2020 (9) TMI 122 - AT - Insolvency and Bankruptcy

Threatening and obstructing Liquidator from taking action in respect of the property - Appellant states that the Appellant has even paid property tax and thus he claims that the Appellant is entitled to protect his possession - HELD THAT - In law possession would require two elements one corpus and the other is animus . Even if corpus is there but animus to hold property by way of a confirmed right or title does not appear to be there. Merely being on property does not give title. The letter is not based on any resolution of Trust. The Appellant does not show that he is in possession as owner or tenant or licensee as such. Only giving property to manage school at the place would not be sufficient for the Appellant to claim possession when the Corporate Debtor goes in liquidation. There are no error in the Impugned Order where it directs that the Appellant will not disturb or obstruct the possession of Liquidator with regard to the property concerned. However it appears to us that the direction passed by the Adjudicating Authority quashing Civil Suit is not legal - Even if such bar is there it is not appropriate for the Adjudicating Authority to quash the concerned suit which is filed in the Civil Court. It would be for the Liquidator to move the concerned Civil Court pointing out the provision of IBC or to move the District Court in the hierarchy for quashing of the Suit concerned. As regards the argument of the learned Counsel for the Appellant that the Liquidator has in the MA claimed rent in the prayer and so the Liquidator accepts that the Appellant should be treated as person liable to pay rent. What appears from the records and facts is that the Liquidator claimed that the Appellant should pay the rent for use of the Wada property . Appeal allowed in part.

Summary

Issues:
1. Possession claim based on a letter dated 17th August, 2002.
2. Jurisdiction of Civil Court in insolvency proceedings.
3. Claim of rent or mesne profits by the Liquidator.
4. Arrest direction against the Appellant.

Analysis:
1. The Appellant claimed possession of the property based on a letter dated 17th August, 2002, which was issued by a Director of the Corporate Debtor. The letter indicated possession for the management of a school, but lacked a formal agreement. The Tribunal observed that mere possession does not confer ownership or tenancy rights, especially in a liquidation scenario. The Appellant failed to establish legal status or animus to hold the property as an owner, tenant, or licensee, rendering the possession claim insufficient.

2. The Tribunal upheld the direction prohibiting the Appellant from disturbing the Liquidator's possession of the property. However, it deemed the Adjudicating Authority's decision to quash a Civil Suit as improper. Referring to Section 33(5) of the Insolvency and Bankruptcy Code, the Tribunal clarified that while legal proceedings against the corporate debtor are restricted post-liquidation, the Liquidator should seek redressal through the appropriate legal channels rather than the Adjudicating Authority.

3. Regarding the Liquidator's claim for rent or mesne profits, the Tribunal clarified that such a claim does not establish a lessor-lessee relationship or confer property rights. The Liquidator's demand for rent "for use of the Wada property" did not create a legal entitlement for the Appellant. The Tribunal emphasized that mere words in a claim cannot create a title or ownership right.

4. The Tribunal addressed the directive for the Appellant's arrest, noting allegations of threats and obstruction against the Liquidator. Instead of enforcing immediate arrest, the Tribunal instructed the Police to take appropriate legal action based on the circumstances. The Tribunal modified the arrest direction to ensure compliance with the law while maintaining the rest of the Impugned Order. The Appeal was partly allowed, setting aside the quashing of the Civil Suit and granting the Liquidator the option to pursue appropriate relief through the Civil Court or District Court.