2025 (1) TMI 353 - AT - IBC

Exclusion of the asset from the liquidation estate of the CD - Whether the Wockhardt Cephalosporin Facility, which was situated in area of 13,000 sq. ft. of the larger property is not the asset of the CD and need to be excluded from the liquidation estate of the CD? - whether in the impugned order the Adjudicating Authority did not record any reason? - HELD THAT - From the impugned order of the Adjudicating Authority, it does appear that reasons have been given by the Adjudicating Authority for holding that CD has absolute right over the property and area of 13,000 sq. ft., cannot be excluded from the liquidation estate. It is true that only brief reasons have been given by the Adjudicating Authority for rejecting the Application of the Appellant and the order also notices the submission of the Appellant and the Liquidator to rely on Assignment Deed dated 27.03.2018 and the conclusion was recorded by the Adjudicating Authority. The order impugned cannot be set aside on the ground that it does not record any reason. Reasons have been recorded, though, briefly in the impugned order. The consent letter dated 09.03.2017 was consent letter for transfer of Plot No.B-15/2 admeasuring 64,925 sq. mtrs. was in favour of CD for which consent was granted by MIDC. Thus, consent letter dated 09.03.2017 read with Assignment Agreement dated 27.03.2018 in favour of CD was assignment of entire area of 64,925 sq. mtrs. Hence, the CD acquired the leasehold rights of the entire area of Plot No.B-15/2 admeasuring 64,925 sq. mtrs. and the letter dated 09.03.2017 clearly mentions that there is no consent, rather prayer to continue sub-letting was not granted and Transferee was asked to apply for fresh sub-letting and Transferee clearly meant CD, i.e. M/s Euro Healthcare Pvt. Ltd. There is nothing on record to indicate that CD after assignment in its favour, obtained any consent for sub-letting in favour of Wockhardt Ltd., nor there is anything on record to indicate that sub- letting consent was ever granted by MIDC for Wockhardt Cephalosporin Facility area. Thus, amount which was demanded by MIDC was due to there being unauthorised sub-tenant and the said letter in no manner can be read as granting of consent for sub-tenant by the MIDC. The Lessee was prohibited to part with any portion of the leased land without prior consent of MIDC and there being no consent by MIDC for sub-letting, the claim of the Appellant that it is entitled to area of Wockhardt Cephalosporin Facility, which would be excluded from the assets of the CD, cannot be accepted. The payment made by the Appellant in pursuance of letter issued by RP, asking to make payment of unauthorised sub-letting charges, cannot be read as any valid sub-letting in favour of the Appellant of the 13,000 sq. ft. area, as claimed by the Appellant. In the reply, which was filed by the Liquidator before the Adjudicating Authority, it was categorically pleaded that Sub-Letting Agreement was an un-registered Agreement and sub-letting of leased land could have been done only by registered agreement. Conclusion - The Wockhardt Cephalosporin Facility is part of the liquidation estate of the CD. Appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the Wockhardt Cephalosporin Facility, situated on an area of 13,000 sq. ft. of the larger property, is part of the assets of the Corporate Debtor (CD) and should be included in the liquidation estate.
• Whether the order of the Adjudicating Authority rejecting the exclusion of the said facility from the liquidation estate was reasoned and justified.
• Whether the sub-letting agreements and other related documents relied upon by the Appellant confer any legal rights to exclude the 13,000 sq. ft. area from the liquidation estate.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Inclusion of the Wockhardt Cephalosporin Facility in the Liquidation Estate

• Relevant Legal Framework and Precedents: The case revolves around the interpretation of lease agreements, sub-letting agreements, and the requirement of consent from the Maharashtra Industrial Development Corporation (MIDC) for sub-letting or assignment of leasehold rights.
• Court's Interpretation and Reasoning: The court analyzed the lease deed executed by MIDC, which prohibited assignment or sub-letting without MIDC's prior written consent. The court also examined the assignment deeds and sub-letting agreements to determine the legal standing of the Appellant's claim.
• Key Evidence and Findings: The court found that the sub-letting agreement dated 17.07.2002 required MIDC's approval, which was not obtained. The assignment deed dated 27.03.2018 in favor of the CD included the entire area of 64,925 sq. mtrs., with MIDC's consent for this assignment.
• Application of Law to Facts: The court applied the terms of the lease and assignment deeds to conclude that the CD holds leasehold rights over the entire plot, including the 13,000 sq. ft. area claimed by the Appellant.
• Treatment of Competing Arguments: The Appellant argued that the area was sub-leased to them and should be excluded from the liquidation estate. The Respondent countered that the sub-letting was unauthorized due to the lack of MIDC's consent. The court sided with the Respondent, emphasizing the absence of required consent.
• Conclusions: The court concluded that the Appellant failed to establish any legal right over the 13,000 sq. ft. area, and it should remain part of the liquidation estate.

Issue 2: Adequacy of Reasons in the Adjudicating Authority's Order

• Relevant Legal Framework and Precedents: The requirement for reasoned orders is a well-established principle in Indian jurisprudence, as emphasized by the Supreme Court in various judgments, including the case of Assistant Commissioner, Commercial Department, Works Contract and Leasing Kota vs. Shukla and Brothers.
• Court's Interpretation and Reasoning: The court noted that while the reasons provided by the Adjudicating Authority were brief, they were sufficient to convey the rationale behind the decision.
• Key Evidence and Findings: The Adjudicating Authority relied on the assignment deed dated 27.03.2018 and the consent letter from MIDC to conclude that the CD had absolute rights over the entire property.
• Application of Law to Facts: The court applied the principles of reasoned decision-making to assess whether the Adjudicating Authority's order met the necessary standards.
• Treatment of Competing Arguments: The Appellant contended that the order lacked adequate reasoning, while the Respondent maintained that the reasons, though brief, were clear and justified. The court agreed with the Respondent.
• Conclusions: The court found that the Adjudicating Authority's order, although concise, contained sufficient reasoning to uphold the decision.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The Bench is of the considered view that the above-mentioned clauses of the assignment deed dated 27.03.2018 clearly establish the absolute right of the Corporate Debtor over the said property and therefore it is part of the liquidation estate."
• Core Principles Established: The necessity of obtaining requisite consents for sub-letting or assignment of leasehold rights, and the importance of reasoned orders in judicial proceedings.
• Final Determinations on Each Issue: The Wockhardt Cephalosporin Facility is part of the liquidation estate of the CD, and the Adjudicating Authority's order is upheld as adequately reasoned.

The judgment underscores the importance of adhering to procedural requirements for lease assignments and sub-letting, as well as the necessity for judicial orders to be adequately reasoned to facilitate appellate review.