2023 (1) TMI 552 - AT - Insolvency and Bankruptcy

Demand of lease amount during moratorium period - whether the Adjudicating Authority has rightly applied the explanation under Section 14(1)(d) of the Code for the purpose of directing the Appellant to pay the lease premium amount and the lease rent to the Respondent (NOIDA)? - HELD THAT - Section 14 of the Code deals with the moratorium and Section 14(1)(d) of the Code says that there would be a prohibition from the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor. However, explanation appended to Section 14(1) (d) says that with the prohibition of recovery of any property by an owner or lessor, a license, permit, registration, quota, concession, clearance or a similar grant or right either given by the Central Govt., State Govt. local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency but there would be a condition for its continuation if there is no default in payment of the dues of such license, permit, registration, quota, concession, clearance or a similar grant or right during the moratorium period. The similar grant or right has to be read in respect of the licence, permit, registration, quota, concession, clearance but it cannot be read as the premium amount or lease rent which has been so ordered by the Adjudicating Authority to be paid by the Appellant to the Respondent. The impugned order is patently illegal and deserves to be set aside - Appeal allowed.

Summary

Issues:
- Interpretation of Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016 regarding recovery of property by an owner or lessor during the moratorium period.

Analysis:

1. The appeal challenged an order directing the Resolution Professional (RP) to make payments towards outstanding dues under a lease deed. The lease agreement involved payment of a premium and lease rent over a specified period. The Adjudicating Authority allowed the application by the lessor for payment of dues. The RP contested, arguing that the explanation of Section 14(1)(d) of the Code did not apply to lease rent and premium payments.

2. The Adjudicating Authority's decision was based on Section 14(1)(d) of the Code, which prohibits recovery of property by an owner or lessor during the moratorium period. The Authority considered the lease premium and rent as dues falling under this provision, necessitating payment by the RP to the lessor.

3. The RP contended that the lease rent and premium were not explicitly mentioned in the explanation of Section 14(1)(d) and should not be considered similar grants or rights. The lessor argued that lease and premium payments should be included under the scope of "similar grant or right."

4. The Tribunal analyzed Section 14 of the Code, emphasizing that the explanation to Section 14(1)(d) specifically mentions certain types of grants and rights but does not explicitly include lease payments. The Tribunal concluded that the lease rent and premium could not be equated with the grants or rights mentioned in the provision.

5. Therefore, the Tribunal found the Adjudicating Authority's application of Section 14(1)(d) to direct payment of lease premium and rent as erroneous. The appeal was allowed, setting aside the impugned order without costs, as the lease payments were not covered under the relevant provision of the Code.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by the parties, the relevant legal provisions, and the Tribunal's decision, providing a comprehensive understanding of the case.