2021 (4) TMI 1305 - Tri - Insolvency and Bankruptcy

Seeking vacation of leased premise owned by the Applicants and hand over vacant possession of the same - whether the Owner/ Lessor of land in actual physical possession of Corporate Debtor can recover the same while moratorium is in effect? - HELD THAT - In the matter of M/s Navbharat Castings LLP vs. M/s Moserbear India Ltd. Anr 2018 (7) TMI 2184 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI , the Hon ble NCLAT was dealing with the issue as to whether the order of moratorium will be applicable to the leasehold property of a Landlord in respect of which the Corporate Debtor is a tenant, particularly after decree of eviction passed in favour of the land lord against the Corporate Debtor, which is similar to the facts of the present case and the finding recorded by the Hon ble NCLAT in the said matter is on clear terms that the recovery of property by the Owner/ Landlord occupied by the Corporate Debtor during the period of moratorium is not permissible. The order of moratorium takes effect immediately from the insolvency commencement date which is defined under Section 5(12), and the same lasts till the completion of the Corporate Insolvency Resolution Process (CIRP). Under Section 12 of IBC, 2016 the time limit for completion of CIRP is provided as 180 days from the date of admission of application to initiate such process which can be extended for a further period not exceeding 90 days but has to be mandatorily completed within a period of 330 days from the insolvency commencement date including the period of judicial intervention. As to the facts of the present case, it is seen that this Tribunal vide order dated 06.08.2020 has extended the CIRP period of the Corporate Debtor by 150 days including the exclusion of the periods lost due to the lockdowns imposed by the Central / State Governments. Seeking direction to Respondent to pay the Applicants a sum of ₹ 99,12,000/- plus GST for 12 months, plus future rent at ₹ 7,00,000/- plus GST until handing over of the possession of the leased property - HELD THAT - Eventhough the amount as claimed by the Applicants, for the period of moratorium, has not been paid in full, the Respondent has paid certain sum to the Applicants. In any case, it was submitted by the Learned Counsel for the Respondent that the negotiation talks are going on with the landlords for reduction of rent and also they have planned to downsize the hospitals from 96 centers to 44 centers and as such the cost if any which is due and payable to the Applicants, on account of rent, during the period of moratorium, would fall within the domain of CIRP Costs . Further taking into consideration the facts of the present case, this Tribunal cannot direct the Respondent to pay the rental arrears due to the Applicants incurred during the period of moratorium - the sum which is due and payable to the Applicants would form part of the CIRP costs. The CIRP costs would be paid in priority even if a Resolution Plan in relation to the Corporate Debtor is approved by this Tribunal or if the Corporate Debtor is ordered for Liquidation. The Corporate Debtor cannot be directed to evict the premises during the period when the moratorium is in force and the rental arrears which is due and payable to the Applicants would form part of the CIRP costs, to be paid in priority be it resolution or liquidation as the case may be - application disposed off.

Summary

Issues Involved:
1. Whether the Owner/Lessor can recover the leased property from the Corporate Debtor during the moratorium period.
2. Whether the Respondent should pay the Applicants the claimed rental arrears plus GST for the period of moratorium and future rents until possession is handed over.

Issue-Wise Detailed Analysis:

Issue 1: Recovery of Leased Property During Moratorium
The primary question was whether the Owner/Lessor could recover the leased property from the Corporate Debtor during the moratorium period. The Tribunal referred to Section 14(1)(d) of the Insolvency and Bankruptcy Code (IBC), 2016, which explicitly prohibits the recovery of any property occupied by the Corporate Debtor during the moratorium period. The Tribunal cited the Hon’ble NCLAT's decision in M/s Navbharat Castings LLP vs. M/s Moserbear India Ltd., which held that "the recovery of the property by the owner occupied by the Corporate Debtor is not permissible during the period of moratorium."

The Tribunal also referenced Section 14 of IBC, which provides for a moratorium as a sequel to the order of admission of an application under Sections 7, 9, or 10 of IBC, prohibiting recovery of any property by an Owner or Lessor where such property is occupied by or in possession of the Corporate Debtor. The moratorium lasts until the completion of the Corporate Insolvency Resolution Process (CIRP).

Given these provisions, the Tribunal concluded that directing the Corporate Debtor to vacate the premises during the moratorium would violate Section 14 of IBC. Therefore, the first relief sought by the Applicants could not be granted.

Issue 2: Payment of Rental Arrears and Future Rents
Regarding the second relief, the Applicants sought payment of ?99,12,000 plus GST for 12 months, and future rent at ?7,00,000 plus GST per month until possession of the leased property was handed over. The Tribunal acknowledged that although the full amount claimed by the Applicants had not been paid, the Respondent had made partial payments. The Respondent argued that the rental dues during the moratorium should be treated as CIRP costs, which are paid in priority.

The Tribunal noted that negotiations were ongoing with landlords for rent reduction and that the Respondent planned to downsize the number of operational centers. The Tribunal held that the rental arrears due during the moratorium would fall within the domain of CIRP costs, which are to be paid in priority, whether a Resolution Plan is approved or the Corporate Debtor is ordered for liquidation.

Conclusion:
The Tribunal concluded that the Corporate Debtor could not be directed to vacate the premises during the moratorium period, and the rental arrears due to the Applicants would form part of the CIRP costs, to be paid in priority. The application was disposed of accordingly.