Resolution Plan Can't Be Approved By NCLT If Leasehold Rights Over Primary Assets Are Not Proved: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan and Mr. Barun Mitra (Technical Member) upheld an order of NCLT Kolkata which refused to sanction a resolution plan wherein a disputed parcel of land was the primary asset.The Tribunal held that since the corporate debtor failed to prove leasehold rights over the land as the deed was executed by unauthorised persons, lacked proof of payment, and was void; the resolution plan could not be approved. Background The land was originally acquired by the State of Bihar in 1961 which was later vested in Bihar State Industrial Development Corporation (BSIDC) subsequent to the liquidation of the Gayday Iron and Steel Co. Ltd. in 1982. BSIDC established Magadh Spun Pipes Ltd and handed over the possession of the land and assets of the factory to it. The corporate debtor claimed lease hold rights over the said land based on alleged execution of the deed by both BSIDC and Magadh in favour of the corporate debtor for a consideration of Rs. 16 crores. Based on this deed, it obtained credit facilities from the State Bank of India. During the Corporate Insolvency Resolution Process (CIRP), a resolution plan submitted by Agile Metaliks Ltd. was approved. However, both BSIDC and Magadh intervened before the National Company Law Tribunal (NCLT) and argued that they did not execute any such lease in 2007 and also alleged forgery. The NCLT held that since the original deed was not produced and payment under the deed was also unsubstantiated, the claim of the corporate debtor as a lessee did not inspire confidence. Consequently, it rejected the resolution plan approval application and directed reconsideration by CoC. The Appellants submitted that the deed was a registered document, the validity of which had to be presumed as per the statute. The SBI had conducted a title investigation before advancing the loan which confirmed the title in favor of the corporate debtor. It was further submitted that BSIDC as a successful auction purchaser of the land which was confirmed by the Supreme Court in 1982 was authorised to lease the land in 2007. The allegations of fraud and forgery cannot be decided in summary proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) therefore, the NCLT exceeded its jurisdiction by adjudicating the deed forged. It was stated that rejection of plan approval undermined the CIRP and further jeopardised the recovery of a substantial amount advanced by the SBI. The Respondents submitted that BSIDC became the owner of the land only in 2009, which was registered in 2009; therefore, the said land could not have been given on lease in 2007 to the corporate debtor. It was stated that the signatories of the deed were not authorised to execute the deed. No proof of consideration was produced, which made the document ex facie fabricated. Analysis The Tribunal observed that while it is true that the NCLT cannot decide the allegations of fraud and forgery under the IBC, it can determine whether a particular asset forms part of the estate of the corporate debtor or not under the CIRP. It further noted that since BSIDC became the owner of the said land only in 2009, its authority to lease the land in 2007 was doubtful. No evidence was produced to demonstrate that consideration to the tune of Rs. 16 crores was paid. Additionally, no proof of annual lease rent as recited in the deed was furnished. It also noted that key individuals who are stated to have executed the deed lacked the authority to execute the deed. Neither the conveyance deeds of 2009 and 2012 nor the financial statements of the Magadh mentioned anything about the lease. In light of the above discussion, it was held that the lease deed was void and unforceable; therefore, the said land could not be claimed by the corporate debtor. It was stated that since the disputed land was the primary asset forming part of the Resolution Plan, the plan could not be approved. Accordingly, the present appeal was dismissed. However, the SBI was directed to pursue other remedies to recover its dues. Case Title: Committee of Creditors of Jupitar Spun Pipes & Casting Pvt. Ltd. Through its leading Financial Creditor State Bank of India Versus Bihar State Industrial Development Corporation Ltd. & Ors. Case Number:Comp. App. (AT) (Ins) No. 950-954 of 2024 Judgment Date: 19/09/2025 For Appellant : Mr Abhinav Vashisht, Sr. Advocate, Mr Indranil Ghosh, Mr Saildendra Tiwari, Ms Akshita Sachdeva, Ms Mrinal Chaudhary, Advocates For Respondents : Mr Abhijeet Sinha, Sr. Advocate, Mr Shanak Mitra, Mr Saiket Sarkar, Mr Keshav Tibarwala, Advocates for R5. Mr. Sajeve Deora, Ms. Tanvi Luhariwala, Advocate for R3. Ms Tanvi, Vikash Singh, Ujwal Chaudhary, Tejasvi, Advocates for R1. Ms. Divya Gupta, Advocate for R2 and R6. Click Here To Read/Download The Order

Resolution Plan Can't Be Approved By NCLT If Leasehold Rights Over Primary Assets Are Not Proved: NCLAT

Mohd Malik Chauhan

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