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2018 (4) TMI 1818 - Tri - Companies LawRefrain from taking over the possession of the said land till the completion of corporate insolvency resolution process subject to the proviso u/s 14 (1) (d) of the Code - ex-parte ad-interim order directing the Respondent to continue the JDA - whether MHADA land falls within the ambit of clause 'd' of section 14(1) of the Code or not? HELD THAT - Even if it is assumed, the Corporate Debtor has been continuing with the possession of the property basing on the JDA, such possession cannot be called as possession recognised under law. It can't be either possession on lease, or possession on mortgage with possession, or adverse possession - this application has been filed by the Resolution Professional through Corporate Debtor to ascertain that he is entitled to the exclusive possession of the property despite no right has been accrued to this Corporate Debtor. When the documents disclose granting licence to this Corporate Debtor for joint development, it is evident on record that this right given to the Corporate Debtor is for joint development by the Corporate Debtor and tenants therein. If it is for joint development, then it is to be understood that it is a right given for joint development not for exclusive development by the Corporate Debtor. Therefore, either by law, or by factual matrix, the possession claimed by the corporate debtor is not recognised under law. If section 18 is r/w section 25 of the Code, it is evident in section 18 (1) (f) that IRP is endowed with duty to take control custody of any assets over which Corporate Debtor has ownership right as recorded in the Balance Sheet of the Corporate Debtor or with information utility or the depository of securities or any other registry that records the ownership records, the ownership of assets of the Corporate Debtor which may or may not be in possession of the in the same section, an explanation has been given stating that assets shall not include the assets owned by third party in possession of the Corporate Debtor, held under Trust or under contractual arrangements including bailment. Assuming the agreement of licence is in force, then also the possession alleged to be lying with the Corporate Debtor cannot become an asset mentioned in section 18(1)(f) of the Code - It is a fact that this Corporate Debtor in spite of taking over from the banks and over ₹ 1,000crores collected from the free sale, this Corporate Debtor till date neither paid money to the bankers nor provided flats to either to the tenants or to MHADA as agreed in the agreement. This postponement has been continuing for the last nine years, no respite to the tenants, the rent has not been paid for the last several years, that due outstanding has itself been accrued to ₹ 35crores. This has been clearly recorded in the order passed by Hon'ble High Court on 20.03.2017 mentioning that flats have not been made ready to be given either to tenants or to MHADA. It is a public land and meant for public use, the corporate debtor is not expected to game the system without any development for the last nine years. Even if termination of JDA by MHADA is not taken into consideration, we don't find any covenant in favour of the Corporate Debtor transferring possessory rights over the property of MHADA to the Corporate Debtor henceforth, this Bench hereby holds that possessory rights has not been transferred to the Corporate Debtor by virtue of the agreements entered in the year 2008 as well as in 2011. It is also trite law that whenever any section is with overriding effect or prohibiting in nature, it has to be applied strictly to the ambit that has been mentioned under the section. It cannot be liberally used to apply to something that is not mentioned in the section. Therefore, when a party exercises its right of termination, it will not fall within the ambit of section 14(1)(a), here there is no scope to apply the object or purpose of Code or purpose of the section to extend the purview of this section - thus, the onerous duty is cast upon the Adjudicating Authority to examine into as to which issue is hit by section 238, which is not, if that discretion is not properly exercised, then it will jeopardise the rights of the parties. One must not get lost sight of the fact that the rights vested with the parties will not be extinguished by a statute much less by a court of law unless it has been legislated that a particular right vested with the parties has been held as extinguished by virtue of a legislation. In the backdrop of this, it is clear that there cannot be an omnibus application of section 238 to each and every issue related to corporate debtor. Whether this Bench can ignore such situation saying that since it is Section 7 or 9 petition, it will pass an admission order thereafter to proceed with CIRP ignoring the fraud manipulated by the company through its management. There can be myriad situations such as above causing uncertainty to the rights of the parties, if section 238 is applied without taking the context involved in the case into consideration. This Bench has not found any merit in the application moved by the Resolution Professional/Petitioner - Application dismissed.
Issues Involved:
1. Whether MHADA land falls within the ambit of clause 'd' of section 14(1) of the Insolvency and Bankruptcy Code (IBC). 2. Whether the termination of the Joint Development Agreement (JDA) by MHADA during the moratorium period is valid. 3. Whether the Corporate Debtor has possessory rights over the MHADA land. 4. Application of section 238 of the IBC in the context of overriding other laws. Issue-wise Detailed Analysis: 1. Whether MHADA land falls within the ambit of clause 'd' of section 14(1) of the IBC: The Resolution Professional (RP) argued that the possessory right given to the Corporate Debtor for development under the JDA falls within the definition of "property" under section 3(27) of the IBC, thus invoking clause 'd' of section 14(1). However, the Tribunal concluded that the right of license does not constitute an interest in the property. The Tribunal emphasized that the Corporate Debtor’s possession is not lawful possession as per section 14(1)(d) and that a license does not create any interest in the property. Therefore, MHADA land does not fall within the ambit of clause 'd' of section 14(1) of the IBC. 2. Whether the termination of the Joint Development Agreement (JDA) by MHADA during the moratorium period is valid: The Tribunal examined section 14 of the IBC, which imposes a moratorium prohibiting the recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor. The RP argued that the termination of the JDA by MHADA during the moratorium period was invalid. However, the Tribunal held that the termination of the JDA was not a proceeding before any authority and thus did not fall within the ambit of section 14(1)(a). The Tribunal concluded that the termination of the JDA by MHADA was valid even during the moratorium period. 3. Whether the Corporate Debtor has possessory rights over the MHADA land: The Tribunal analyzed the nature of the rights conferred upon the Corporate Debtor under the JDA and the subsequent agreements. It was determined that the Corporate Debtor was granted a license for joint development, which does not confer possessory rights over the property. The Tribunal emphasized that the Corporate Debtor’s right was limited to development and did not include any interest or possessory right over the MHADA land. The Tribunal concluded that the Corporate Debtor did not have possessory rights over the MHADA land. 4. Application of section 238 of the IBC in the context of overriding other laws: The RP argued that section 238 of the IBC, which gives the Code an overriding effect, should prevail over other laws, including the MHAD Act and the Specific Relief Act. The Tribunal clarified that section 238 is intended to expedite the resolution or dissolution of companies and should not be used to extinguish vested rights of parties. The Tribunal emphasized that section 238 should be applied strictly within its ambit and not liberally to override other laws unless explicitly inconsistent with the IBC. The Tribunal concluded that section 238 did not override the rights and obligations under the JDA and other agreements. Conclusion: The Tribunal dismissed the Miscellaneous Application filed by the Resolution Professional, holding that the Corporate Debtor did not have possessory rights over the MHADA land, the termination of the JDA by MHADA was valid, and section 238 of the IBC did not override the rights under the JDA and other agreements. The Tribunal emphasized the importance of adhering to the specific provisions of the IBC and not extending its application beyond its intended scope.
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