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2021 (4) TMI 1317 - Tri - Insolvency and BankruptcyValidity of notice issued - seeking restraint on Respondent from taking any steps in further of the said notice - seeking restraint from terminating the lease agreement till the completion of the corporate insolvency resolution process or to take any further step in this respect - seeking extension of co-operation in concluding the corporate insolvency resolution process in terms of the Insolvency and Bankruptcy Code, 2016 - seeking injunction on Respondent from taking possession of the said leasehold land till such time this MA is disposed of. HELD THAT - The CIRP was initiated on 11.03.2019 and the impugned notice is dated 08.11.2019. The CIRP on the extension being granted came to an end on 06.12.2019. The R1's Show Cause Notice terminating the lease agreement dated 22.01.2015 was issued on 08.11.2019 and the same was signed by Regional Officer, MIDC, Nashik - it is clear that R1's action in seeking possession of the leased land, during the currency of CIRP, is hit by Section 14(1)(d) of the Code. As far as other prayers, R1 shall not take any coercive steps till the Application for approval of the Resolution Plan (MA No. 3960 of 2019) is heard by this Bench - application allowed.
Issues Involved:
1. Validity of the notice dated 08.11.2019 issued by the Respondent. 2. Termination of the lease agreement during the Corporate Insolvency Resolution Process (CIRP). 3. Applicability of Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016 (the Code) during CIRP. 4. Jurisdiction of the National Company Law Tribunal (NCLT) over administrative actions. Detailed Analysis: 1. Validity of the Notice Dated 08.11.2019: The Resolution Professional sought to quash and set aside the notice dated 08.11.2019 issued by the Respondent, claiming it was null and void. The notice aimed to terminate the lease agreement and take possession of the leased land during the CIRP. The Tribunal noted that the notice unequivocally indicated that the Corporate Debtor was in possession of the leased land, thereby invalidating the Respondent's claim that possession was taken under the SARFAESI Act by DHFCL and subsequently by R2. Consequently, the Tribunal held that the Applicant (Resolution Professional) was in possession of the property. 2. Termination of the Lease Agreement During CIRP: The Respondent argued that the lease agreement was terminated due to the Corporate Debtor's failure to comply with the construction timeline stipulated in the lease deed. The Tribunal observed that the termination notice dated 08.11.2019 was issued during the CIRP, which was initiated on 11.03.2019. The Tribunal emphasized that the termination of the lease agreement during the CIRP is subject to the moratorium under Section 14 of the Code, which prohibits such actions. 3. Applicability of Section 14(1)(d) of the Code During CIRP: The Tribunal relied on the judgment in Rajendra K. Bhutta vs. Maharashtra Housing and Area Development Authority & Another, which clarified that Section 14(1)(d) of the Code prohibits the recovery of any property occupied by the Corporate Debtor during the CIRP. The Tribunal held that the notice dated 08.11.2019 was hit by Section 14(1)(d) of the Code, rendering it invalid and illegal. The Tribunal further noted that the Code, under Section 238, has an overriding effect on any other law, including the MIDC Act. 4. Jurisdiction of NCLT Over Administrative Actions: The Respondent contended that the decision to terminate the lease and repossess the plot fell outside the purview of the Code and was in the public law domain, which could only be challenged in a court with the power of judicial review over administrative actions. The Tribunal, however, held that the NCLT has jurisdiction under Section 60(5)(c) of the Code to decide any question of law or fact arising out of or in relation to the insolvency resolution. The Tribunal distinguished the present case from the judgments in Embassy Property Developments Pvt. Ltd. and Monnet Ispat & Energy Ltd., stating that the facts of those cases were not applicable to the present scenario. Conclusion: The Tribunal allowed the Application, quashing the notice dated 08.11.2019 and restraining the Respondent from taking any coercive steps until the Application for approval of the Resolution Plan (MA No. 3960 of 2019) is heard. The Tribunal emphasized the overriding effect of the Code during the CIRP and the applicability of the moratorium under Section 14(1)(d).
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