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2023 (3) TMI 699 - SC - Insolvency and BankruptcyEviction order - tri-partite agreement - right or interest that the Corporate Debtor has over the property in question, for the purpose of deciding the inclusion of the same in the Information Memorandum prepared by the Resolution Professional under Regulation 36 of the Regulations - Seeking direction to Energy Properties Others (including Victory) not to obstruct the sole and exclusive possession of the property - issuance of direction to the local district administration to give proper assistance to the Resolution Professional in taking possession of the property so as to discharge his duties under the Code. What is the nature of the right or interest that the Corporate Debtor has over the property in question, for the purpose of deciding the inclusion of the same in the Information Memorandum prepared by the Resolution Professional under Regulation 36 of the Regulations? - HELD THAT - A bundle of rights and interests were created in favour of the Corporate Debtor, over the immovable property in question. The creation of these bundle of rights and interests was actually for a valid consideration. But for the payment of such consideration, Energy Properties would not even have become the owner of the property in dispute. Therefore, the development rights created in favour of the Corporate Debtor constitute property within the meaning of the expression under Section 3(27) of IBC. At the cost of repetition, it must be recapitulated that the definition of the expression property under Section 3(27) includes every description of interest, including present or future or vested or contingent interest arising out of or incidental to property . Since the expression asset in common parlance denotes property of any kind , the bundle of rights that the Corporate Debtor has over the property in question would constitute asset within the meaning of Section 18(f) and Section 25(2)(a) of IBC. In Sushil Kumar Agarwal 2018 (10) TMI 1822 - SUPREME COURT , this Court brought out the distinction between different types of Development Agreements, with particular reference to Section 14(3)(c) of the Specific Relief Act, 1963. After summarizing the different types of Development Agreements, this Court held that An essential incident of ownership of land is the right to exploit the development potential to construct and to deal with the constructed area. In some situations, under a development agreement, an owner may part with such rights to a developer. This in essence is a parting of some of the incidents of ownership of the immovable property. Therefore, it is not very difficult to conclude, that a bundle of rights and interests were created in favour of the Corporate Debtor, by a series of documents such as (i) the MoU dated 24.01.2008; (ii) the shareholders agreement dated 24.01.2008; (iii) the flow of the consideration from the Corporate Debtor to the UCO Bank and to Energy Properties; (iv) the Development Agreement dated 16.06.2008; (v) the Memorandum Recording Possession dated 02.03.2010 executed by the original shareholders of Energy Properties; (vi) the Memorandum Recording Possession dated 24.06.2010 executed by Energy Properties in favour of the Corporate Debtor; and (vii) the Leave and License Agreement primarily executed by the Corporate Debtor in favour of Victory, which was merely confirmed by Energy Properties as a confirming party. Some of these bundle of rights and interests, partake the character and shade of ownership rights. Therefore, these rights and interests in the immovable property are definitely liable to be included by the Resolution Professional in the Information Memorandum and the Resolution Professional is duty bound under Section 25(2)(a) to take custody and control of the same. Whether NCLT and NCLAT have exercised a jurisdiction not vested in them in law by seeking to recover/protect the possession of the Corporate Debtor? - HELD THAT - As a matter of fact, the only decision of this Court which may probably come close to the facts of the present case, is the one in RAJENDRA K. BHUTTA VERSUS MAHARASHTRA HOUSING AND AREA DEVELOPMENT AUTHORITY AND ANOTHER 2020 (3) TMI 34 - SUPREME COURT . In the said case, there was a tripartite joint development agreement entered into between (i) a Society representing a large number of persons occupying 672 tenements in the property; (ii) Maharashtra Housing and Area Development Authority (MHADA) , which was the owner of the land; and (iii) the corporate debtor. After initiation of CIRP against the corporate debtor, MHADA issued a notice for the termination of the joint development agreement. NCLAT refused to treat the property as the asset of the corporate debtor. But this Court reversed the said decision, by holding that Section 14(1)(d) stood attracted in the facts and circumstances of the said case and that even a reference to Sections 18 and 25 may not be necessary. Though the said case arose out of a fact situation where the termination of the joint development agreement was hit by Section 14, the said decision clinches the issue on what constitute a property and the distinction between occupation and possession of a property. The fact that there were security guards posted in the property is borne out by records. This is why NCLT as well as NCLAT have done a delicate act of balancing, by protecting the interests of Victory to the extent of the land permitted to be occupied. In fact, Victory does not even have the status of a lessee, but is only a licensee. A license does not create any interest in the immovable property - NCLT as well as NCLAT were right in holding that the possession of the Corporate Debtor, of the property needs to be protected. This is why a direction under Regulation 30 had been issued to the local district administration. The impugned orders do not call for any interference. Hence, the appeals are dismissed.
Issues Involved:
1. Jurisdiction of NCLT and NCLAT in ordering possession and eviction under IBC. 2. Nature of the rights or interests of the Corporate Debtor over the disputed property. Summary: Issue No. 1: Nature of Rights or Interests of the Corporate Debtor The Supreme Court examined whether the development rights held by the Corporate Debtor over the land in question constitute "property" under Section 3(27) of the Insolvency and Bankruptcy Code (IBC). The Court noted that a bundle of rights and interests were created in favor of the Corporate Debtor through various agreements, including a Memorandum of Understanding (MoU) dated 24.01.2008, a Shareholders Agreement, a Development Agreement dated 16.06.2008, and subsequent memorandums recording possession. These agreements provided the Corporate Debtor with exclusive development rights and physical possession of the property. The Court concluded that these rights constitute "property" and "assets" under Sections 18(f) and 25(2)(a) of IBC, which the Resolution Professional is duty-bound to include in the Information Memorandum. Issue No. 2: Jurisdiction of NCLT and NCLAT The appellants contended that NCLT and NCLAT lacked jurisdiction to order possession and eviction of a third-party licensee under the IBC. The Supreme Court clarified that the exclusion of third-party assets under the Explanation to Section 18 is limited to that section and does not extend to Section 25. The Court held that the bundle of rights and interests created in favor of the Corporate Debtor could even imply an agency under the Indian Contract Act, 1872, which is not terminable due to the consideration involved. The Court distinguished the present case from previous rulings like Embassy Property Developments and Gujarat Urja Vikas Nigam, noting that those cases did not involve similar rights and interests in immovable property. Conclusion The Supreme Court upheld the decisions of NCLT and NCLAT, affirming that the development rights of the Corporate Debtor over the property should be included in the Information Memorandum. The Court dismissed the appeals, confirming that NCLT and NCLAT acted within their jurisdiction in protecting the possession and interests of the Corporate Debtor.
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