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2023 (3) TMI 1388 - AT - Insolvency and BankruptcyFraudulent/Preferential transaction - Validity of application filed by the Liquidator of the Corporate Debtor - direction not to disturb the possession or interfere with the leasehold right of M/s Indore Steel Alloys Pvt. Ltd. (present Respondent No.1) and Tin shed on the leasehold land - whether the transfer of subject land by MPIDCL to Respondent No.1 has been executed in accordance with law? - whether there is any merit in the claim of the Appellant that the transaction was not done in good faith but was a fraudulent and a preferential transaction? HELD THAT - The Adjudicating Authority has returned the finding that in terms of the sale deed executed by MPFC in favour of the Corporate Debtor, the latter was required to get the lease executed in its favor within a period of six months from the date of execution of the sale deed failing which MPIDCL would have the right to cancel the lease and allot the subject land to other applicants. Cognizance has also been taken by the Adjudicating Authority of MP Rules, 2019 providing for automatic cancellation of the lease if the purchaser after purchase of the land fails to get the lease executed in its favor - The Adjudicating Authority has held that ISAPL has thus legally and validly acquired leasehold ownership rights and possession over the subject land directly from the MPIDCL and not from the corporate debtor. Holding that ISAPL is the perpetual lessee of the subject land, the impugned order also notes that this transaction between ISAPL and MPIDCL does not fall within the purview of Sections 43, 49, and 66 of the IBC. It is noticed from the facts of the present case that the corporate debtor in spite of being aware that it was under obligation to get the lease deed of 23.02.2010 executed in its favour, failing which MPIDCL was free to further allot the subject land, never got the lease deed executed by MPIDCL despite lapse of 10 years. Hence, in terms of para 6 of the sale deed, the leasehold right of the corporate debtor over the subject land had clearly lapsed. We do not find any mala-fide or perversity on the part of Respondent No.6 in their understanding or appreciation of MP Rules and application of Clause 6 of the sale deed executed with the Corporate Debtor. In the given circumstances, MPIDCL being a wholly owned subsidiary of the State Government of Madhya Pradesh and bound by the MP Rules, 2019, there is no error in the findings of the Adjudicating Authority that MPIDCL was fully authorized, being the owner of the subject land, to execute the lease deed in favour of Respondent No.1. It has also been contended by the Learned Counsel for the Appellant it is not MPIDCL which had cancelled the lease or re-auctioned on its own but it was occasioned by a joint application filed by PTL and ISAPL before MPIDCL. The role of suspended management in aiding, abetting and prompting the transfer of subject land and that PTL was used by them as an illegal conduit to commit fraud on the creditors of the Corporate Debtor has also been raised by the Appellant - the contention of the Respondents agreed that the transaction between ISAPL and PTL related to purchase of Tin shed while the transaction between ISAPL and MPIDCL was for lease rights over the subject land and that both transactions were separate and not connected. It has also been contended by the Respondents that the fact that the corporate debtor did not acquire ownership rights over the said land is substantiated by the fact that the lease deed entered into between Respondent No.1/ISAPL and MPIDCL was an amendment of the original lease deed of PCPL dated 07.02.1987 for the remaining lease period. This clearly shows that MPIDCL had never executed any lease deed in favour of the corporate debtor or else it would have had to modify or amend the lease deed signed with them and not with PCPL while transferring the leasehold rights for the remaining period to Respondent No.1. This brings us to the contention of the Appellant that the ex-management by not getting the name changed in the lease deed in favour of the Corporate Debtor in 2010 used this fact as a loophole to transfer the leasehold rights in favour of Respondent No.1 and that this amounts to conducting fraudulent transaction - The negligence on the part of the Corporate Debtor not to have executed the lease deed cannot be overlooked and cannot be allowed to become a ruse for fraudulent transaction. Mere possibility of a potential collusion without material on record is not sufficient to persuade this Bench to record any finding on preferential or fraudulent transaction. The present transaction between MPIDCL and the ISAPL/Respondent No. 1 not being illegal nor suffering from any procedural or material irregularities, we are satisfied with the findings of the Adjudicating Authority that it is not open to the Appellant to unsettle or derail the transaction by raising the bogey of Section 43, 49 and 66 of IBC or to disturb the possession or interfere with the leasehold right of ISAPL. There are no illegality in the impugned order of the Adjudicating Authority which may warrant any interference in the exercise of our appellate jurisdiction. There is no merit in the appeal - appeal dismissed.
Issues Involved:
1. Validity of the transfer of leasehold rights over the subject land. 2. Allegations of fraudulent and preferential transactions. 3. Compliance with statutory requirements for lease registration. 4. Authority and actions of MPIDCL regarding leasehold rights. 5. Role of suspended management and potential collusion. Summary: 1. Validity of the transfer of leasehold rights over the subject land: The core issue was whether the transfer of the subject land by Madhya Pradesh Industrial Development Corporation Ltd. (MPIDCL) to Respondent No.1 was executed in accordance with the law. The Adjudicating Authority found that the Corporate Debtor failed to get the lease executed in its favor within the stipulated six months, leading to the automatic cancellation of its lease rights. Consequently, MPIDCL legally transferred the leasehold rights to Respondent No.1 after they paid the full consideration and cleared all dues. 2. Allegations of fraudulent and preferential transactions: The Appellant contended that the transactions involving the Corporate Debtor, PTL, and Respondent No.1 were fraudulent and preferential. However, the Adjudicating Authority found no evidence of mala fide intent or procedural irregularities. The transaction between ISAPL (Respondent No.1) and MPIDCL was deemed bona fide and not falling within the purview of Sections 43, 45, 49, and 66 of the Insolvency and Bankruptcy Code (IBC). 3. Compliance with statutory requirements for lease registration: The Adjudicating Authority emphasized the statutory requirement for the registration of lease deeds as per the Registration Act, 1908, and the Transfer of Property Act, 1882. The Corporate Debtor's failure to comply with these requirements rendered the transaction unenforceable. The Respondent No.1's lease was valid as it was executed and registered in accordance with the law. 4. Authority and actions of MPIDCL regarding leasehold rights: MPIDCL, being a state-owned entity, acted within its rights under the Madhya Pradesh State Industrial Land and Building Management Rules, 2019 (MP Rules, 2019). The Corporate Debtor's non-payment of dues and non-registration of the lease deed justified MPIDCL's decision to transfer the leasehold rights to Respondent No.1. 5. Role of suspended management and potential collusion: The Appellant alleged that the suspended management of the Corporate Debtor facilitated fraudulent transactions. However, the Adjudicating Authority found no substantial evidence of collusion or fraud. The transactions were separate and legally executed, and the negligence of the Corporate Debtor in not registering the lease deed could not be used as grounds for alleging fraudulent transactions. Conclusion: The appeal was dismissed, with the Adjudicating Authority's order upheld. The transfer of leasehold rights to Respondent No.1 was found to be legal and valid, and there was no merit in the Appellant's claims of fraudulent and preferential transactions. The judgment emphasized the importance of compliance with statutory requirements and the authority of MPIDCL in managing leasehold rights.
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