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2024 (10) TMI 682 - AT - IBCTermination of lease deed of the subject land by the Noida authority prior to the commencement of the CIRP of the Corporate Debtor - inclusion of subject plot in the resolution plan despite the lease cancellation - wrong and fraudulent action of the suspended management of the Corporate Debtor that the lease over the land was still subsisting - HELD THAT - The material on record clearly show that the lease of the subject plot was cancelled by Noida authority on 13.08.2015. Nothing has been placed on record to show that the lease deed of the said plot was restored to the Corporate Debtor except that an application had been filed by the suspended management after a gap of 305 days before the Noida authority seeking restoration - In the present case, the Adjudicating Authority has correctly held that since the lease deed had been cancelled much before the commencement of the CIRP, the Corporate Debtor had lost the right to possess the subject plot before the initiation of CIRP. Since the subject plot ceased to be an asset of the Corporate Debtor with effect from 13.08.2015, the provision of moratorium in terms of Section 14 of the IBC will not get attracted in the present case. There is nothing on record to show that post cancellation of the lease deed, the Noida authority was paid any lease rent or there is any written permission or assent of the Noida authority for restoration or continuation of the said lease. Simply by having filed an application for restoration of the said plot of land, the deemed subsistence or continuation of the lease deed cannot be presumed. The lease having been cancelled on 31.08.2015 for want of deposit of necessary lease rent/charges in terms of the allotment, the lease land could not have been made a part of the resolution plan of the Corporate Debtor - Basis the wrongful obtaining of RERA registration, it cannot be rightfully claimed by the RP that the lease was subsisting or stood revived. Despite knowing that the lease had been cancelled by the Noida authority, merely on the pretext that the cancellation of the lease was not followed up with other measures by the Noida authority, the RP should not have treated the subject plot to be in the possession of the suspended management. Given this set of facts, RP should have been more circumspect and should not have agreed to make the housing project of suspended management on the subject plot a part of the resolution plan. Instead, the RP continued to take all actions including preparation of the IM projecting the cancelled plot as the asset of the Corporate Debtor and getting approval of the resolution plan from the COC as if the said plot existed with the corporate debtor. Such a resolution plan which is premised on the basis that the land belonged to the Corporate Debtor could not have been considered by the COC - The Adjudicating Authority in its order dated 20.02.2020 had directed the RP to file a complaint with the EOW cell of Delhi police and this again shows that RP had not taken this action on his own volition but was goaded into action by the RP. There is no quarrel that during the CIRP process, RP is expected to play a pivotal role, so as to effectively assume control of the corporate debtor's management and become responsible for overseeing all aspects of CIRP. RP's underlying mandate is to ensure efficiency, transparency, and accountability within the insolvency resolution process marked by a nuanced equilibrium among creditor rights, stakeholder concerns, and procedural equity. In the present case, the Adjudicating Authority has rightly noted that the role of the RP has leaned towards justifying the wrongful action of the suspended management - there are no error in the findings arrived at by the Adjudicating Authority and affirm the observations made in respect of the unbecoming and unfair conduct of the RP. There are no reasons to interfere with the impugned order in particular with regard to the observations made on the role of the RP - there are no merit in the appeal - appeal dismissed.
Issues Involved:
1. Validity of the lease cancellation of the subject plot prior to the initiation of the Corporate Insolvency Resolution Process (CIRP). 2. Whether the Resolution Professional (RP) acted appropriately in including the subject plot in the resolution plan despite the lease cancellation. 3. The implications of the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) on the subject plot. 4. The conduct and responsibilities of the Resolution Professional during the CIRP process. Issue-wise Detailed Analysis: 1. Validity of the Lease Cancellation: The core issue revolves around the lease cancellation of the subject plot by the Noida authority on 13.08.2015, which predates the initiation of CIRP on 09.03.2018. The Respondent argued that the lease was terminated well before the CIRP commenced, and the application for restoration was made beyond the permissible period, leading to its rejection on 10.11.2020. The Adjudicating Authority upheld this view, emphasizing that the lease was not restored, and thus, the Corporate Debtor had lost any rights over the plot before CIRP began. This cancellation meant the plot could not be included in the resolution plan. 2. Conduct of the Resolution Professional: The RP was criticized for including the subject plot in the resolution plan despite being aware of the lease cancellation. The RP's actions were seen as irresponsible, projecting the cancelled lease as an asset of the Corporate Debtor and inviting expressions of interest based on this premise. The Adjudicating Authority noted that the RP attempted to justify the actions of the suspended management, who had falsely claimed legal title over the land for RERA registration. The RP's failure to exclude the plot from the resolution plan was seen as an attempt to perpetuate the wrongful actions of the Corporate Debtor's management. 3. Implications of the Moratorium: The Appellant argued that the moratorium under Section 14 of the IBC prohibited the Noida authority from taking possession of the plot during CIRP. However, the Adjudicating Authority found that since the lease was cancelled before the CIRP, the plot was not an asset of the Corporate Debtor, and thus, the moratorium did not apply. The RP's reliance on the moratorium to justify the inclusion of the plot in the resolution plan was deemed unfounded. 4. Responsibilities of the Resolution Professional: The Adjudicating Authority highlighted the RP's critical role in managing the CIRP process, emphasizing the need for transparency and accountability. The RP was expected to act diligently and not justify the wrongful actions of the suspended management. The Tribunal found that the RP's conduct was unbecoming and unfair, as it leaned towards supporting the management's fraudulent claims. The RP's failure to take proactive steps, such as excluding the plot from the resolution plan and addressing the lease cancellation, was criticized. Conclusion: The Tribunal upheld the Adjudicating Authority's decision, affirming that the RP acted inappropriately by including the cancelled lease in the resolution plan and failing to maintain transparency. The appeal was dismissed, with no merit found in the RP's arguments, and the observations on the RP's conduct were affirmed. The Tribunal emphasized the RP's duty to ensure procedural equity and accountability in the CIRP process.
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