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2022 (12) TMI 370 - AT - Insolvency and BankruptcyTaking possession of the demise premises in view of Section 14(1)(d) of I B Code - HELD THAT - Section 14(1)(d) provides that the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor is prohibited. In support of this submission, Counsel for the Appellant has relied upon a decision of the Hon ble Supreme Court rendered in the case of RAJENDRA K. BHUTTA VERSUS MAHARASHTRA HOUSING AND AREA DEVELOPMENT AUTHORITY AND ANOTHER 2020 (3) TMI 34 - SUPREME COURT , in which the question was about the correct interpretation of Section 14(1)(d) of the Code. In the case of Rajendra K. Bhutta, the application under Section 7 was admitted on 24.07.2017 and notice of termination was issued on 12.01.2018. The Appellant wherein filed an application before the NCLT to restrain MHADA from taking over possession till completion of the CIRP, on the ground that recovery of possession shall be in derogation of the moratorium imposed under Section 14 of the Code but the said application was dismissed. Further, NCLAT also dismissed the appeal holding that it cannot be treated to be the asset of the Corporate Debtor for the application of provisions of Section 14(1)(d) of the Code. The Hon ble Supreme Court, however, allowed the appeal. We have carefully gone through the aforesaid decision which is in fact not applicable to the facts of this case because in the reported case the termination notice was issued by MHADA after the CIRP whereas in the present case the lease deed was terminated way back on 01.12.2015, constructive possession was taken, the Corporate Debtor was admitted into CIRP and moratorium was imposed on 26.04.2019. It has also been observed by the Tribunal that the Corporate Debtor had lost possessory rights more than three years prior to the initiation of the CIRP. The property of third party, occupied by the Corporate Debtor had been expressly excluded from the purview of term asset. Since the demised premises ceased to be the property of the Corporate Debtor much prior to the initiation of CIRP, therefore, it cannot be covered under Section 14 much less 14(1)(d) of the Code. Appeal dismissed.
Issues Involved:
1. Validity of the lease cancellation by RIICO. 2. Applicability of Section 14(1)(d) of the Insolvency and Bankruptcy Code (IBC), 2016. 3. Possession rights of the Corporate Debtor over the disputed property. 4. Legal implications of actions taken by RIICO post-moratorium. Detailed Analysis: Issue 1: Validity of the Lease Cancellation by RIICO The core of the dispute revolves around the cancellation of the lease deed by RIICO on 01.12.2015. RIICO had allotted institutional land to the Corporate Debtor for hotel development, but the lease was canceled due to non-compliance with construction requirements. The Corporate Debtor's appeals against this cancellation were dismissed by RIICO's Managing Director and Chairman in 2017 and 2018, respectively. The Tribunal noted that the Corporate Debtor lost possessory rights over the property more than three years before the initiation of the Corporate Insolvency Resolution Process (CIRP). Issue 2: Applicability of Section 14(1)(d) of the IBC The Appellant argued that the moratorium under Section 14(1)(d) of the IBC prohibited the recovery of property by an owner or lessor if occupied by or in possession of the Corporate Debtor. They relied on the Supreme Court's decision in Rajendra K. Bhutta Vs. Maharashtra Housing Area Development & Anr. However, the Tribunal distinguished this case, noting that in Rajendra K. Bhutta, the termination notice was issued after the CIRP began, whereas in the current case, the lease was terminated well before the CIRP initiation. Issue 3: Possession Rights of the Corporate Debtor Over the Disputed Property The Tribunal observed that the Corporate Debtor had already lost possessory rights over the property before the CIRP initiation. The property was no longer in the lawful possession of the Corporate Debtor when the moratorium was imposed. The Tribunal emphasized that Section 14 of the IBC could not be invoked to regain possession of a property that ceased to be under the Corporate Debtor's control prior to the CIRP. Issue 4: Legal Implications of Actions Taken by RIICO Post-Moratorium The Appellant's counsel argued that post-moratorium actions by RIICO, including taking possession of the property, violated Section 14(1)(d) of the IBC. However, the Tribunal held that since the lease was terminated and possession was effectively taken by RIICO before the CIRP, the moratorium did not apply. The Tribunal further noted that the Appellant's reliance on Rajendra K. Bhutta was misplaced as the circumstances differed significantly. Conclusion: The Tribunal concluded that since the property ceased to be the Corporate Debtor's asset before the CIRP initiation, it could not be protected under Section 14(1)(d) of the IBC. Consequently, the appeal was dismissed, affirming that the demised premises were not covered under the moratorium provisions of the IBC. The Tribunal's decision underscores the importance of the timing of lease termination and possession in determining the applicability of the IBC's moratorium provisions.
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