2023 (4) TMI 1079 - AT - Insolvency and Bankruptcy

Jurisdiction for deciding on the eviction vested with the Small Causes Court or the NCLT where liquidation was underway - Appellant was a tenant or a licensee or an illegal occupant - putting the premises under lock and key of the Liquidator once a status-quo order has been passed by the Small Causes Court, Mumbai - HELD THAT - Once a property was part of the liquidation state of the Corporate Debtor under liquidation, the provisions of IBC were applicable regarding the assets which were in the ownership of the Corporate Debtor and Section-238 of the IBC prohibited the applicability of any other law which was inconsistent with the IBC. In the matter of Embassy Properties Developments 2019 (12) TMI 188 - SUPREME COURT , the Hon ble Supreme Court has held that if asset owned by a third party in possession of the Corporate Debtor held under contractual arrangements, is specifically kept out of the definition of the term assets Further, in a situation where a contractual arrangement is ongoing, the Resolution Professional cannot short-circuit the same and bring a claim before NCLT taking advantage of Section 60(5). These judgements are distinguished on the basis of the fact that no contractual arrangement existed between the Appellant and the Corporate Debtor after 02.07.2020, when the extended Leaves and Licence Agreement expired and therefore the ratio in these judgements cannot provide support to the case of the Appellant. The residuary jurisdiction is relevant during the CIRP when the insolvency resolution of the corporate debtor is taking place, whereas in the present case the liquidation of the corporate debtor is being considered and the liquidator has taken recourse to its powers under section 33(5) to get control and custody of the asset of the corporate debtor. The NCLT order notes the contention of the Liquidator that Respondent No. 1 had obtained status-quo order from the Small Causes Court, Mumbai by suppressing facts and without making the Liquidator as a necessary party. We therefore, are of the opinion that the status- quo order was obtained from the Small Causes Court by the Appellant without placing full and complete facts regarding its occupation and possession of the said premises and without impleading the Liquidator as a necessary party - the NCLT possesses the correct jurisdiction in considering an application for vacation of the premises in question and that the NCLT was correct in passing the Impugned Order which would be necessary to put the premises in question with the Liquidator and pending the final disposed of I.A. No. 1635 of 2020 - The Impugned Order does not need any intervention. The NCLT possesses the correct jurisdiction for considering an application for vacation of the premises in question in the circumstances of the present case, and the NCLT was correct in passing the Impugned Order which would be necessary to place the custody of the premises in question with the Liquidator pending the final disposal of I.A. No. 1635 of 2020 so that the liquidation process is completed timely and in accordance with legal provisions - Appeal dismissed.

Summary

Issues Involved:
1. Whether the Appellant was a 'tenant,' 'licensee,' or 'illegal occupant' and the jurisdiction for deciding the eviction.
2. Whether the NCLT was correct in passing the Impugned Order for putting the premises under lock and key despite the status-quo order by the Small Causes Court.

Summary:

Issue 1: Tenant, Licensee, or Illegal Occupant and Jurisdiction
The Appellant entered into a Leave and Licence Agreement for premises at Plot No. A-7, MIDC, Andheri (E), Mumbai, which was extended by the Resolution Professional during the CIRP but expired on 02.07.2020. The Liquidator initiated proceedings for the liquidation of the Corporate Debtor and demanded the Appellant vacate the premises and pay outstanding licence fees. The Appellant paid the outstanding amount but referred to it as "rent," which the Liquidator clarified as "licence fee." The Appellant claimed to be a lawful tenant and filed a suit in the Small Causes Court, which granted a status-quo order. The NCLT, however, directed the Liquidator to lock and seal the premises, pending further consideration.

The NCLAT noted that the relationship between the Appellant and Corporate Debtor was that of a 'licensee' and 'licensor,' not 'tenant' and 'landlord.' The Appellant was in illegal possession after the expiry of the Leave and Licence Agreement. The Liquidator's duty under Section 35 of the IBC to take control and custody of the Corporate Debtor's assets was emphasized. The NCLT was deemed to have the correct jurisdiction under Section 60(5) of the IBC to entertain applications related to the liquidation process, overriding other laws as per Section 238 of the IBC.

Issue 2: NCLT's Order and Status-Quo by Small Causes Court
The NCLT's order to lock and seal the premises was challenged by the Appellant, citing the status-quo order from the Small Causes Court. However, the NCLAT found that the Appellant had obtained the status-quo order by suppressing facts and without making the Liquidator a necessary party. The NCLT's jurisdiction was upheld as the correct forum for resolving issues related to the liquidation process, ensuring timely and effective resolution. The NCLT's order was necessary to place the premises under the Liquidator's custody, pending the final disposal of the application.

Conclusion:
The NCLAT concluded that the NCLT possessed the correct jurisdiction to adjudicate the matter and upheld the Impugned Order, dismissing the appeal with no order as to costs.