2020 (11) TMI 10 - Tri - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - Direction to release or vacate the subject property owned by the corporate debtor - HELD THAT - When the Adjudicating Authority is provided with a specific jurisdiction, the Civil Courts have no jurisdiction in respect of those matters such as Preferential transactions (sections 43 and 44 of the Code), Undervalued transactions (sections 45 to 48 of the Code), etc. When these provisions are read in conjunction with other provisions of the Code such as 18(f)(vi), 25(2)(b) and 35(1)(k) of the Code, the jurisdiction of the Adjudicating Authority does not extend to subjects such as recovery of money, specific performance, eviction proceedings, etc. which were to be dealt with by Civil Courts only. It is to be borne in mind that on the guise that the Insolvency and Bankruptcy Code is a complete Code, the Adjudicating Authority can neither enlarge nor amplify its jurisdiction. This bench is of the view that recovery of rent from the tenant and the eviction of tenant from the property of the Corporate Debtor is in the exclusive domain of the civil courts and cannot be dealt with by the Adjudicating Authority by invoking section 60(5) of the Code and the jurisdiction lies with the Civil Court/Rent Control Court only - In view of the fact that the respondent is paying rent all along for the property, which is an admitted fact, the liquidator is right in including this immoveable property in the liquidation estate of the Corporate Debtor. The Liquidator may take steps to register the sale deed for the property in his favour, if so advised, so that there will be a clear title for the property. The applicants in both the applications are required to approach the appropriate jurisdictional Civil Court for the remedies claimed in these applications except the sale of the property. As far as sale of the property by the liquidator is concerned, he can do so after taking possession by due process of law - Application dismissed.

Summary

Issues Involved:

1. Legality of the respondent's occupation of the subject property.
2. Entitlement of the applicant to recover outstanding rent/compensation and interest.
3. Authority of the applicant to sell, dispose of, and transfer the subject property.
4. Jurisdiction of the National Company Law Tribunal (NCLT) in eviction proceedings and recovery of rent.

Issue-wise Detailed Analysis:

1. Legality of the Respondent's Occupation:

The applicant, the liquidator of M/s Precision Fasteners Limited, filed an application under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016, seeking a declaration that the respondent's occupation of the subject property was illegal and requesting the respondent to vacate and hand over peaceful possession of the property. The applicant asserted ownership of the property by the corporate debtor, supported by an agreement dated 07/10/1983 and a letter from the developer recognizing the corporate debtor's ownership. The respondent, however, refused to vacate, claiming tenancy rights and disputing the corporate debtor's title to the property.

2. Entitlement to Recover Outstanding Rent/Compensation and Interest:

The applicant sought an order directing the respondent to pay ?1,94,953 towards outstanding rent/compensation and ?12,235 as interest, along with further interest at 12% per annum from the date of default. The respondent had reduced the rent unilaterally and stopped paying rent from June 2018. The applicant argued that the respondent's actions were unjustified and that the corporate debtor's ownership was evident from property tax receipts and rent payments.

3. Authority to Sell, Dispose of, and Transfer the Property:

The applicant requested permission to sell, dispose of, and transfer the subject property in accordance with the Insolvency and Bankruptcy Code, 2016. The applicant emphasized the liquidator's duty to liquidate the corporate debtor's assets and distribute proceeds to creditors. The applicant also sought police protection to implement the tribunal's orders.

4. Jurisdiction of NCLT in Eviction Proceedings and Recovery of Rent:

The tribunal referred to the Supreme Court's judgment in Embassy Property Developments Pvt. Ltd. vs. State of Karnataka, which clarified that NCLT does not have jurisdiction over all types of claims related to the property of the corporate debtor. It highlighted that matters such as eviction and recovery of rent fall under the jurisdiction of civil courts. The tribunal also cited the NCLAT judgment in K.L Jute Products Pvt. Ltd. vs. Tirupti Jute Industries Ltd., which reinforced that eviction proceedings are beyond NCLT's purview.

Conclusion:

The tribunal concluded that the recovery of rent and eviction of the tenant from the corporate debtor's property are within the exclusive domain of civil courts. The liquidator's inclusion of the property in the liquidation estate was upheld, and the liquidator was advised to take possession and proceed with the sale through due legal process. Both applications, MA 1512/2018 and MA 47/2019, were dismissed, directing the parties to seek remedies in the appropriate civil court.