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2024 (11) TMI 802 - AT - IBCJurisdiction to enter into issue as to whether the subject land is asset of the corporate debtor - parties were required to be relegated to the Competent Civil Court having jurisdiction or not - proceedings conducted by Sole Arbitrator and the orders passed by the Sole Arbitrator amounts to arbitral award under the Arbitration Conciliation Act, 1996 determining the rights of both the parties so as to bind the parties in any subsequent proceedings - IRP/ RP could or could have been included the subject land in the Information Memorandum/ CIRP process of the corporate debtor by virtue of Section 18(1)(f) explanation. Whether the Adjudicating Authority had jurisdiction to enter into issue as to whether the subject land is asset of the corporate debtor or the parties were required to be relegated to the Competent Civil Court having jurisdiction? - HELD THAT - Whether an asset is required to be reflected in the Information Memorandum or the asset belong to the Corporate Debtor are the question which arise out of or in relation to the insolvency resolution process. The present is a case where the Corporate Debtor has claimed development rights in the land. It is no more res-integra that the development rights are property within the meaning of Section 3(27) of the IBC. We may refer to the judgment of the Hon ble Supreme Court in Victory Iron Works Ltd. vs. Jitendra Lohia Anr. 2023 (3) TMI 699 - SUPREME COURT where the Hon ble Supreme Court had held that the development rights created in favour of the corporate debtor constitute property within the meaning of Section 3(27) of the IBC. The question as to whether the assets which are included in the Information Memorandum are the assets of the corporate debtor is foundation of entire CIRP process. When the inclusion of the said asset is questioned before the NCLT by the Appellant, Adjudicating Authority does not lack jurisdiction in entering into question and deciding as to whether assets are part of the CIRP or it should be excluded. We, thus, are of the view that the above question could be determined by the Adjudicating Authority and parties need not have to be relegated to the Civil Court having jurisdiction, the view of the NCLT to the contrary cannot be approved. Judgment of the Hon ble Supreme Court in Victory Iron 2023 (3) TMI 699 - SUPREME COURT , clearly has held that the NCLT and NCLAT can exercise jurisdiction in the above facts. Whether proceedings conducted by Sole Arbitrator and the orders passed by the Sole Arbitrator dated 27.05.2014 and 15.07.2015 amounts to arbitral award under the Arbitration Conciliation Act, 1996 determining the rights of both the parties so as to bind the parties in any subsequent proceedings? - HELD THAT - In view of the statutory scheme of the Arbitration Conciliation Act, 1996, and the fact that both City Civil Session Court Judge as well as High Court of Karnataka having held that the order dated 15.07.2015 passed by the Sole Arbitrator is an order under Section 33(2)(c), the order dated 15.07.2015 cannot be held to be arbitral award within the meaning of Arbitration Conciliation Act, 1996 so as to make it binding on the parties under Section 35 of the Act. Thus, in view of the fact that the Sole Arbitrator terminated the arbitration proceedings under Section 33(2)(c) by order dated 15.07.2015, the order dated 15.07.2015 cannot be held to be an award within the meaning of Arbitration Conciliation Act, 1996. Whether the IRP/ RP could or could not have included the subject land in the Information Memorandum/ CIRP process of the corporate debtor by virtue of Section 18(1)(f) explanation? - Whether Adjudicating Authority erred in not allowing the IA No.4648 of 2020 as prayed by the Appellant? - HELD THAT - The present is a case where corporate debtor is not claiming any ownership rights over the subject land. Corporate debtor is claiming development rights and the ownership of the Appellants is not even denied by the Resolution Professional. Reply to the IA was filed by the Resolution Professional. In the reply, Resolution Professional has pleaded that the Resolution Professional has rightly included the project in the Information Memorandum as besides receiving the compensation due and payable by the Applicants in terms of clause 6, the Resolution Professional is also required to deal with the claims of Real Estate Allottee pertaining to said project. IRP/RP has rightly included the subject land in the Information Memorandum/ CIRP and he was not precluded by virtue of Section 18(1)(f) explanation from asserting development rights in the subject land - Adjudicating Authority did not commit any error in not allowing IA No.4648 of 2020 which prayed for exclusion of subject land from the Resolution Plan/CIRP of the corporate debtor. Whether the Adjudicating Authority committed error in allowing the IA No.58 of 2023 filed by the SRA? - HELD THAT - The Adjudicating Authority did not commit any error in allowing Intervention Petition filed by Art Construction Pvt. Ltd. The order dated 30.04.2024 passed in IA No.58 of 2023 upheld - appeal dismissed.
Issues Involved:
1. Jurisdiction of the Adjudicating Authority regarding the asset status of the subject land. 2. Determination of whether the Sole Arbitrator's proceedings and orders constitute an arbitral award. 3. Inclusion of the subject land in the Information Memorandum/CIRP process by the IRP/RP. 4. Decision on the IA No.4648 of 2020 filed by the Appellant. 5. Allowance of IA No.58 of 2023 filed by the Successful Resolution Applicant (SRA). Issue-wise Detailed Analysis: Issue I: Jurisdiction of the Adjudicating Authority The Adjudicating Authority had jurisdiction to determine whether the subject land was an asset of the corporate debtor. The determination of assets is crucial for the CIRP process, and the development rights claimed by the corporate debtor constitute "property" under Section 3(27) of the IBC. The NCLT and NCLAT have jurisdiction in matters related to the protection of assets of the corporate debtor, as established in the Supreme Court's judgment in "Victory Iron Works Ltd. vs. Jitendra Lohia & Anr." The Adjudicating Authority should have decided on the merits of whether the subject land could be treated as an asset of the corporate debtor without relegating the parties to a civil court. Issue II: Arbitral Award Status of Sole Arbitrator's Orders The proceedings conducted by the Sole Arbitrator and the orders dated 27.05.2014 and 15.07.2015 do not amount to an arbitral award under the Arbitration & Conciliation Act, 1996. The order dated 15.07.2015 was an order under Section 32(2)(c) of the Act, which terminated the arbitration proceedings without determining the rights of the parties. Such an order is not an arbitral award and does not have finality or binding effect under Section 35 of the Act. Issue III & IV: Inclusion of Subject Land in CIRP and IA No.4648 of 2020 The IRP/RP rightly included the subject land in the Information Memorandum/CIRP process. The development rights are considered property under Section 3(27) of the IBC, and the RP is entitled to assert these rights. The explanation to Section 18(1)(f) does not preclude the inclusion of development rights in the CIRP. The Adjudicating Authority did not err in not allowing IA No.4648 of 2020, which sought to exclude the subject land from the CIRP. The corporate debtor's development rights in the land were validly included in the CIRP process. Issue V: Allowance of IA No.58 of 2023 by the SRA The Adjudicating Authority did not err in allowing IA No.58 of 2023 filed by the SRA, M/s. Art Construction Pvt. Ltd. The SRA's Resolution Plan had been approved by the CoC with a majority vote, making them a significant stakeholder in the resolution of the corporate debtor. Allowing the intervention was appropriate given their vested interest in the CIRP process. Conclusion: The orders dated 30.04.2024 passed by the Adjudicating Authority in IA No.58 of 2023 and IA No.4648 of 2020 are upheld. The appeals filed by the Appellant are dismissed, affirming the inclusion of the subject land in the CIRP and the jurisdiction of the Adjudicating Authority to decide on these matters.
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