2024 (11) TMI 616 - AT - IBC

Maintainability of eviction application - direction to CD to vacate two office spaces in the White House Property in Delhi - main contention of the appellant is that impugned order is completely unreasoned and non-speaking in nature and only a part of the application has been decided - principles of natural justice - whether CoC can take a decision to hand over the property in possession of CD to third parties and whether AA has powers to allow such advice of CoC? - HELD THAT - There is an absolute bar on recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor. It is seen from the extract of minutes of the 6th CoC that the CoC was seeking legal opinion from the advocate regarding vacation of the registered office, and till then the voting with respect to the same could not be done. It was further discussed that in view of applications filed by Nobel Dealcom and Sincere Securities before the AA, the RP should appear and take necessary steps. It is clear from the above, that there was no final decision of the CoC with proper voting, with regard to vacation of the registered office of the CD. The CoC does not appear to have taken a decision about vacation of registered office even in the 6th CoC meeting after which RP gave a statement in Court that the property is not required to be held based on which AA passed the impugned order. CoC at this stage also stated that they are in process of seeking legal opinion and till such time voting on the agenda could not be done. It is clear from the above that the decision to release the property by the RP was his own decision, which was not confirmed by CoC. The submission of CoC at this stage, that such decision was taken with 100% voting right does not seem to be based on records. The moratorium under Section 14 binds the AA also by the use of the word shall by order declare moratorium for prohibiting all of the following inter alia meaning that it is a mandatory action on the part of AA. The AA should have first examined, whether it is possible to allow such applications in view of express provisions in Section 14 (1) (d) even if such applications are supported by CoC. Prima facie the Code does not seem to provide such discretion to AA. In any case AA should have examined the issue in detail with regard to provision of Section 14 (1) (d) before passing a nonspeaking order merely on the basis of consent of RP to release of property based on application by owner/lessor. The order of AA in the I.A No. 1083 filed by Respondent No.2 and I.A. No. 1082 filed by Respondent No. 3 to 4 has been passed on the prayer of owner/lessor. The RP has only supported the contention of Respondents No. 2 to 4. The AA has not examined the maintainability of such application by owner/lessor in view of express provision under Section 14 (1) (d) of the Code - appellant has locus to file this appeal - the case remanded back to the AA to examine and decide the issues in a comprehensive manner including the application of the appellant in I.A. No. 1412 of 2023 preferably within four weeks - appeal allowed.

Summary

Issues Involved:
1. Maintainability of the appellant's application.
2. Authority of the Committee of Creditors (CoC) to decide on handing over property in possession of the Corporate Debtor (CD) to third parties under Section 14(1)(d) of the Insolvency and Bankruptcy Code (IBC), 2016, and the powers of the Adjudicating Authority (AA) to allow such decisions.

Issue-wise Detailed Analysis:

1. Maintainability of the Appellant's Application:

The appellant, a former promoter-director of the Corporate Debtor (CD), filed an appeal challenging the order of the National Company Law Tribunal (NCLT), asserting his locus standi based on his role as a creditor and an affected party in the insolvency proceedings. The appellant's claim was supported by the Supreme Court's decision in GLAS Trust Company LLC v. BY JU Raveendran & Ors., which established that insolvency proceedings become in-rem from the date of admission, thereby allowing claims from affected parties to be adjudicated by the AA. Consequently, the tribunal affirmed the appellant's standing, deeming his application maintainable.

2. Authority of CoC and Powers of AA under Section 14(1)(d) of IBC:

The appellant contested the NCLT's order directing the CD to vacate office spaces, arguing it violated Section 14(1)(d) of the IBC, which mandates a moratorium prohibiting the recovery of any property by an owner or lessor occupied by or in possession of the CD. The tribunal scrutinized the CoC's resolution to vacate the property, noting that the decision lacked formal voting and was not conclusively resolved in CoC meetings. The tribunal emphasized that the RP's statement to the AA regarding the property's non-requirement was not substantiated by a CoC resolution.

The tribunal highlighted the absolute nature of Section 14(1)(d), which restricts property recovery during the moratorium, and questioned the maintainability of applications filed by owners/lessors seeking recovery, as such actions contravene the statutory moratorium. The tribunal distinguished this case from the Sangita Fiscal Services Pvt. Ltd. v. Duncan Industries case, where property handover was justified due to non-utilization by the CD and lack of Section 14(1)(d) considerations.

The tribunal criticized the AA's order for lacking detailed reasoning and failing to address the implications of Section 14(1)(d) adequately. It noted that the AA's order was based on the RP's unsupported submission, without thorough examination of the CoC's decision or the statutory moratorium's binding nature on the AA.

Conclusion:

The tribunal allowed the appeal, remanding the case to the AA for a comprehensive examination of the issues, including the appellant's application in I.A. No. 1412 of 2023, within four weeks. The AA was instructed to decide in accordance with the law, uninfluenced by previous proceedings, with parties directed to appear before the tribunal on 26.11.2024.