2022 (2) TMI 145 - Tri - Insolvency and Bankruptcy

Seeking to handover the physical possession of the mortgaged leasehold land of the Corporate Debtor (both Express Lease Implied Lease lands used by the Corporate Debtor) into the Liquidation Estate of the Corporate Debtor - addition of mortgaged land into the Liquidation Estate of the Corporate Debtor - the liquidator impleaded the Personal Guarantors of the Corporate Debtor - main contention is that the liquidator cannot proceed against their properties, even though they have given to the Corporate Debtor on lease for constructions of the Doctors quarters in their properties, which forms part of the liquidation estate now decided by the liquidator. HELD THAT - The respondents 1 2 are agreeable to the proceeding of the liquidation against all the properties mortgaged by the Corporate Debtor. Second respondent even though stated that they will be proceeding against the Personal Guarantors, till date no steps taken by them against the guarantors. Hence, both parties are in favour of the liquidation proceedings against the Corporate Debtor. The only thing is that the Personal Guarantors are opposing the action taken by the liquidator, which they are not entitled to because they have given on lease their properties to the Corporate Debtor and the Corporate Debtor has been put under liquidation. In such an event, the respondents 3 to 8 are estopped from seeking a relief from this Tribunal, that their properties cannot be treated as properties of the Corporate Debtor, which is proceeded under the IBC. In view of the fact that they have mortgaged their properties to the Corporate Debtor and the Corporate Debtor is now reached in the stage of Corporate Insolvency Process. The liquidator has rightly proceeded against their properties also for completion of the liquidation process. We do not find any merit in the contention of Respondents 3 to 8. Since the Resolution Professional has to conclude the proceedings, it is highly necessary to get the possession of the property, as it is the duty of the Resolution Professional to dispose of the Liquidation Assets of the Corporate Debtor, if necessary, to settle the claims of all claimants including the Financial Creditors. Since, the Building/hospital is situated in the very same land having 16.55 Ares, no purpose would be served without getting the hospital property also into the Liquidation Assets - There is no doubt that the Liquidator will consider all the claims and make payments to each person/authority, as per the Regulations/Rules. Hence, the 2nd Respondent s apprehension cannot be sustained. Both Respondents are directed to hand over the physical possession of the mortgaged leasehold land of the Corporate Debtor (both Express Lease Implied Lease lands used by the Corporate Debtor) to the Applicant in order to use as the Liquidation Estate of the Corporate Debtor - Applicant is also permitted to add the mortgaged land into the Liquidation Estate of the Corporate Debtor of the respondents 3 to 8, to the liquidation Estate of the Corporate Debtor - Application disposed off.

Summary

Issues Involved:
1. Inclusion of mortgaged leasehold land into the Liquidation Estate.
2. Rights and objections of the Respondents regarding the mortgaged properties.
3. Jurisdiction and powers of the Liquidator and Tribunal under the Insolvency and Bankruptcy Code (IBC), 2016.
4. Objections from Personal Guarantors regarding their properties being included in the Liquidation Estate.

Issue-wise Detailed Analysis:

1. Inclusion of mortgaged leasehold land into the Liquidation Estate:
The Applicant, Liquidator of the Corporate Debtor, sought directions to include mortgaged leasehold lands (Express Lease-100.16 Ares & Implied Lease-78.45 Ares) into the Liquidation Estate. The Tribunal initially allowed this inclusion on 01.02.2021, directing the Respondents to hand over possession of these lands to the Liquidator. The Tribunal reaffirmed its decision on 21.01.2022, emphasizing the necessity of including the land and building together in the Liquidation Estate to realize better value for stakeholders.

2. Rights and objections of the Respondents regarding the mortgaged properties:
Respondent No. 1 (Union Bank of India) and Respondent No. 2 (Meenachil East Urban Co-operative Bank Limited) are secured creditors with mortgaged interests in the properties. Respondent No. 1 supported the Liquidator's application, while Respondent No. 2 initially objected but conditionally agreed to relinquish possession if their claims were prioritized under Section 53(b) of the IBC. The Tribunal noted that both Respondents were willing to cooperate, ensuring that their claims would be addressed as per the IBC regulations.

3. Jurisdiction and powers of the Liquidator and Tribunal under the Insolvency and Bankruptcy Code (IBC), 2016:
The Tribunal highlighted the Liquidator's duty to include all relevant assets in the Liquidation Estate to settle claims of creditors. The Tribunal has the authority to direct the inclusion of mortgaged properties into the Liquidation Estate under Section 36 of the IBC. It was noted that the properties mortgaged by the Promoters/Directors (Personal Guarantors) to secure loans for the Corporate Debtor could be included in the Liquidation Estate, given their integral role in the Corporate Debtor's operations.

4. Objections from Personal Guarantors regarding their properties being included in the Liquidation Estate:
The Personal Guarantors objected to their properties being included in the Liquidation Estate, arguing that these were personal assets and not part of the Corporate Debtor's estate. They contended that the lease agreements were void and that the properties could not be used to discharge the Corporate Debtor's liabilities. However, the Tribunal rejected these arguments, stating that the Personal Guarantors had leased their properties to the Corporate Debtor for business purposes and had mortgaged them to secure loans. Thus, these properties were rightly included in the Liquidation Estate to maximize asset realization for creditors.

Conclusion:
The Tribunal reaffirmed its order from 01.02.2021, directing the Respondents to hand over the mortgaged leasehold lands to the Liquidator for inclusion in the Liquidation Estate. The Liquidator was instructed to follow the necessary procedures as per the IBC regulations. The objections from the Personal Guarantors were dismissed, and the Tribunal emphasized the need to include the properties in the Liquidation Estate to ensure a comprehensive and fair liquidation process. The intervention petitions were also disposed of, as the primary issue had been resolved.