Professional. During the pendency of CIRP, Respondent No. 2 (Sincere Securities Pvt. Ltd.) and Respondents Nos. 3 and 4 (Noble Dealcom Pvt. Ltd. and Jodhpur Properties and Finance Pvt. Ltd. respectively) filed eviction applications IA (IBC)/1083(KB)2023 and IA (IBC)/1082(KB)2023) concerning two office spaces in the "White House" property, which is currently occupied by the CD. The AA ordered the RP to hand over possession of the property within two weeks. Against this order, the present appeal was filed. Contentions The appellant submitted that this order breaches Section 14 of the Code by neglecting protections against eviction during the CIRP. and further claimed that it lacks adequate reasoning and asserting that recovery is barred under Section 14(1)(d) of the Code, which prohibits third parties from reclaiming possession while the matter is sub-judice. That despite the suits pending when insolvency commenced on 20.09.2022, the RP admitted the claims of Respondents Nos. 2 to 4, stating CoC approval, though this is disputed. The appellants argue that the impugned order was premature and that vacating the property without a CoC resolution contravenes the Code and CIRP Regulations, specifically Sections 14 and 74, which outline necessary CoC approval for property possession recovery and set penalties for violations. That the Impugned Order lacks adequate reasoning, the Appellant seeks a remand to the NCLT for a reasoned ruling on the Eviction Applications and IA No. 1412 of 2023. Per contra, the respondent No. 1/RP submitted that CoC of the Corporate Debtor, with 100% voting rights in their commercial wisdom has decided to handover the Delhi property of the Corporate Debtor. That it is the admitted position that the asset (corporate office in Delhi) does not belong to the CD and the ownership of the asset lies with Respondents No. 2 to 4. As such the appellant has does not have any locus to file this appeal and the appeal is required to be dismissed on this ground alone. That the decision of the CoC to hand over Delhi office is not required to be approved by the CoC by way of any resolution of the CoC as the same is not contemplated under Section 28 (1) of IBC, 2016. ...

Corporate Debtor's Property Cannot Be Recovered By Owner/Lessor During Moratorium Period U/S 14 Of IBC: NCLAT

Mohd Malik Chauhan

This is a premium content
Available exclusively to
Our subscribers

INR 1099+GST

Tags

Corporate Debtor's Property Cannot Be Recovered By Owner/Lessor During Moratorium Period U/S 14 Of IBC: NCLAT

Mohd Malik Chauhan

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

Tags

This is a premium content
Available exclusively to
Our subscribers