2023 (4) TMI 1304 - AT - Insolvency and Bankruptcy

Direction to transfer Igatpuri Unit to the nominee of the Resolution Applicant M/s Kitply Industries Ltd within 45 (forty five) days - It is specific case of the appellant that the respondent failed to honour agreement and as such number of communications were made to the respondent/corporate debtor either to make payment or the appellant will take back possession of the property in question. HELD THAT - Admittedly the property of Igatpuri Unit is in relation to agreement to sale which was entered in between the appellant and Corporate Debtor long back in the year 1998. In terms of the agreement after payment of certain amount within a specified time, possession of land property of Igatpuri Unit was to be handed over to the Corporate Debtor i.e. Kitply Inds Ltd. It was clarified in the agreement as to how rest of amount was to be paid; in which manner and within what time. It is specific case of the appellant that the respondent failed to honour agreement and as such number of communications were made to the respondent/corporate debtor either to make payment or the appellant will take back possession of the property in question. The record reflects that several opportunities were given for payment of the consideration amount failing which the appellant had communicated that it will terminate the agreement and take back possession of the property in question. However, it continued for several years. Even OTS was also offered. The appellant claims that as per OTS the entire consideration amount was not paid whereas the respondent has taken a plea that though there were two OTS i.e. dated 19.02.2008 and 20.02.2008, the respondent settled the dispute by making payment of Rs. 2 crore and by issuance of NCD of Rs.31 lakhs. Once it is noticed that title holder of the property in dispute is the appellant, in such situation even after initiation of CIRP neither IRP or RP was competent to control the said property in view of rider as incorporated in Section 18(f) Explanation (a). Admittedly till date the CD is not title holder of the property in question and dispute comes around the execution of the sale deed. It is admitted that dispute regarding either payment of remaining consideration amount as per sale agreement or non-execution of sale deed arose much before initiation of CIRP in the present proceeding and as such neither RP nor NCLT was having any jurisdiction to deal with such property - If there was still dispute in between parties it was not permissible for the NCLT to direct the appellant for transferring the property of Igatpuri in favour of CD or its nominee. Though it is not necessary to reiterate but it is established that unless in terms of agreement to sale, sale deed is finally executed after accepting full consideration amount, title always lies with the vendor. The dispute whether agreement to sale which was entered in between the parties in the year 1998 was breached by the appellant or the respondent breached the agreement, may not be examined in a proceeding under the IBC. Such disputes are required to be examined by the court of competent jurisdiction. In view of admitted position that title of the property in respect of Igatpuri Unit still lies with the appellant, the Learned NCLT has committed error in allowing the application filed on behalf of the Respondent in directing for transferring the land in question and as such there is no option but to set aside the impugned order. Impugned order set aside - appeal allowed.

Issues Involved:
1. Jurisdiction of NCLT in directing the transfer of property.
2. Validity and fulfillment of the agreement to sell.
3. Ownership and title of the Igatpuri property.
4. Compliance with the approved Resolution Plan.
5. Applicability of the doctrine of part performance.
6. Admissibility of claims during CIRP.

Summary:

1. Jurisdiction of NCLT in directing the transfer of property:
The NCLT exceeded its jurisdiction by directing the appellant to transfer the Igatpuri property to the Corporate Debtor (CD). The dispute regarding the agreement to sell, which was entered into in 1998, and its alleged breach, is beyond the scope of IBC proceedings and should be adjudicated by a competent civil court. The NCLT cannot adjudicate on pre-existing contractual disputes unrelated to insolvency, as established by the Supreme Court in Tata Consultancy Services Ltd vs. Vishal Ghisulal Jain and Embassy Property Developments Pvt Ltd vs. State of Karnataka.

2. Validity and fulfillment of the agreement to sell:
The agreement dated 03.09.1998 stipulated that the CD would pay Rs.2.25 Crores for the Igatpuri property in installments. The appellant claims the CD defaulted on payments, leading to the termination of the agreement. The CD argues that it settled the dues through a one-time settlement (OTS) by paying Rs.2 Crores and issuing Non-Convertible Debentures (NCD) worth Rs.31 Lakhs. The dispute over whether the OTS was fully honored remains unresolved and should be addressed in a civil court.

3. Ownership and title of the Igatpuri property:
The title of the Igatpuri property remains with the appellant as no sale deed has been executed in favor of the CD. As per Section 18(f) of the IBC, the Resolution Professional (RP) cannot take control of assets owned by third parties. The CD's possession of the property under the agreement to sell does not transfer ownership, which remains with the appellant until a registered sale deed is executed.

4. Compliance with the approved Resolution Plan:
The Resolution Plan approved by the NCLT on 07.12.2018 mentioned that the Igatpuri property dispute would be resolved post-approval. The appellant was not included in the Committee of Creditors (CoC) and was not provided with the entire Resolution Plan. The NCLT's directive to transfer the property without resolving the underlying dispute contradicts the plan's stipulations and the Supreme Court's rulings in Essar Steel and Ghanashyam Mishra cases.

5. Applicability of the doctrine of part performance:
The doctrine of part performance under Section 53-A of the Transfer of Property Act protects the possession of a transferee against the transferor but does not confer ownership. The CD's possession of the Igatpuri property does not entitle it to ownership without a registered sale deed. The CD can only protect its possession against the appellant, not claim ownership.

6. Admissibility of claims during CIRP:
The appellant's claim of Rs.40.86 Crores, including the Inter Corporate Deposit (ICD) and interest, was rejected by the RP. The appellant did not file a claim for the Igatpuri property, asserting that the agreement was terminated. The NCLT's reliance on the Resolution Plan to settle the property dispute is misplaced as the plan itself acknowledged the ongoing dispute.

Conclusion:
The NCLT's order directing the transfer of the Igatpuri property is set aside. The dispute over the agreement to sell and the fulfillment of the OTS should be adjudicated by a competent civil court. The title of the property remains with the appellant until a registered sale deed is executed. The appeal is allowed without any cost.

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