2023 (2) TMI 487 - HC - Insolvency and Bankruptcy

Termination of lease agreement under Section 5(1) of the Gujarat Public Premises (Eviction of Unauthorized Occupants) Act, 1972 - non-compliance of the conditions of allotment letter - violation of principles of natural justice - whether the issues raised in this petition can be considered by the NCLT in the application filed by the GIDC with a prayer that no option be undertaken of the property in question and leave be granted of the Tribunal for taking action consequent to the termination of the agreement dated 20.01.2007? HELD THAT - What is evident from the facts is that the petitioner was allotted the subject land vide allotment letter dated 09.01.2007. The letter of allotment indicates that the plot was allotted for the purpose of development of a product specific SEZ where the petitioner was an anchor tenant . It was incumbent upon the petitioner to submit a time bound program / development schedule for utilization of the land within three years from the date of allotment. In light of this allotment letter, a license agreement was entered into on 20.01.2007. This license agreement under the relevant clauses also indicated a time bound schedule. The lease deed accordingly was executed on 12.11.2008. It was for a period of 99 years with a relevant date as per the letter of allotment dated 09.01.2007. Clauses 15, 17 and 18 of the lease deed indicate that in the event of non-payment of rent, action will be taken under the GPP Act - the allotment letter, the license agreement and the lease agreement are contracts which have to be read coterminous with each other, in continuation and conjunction. Since the lease agreement is not executed after a certificate of completion of the conditions as stipulated in the license agreement, the contention of learned Senior Advocate Mr.Thakore that the conditions of the lease deed will supersede the license agreement and once the lease agreement is executed, the license agreement stood extinguished is misconceived. Reading the relevant paragraphs in Tata Consultancy Services Limited 2021 (11) TMI 798 - SUPREME COURT as cited by the respondent, the NCLT can intervene when, it is even the case of the petitioner that there is an embargo under the IBC. In the application filed by the respondent which is pending before the NCLT, it is open for the petitioner to take all the contentions raised in this petition. The residuary jurisdiction of the Tribunal therefore to decide this issue had already been invoked by the respondent and the petition therefore, at the hands of the petitioner company which seeks the protective umbrella under the IBC itself can oppose the prayers made in that application. Petition dismissed.

Summary

Issues Involved:
1. Whether the lease agreement should be read in isolation and whether its termination violates the principles of natural justice.
2. Whether the issues raised in the petition can be considered by the NCLT in the application filed by GIDC.

Issue-Wise
Detailed Analysis:

1. Lease Agreement and Principles of Natural Justice:
- Contention by Petitioner: The petitioner argued that the lease agreement, executed for 99 years, superseded the license agreement, and therefore, the lease could not be terminated based on the conditions of the license agreement. The petitioner also claimed that the termination notices were issued without following the principles of natural justice, as no opportunity of hearing was provided, and notices were not properly served.
- Court's Analysis: The court noted that the allotment letter, license agreement, and lease agreement must be read coterminously, in continuation and conjunction. The lease agreement did not extinguish the conditions of the license agreement. The court found no fault in the termination of the lease deed and license agreement, as the petitioner failed to carry out the required development on the allotted land. The court also held that the notices were served in compliance with the GPP Act, and no prejudice was caused to the petitioner due to the non-development of the land.

2. Jurisdiction of NCLT and IBC Provisions:
- Contention by Petitioner: The petitioner argued that the action of GIDC violated the provisions of the Insolvency and Bankruptcy Code (IBC), specifically Section 33(5), which bars initiation of proceedings against the corporate debtor once a liquidation order is passed. The petitioner contended that the NCLT does not have jurisdiction over the matter as it falls outside the purview of IBC.
- Contention by Respondent: The respondent argued that the NCLT has the jurisdiction to entertain or dispose of any application by or against the corporate debtor, as per Section 60(5) of the IBC. The respondent also stated that the land does not form part of the liquidation estate and that the NCLT can adjudicate on questions of law or fact arising from or in relation to insolvency resolution proceedings.
- Court's Analysis: The court referred to relevant case laws, including *Embassy Property Development Private Limited v. State of Karnataka*, *Gujarat Urja Vikas Nigam Limited v. Amit Gupta*, and *Tata Consultancy Services Limited v. Vishal Ghisulal Jani*. It concluded that the NCLT has a wide discretion under Section 60(5)(c) of the IBC to adjudicate questions of law or fact arising from or in relation to insolvency resolution proceedings. The court held that the petitioner could raise all contentions before the NCLT, which had already been invoked by the respondent.

Conclusion:
The court dismissed the petition, holding that the termination of the lease deed and license agreement was valid and that the NCLT has the jurisdiction to adjudicate the issues raised by the petitioner. The court also ordered the parties to maintain the status quo until 03.03.2023.