RP Best Person To Decide What Part Of Corporate Debtor's Business Is To Be Carried Out: NCLAT Delhi

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Shri Barun Mitra (Technical Member) and Shri Arun Baroka (Technical Member), has held that the Resolution Professional who is running the Corporate Debtor's business, is the best person to decide as to what part of the business can be carried out. Further, the allottees of a real estate project developed by the Corporate Debtor cannot demand execution of conveyance deed as a matter of right. Background Facts On 22.08.2019, Indirapuram Habitat Centre Pvt. Ltd. (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) by the NCLT. Mr. Amit Tyagi (“Appellant”) was allotted commercial units in a real estate project developed by the Corporate Debtor. Consequently, A Memorandum of Understanding (“MoU”) was entered between the Parties wherein the Appellant was offered shops in the Project. In 2020, the Appellant filed an application before NCLT seeking execution of conveyance deed in its favour in respect of the allotted shop. The Resolution Professional submitted that a Forensic Audit will have to be conducted to verify the title of allottees on shops. On 31.08.2020, the NCLT rejected the application while directing the Resolution professional to verify the title of allottees. Thereafter, the Appellant filed a second application before the NCLT seeking direction to the Resolution Professional to publish the list of the shop owners as per the Forensic Audit Report, alongwith other reliefs. The Resolution Professional submitted that it is not obligated under IBC to honour the arrangement agreed upon between the allottees and erstwhile management of Corporate Debtor, especially when such arrangement was not in force at the time of CIRP commencement. On 19.12.2023, the NCLT refused the prayer of Appellant for direction to execute Conveyance Deed for the allotted, even though no such prayer was made in the application. The application was rejected by the NCLT. The Appellant filed an appeal before the NCLAT against the order dated 19.12.2023. The Appellant argued that when the Corporate Debtor is being run as a going concern, the Resolution Professional can continue the real estate business of Corporate Debtor, and execution of Conveyance Deed is a part of such business. NCLAT Verdict The Bench opined that that even though no specific prayer was made, the NCLT is empowered consider any prayers made in the application and entertain any issue relating to such prayers. Further, the allottees of a real estate project cannot as a matter of right claim execution of conveyance deed in respect of allotted units. It has been held that the Resolution Professional is the best person to decide what part of the Corporate Debtor's business is to be carried out. “There can be no dispute that by virtue of Section 17, 18 and 25, it is duty of the IRP to manage the affairs and take control of the assets over which the Corporate Debtor has ownership rights. The allottees, cannot as a right claim execution of Conveyance Deed, as has been prayed in the present case before the Adjudicating Authority. The RP, who is running the business of the Corporate Debtor is the best person to take a decision as to what part of the business of the Corporate Debtor can be carried out.” While noting that the directions sought by the Appellant are akin to specific performance of contract entered between Corporate Debtor and him, the Bench observed as under: “The Appellant by making such payers are praying for specific performance of contract entered between the Appellant and the Corporate Debtor. What part of the contract has to be carried out and what part of contract cannot be carried out is in the domain of RP and there has to be reasons for issuing direction akin to order for allowing specific performance of contract. On the facts of the present case, we are of the view that Adjudicating Authority did not commit any error in not acceding the prayers of the Appellant for seeking direction to RP to execute a Conveyance Deed.” The Bench dismissed the appeal while holding that the Resolution Professional has to decide what part of the contract between Corporate Debtor and third party has to be performed. The NCLT order has been upheld. Case title: Amit Tyagi v Indirapuram Habitat Centre Pvt. Ltd. Case No.: Company Appeal (AT) (Insolvency) No.272 of 2024 Counsel for Appellants: Mr. Piyush Singh, Mr. Akshay Srivastava and Mr. Vivek Kumar, Advocates Click here to Read/Download Order

RP Best Person To Decide What Part Of Corporate Debtor's Business Is To Be Carried Out: NCLAT Delhi

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RP Best Person To Decide What Part Of Corporate Debtor's Business Is To Be Carried Out: NCLAT Delhi

Pallavi Mishra

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