2022 (10) TMI 144 - Tri - Insolvency and Bankruptcy

Recovery of the subject land in occupation by the corporate debtor, by the Applicants/Landowners in terms of Section 14(1)(d) of the I B Code - Seeking appropriate directions to the Corporate Debtor M/s. Meenakshi Energy Ltd., to release the land admeasuring 40.23 acres to the Applicants - HELD THAT - The corporate debtor is in possession of the subject property which it is not entitled to, as such the said possession is wrongful. In our considered view the right under Section 14(1)(d) of the Code, namely, not to be dispossessed of a property which is in the possession of the Corporate Debtor during the moratorium period, cannot be extended to situations where the possession is without right, as possession without right wrongful or adverse - allowing the respondent/Corporate Debtor to hold the subject property of the Applicants for the purpose of corporate insolvency resolution of the respondent, not only frustrates the order of the Hon'ble High Court, but also enables the respondent/corporate debtor to enrich unjustly, as admittedly the subject lands were delivered to the respondent/corporate debtor mistakenly/wrongly by APIIC, besides results in deprivation of the constitutional right of the Applicants to hold their property. Even though the object behind imposing moratorium under section 14 of IB Code, is to prevent depletion of a corporate debtor's assets, in our considered view the same cannot be extended to the properties which are not in rightful possession of the corporate debtor as any such extension to the properties which are not in the rightful possession of the corporate debtor results in unjust enrichment by the corporate debtor, under the guise of 'maximisation' at the cost of the lawful owner of the property. Therefore, Section 14(1)(d) of the Code has no application when the corporate debtor is not in rightful possession of the property - the argument of the Ld. Counsel for the Resolution professional that Corporate Debtor is entitled to invoke Section 14(1)(d) of the Code, cannot be accepted. Whether APIICL is a necessary party to the present application? - If so, whether present Application is bad in law for non-joinder of APIICL? - HELD THAT - In the case on APIICL has admittedly taken a stand that the subject lands shall be delivered to the Applicant in compliance of the order of Hon'ble High Court in, supra, as such the question of affecting the right in any, of APIICL does not even arise in this case. Hence, in our considered view APIICL need not be added as a party to the present proceedings. The Resolution Professional is directed to forthwith handover the possession of the land admeasuring to an extent of 40.23 acres covered in Sy. No. 691/2, 428, 55, 636A, 617, 618, 619, 478 and 474 situated in the Momidi Village belonging to Applicant Nos. 1 and 2 and Sy. No. 41, 58, 32, 33A, 60, 65A, 66B2, 123, 153, 72, 478, 63B, 617, 618, 619 and 31C situated in Momidi Village belonging to the Applicant No. 3 and file compliance report within two weeks. Petition allowed.

Summary

Issues Involved:

1. Whether the Corporate Debtor is entitled to stall the recovery of the subject land by the Applicants under Section 14(1)(d) of the Insolvency and Bankruptcy Code (I&B Code).
2. Whether APIICL is a necessary party to the present application, and if the application is bad in law for non-joinder of APIICL.

Issue-wise Detailed Analysis:

1. Entitlement of Corporate Debtor to Stall Recovery of Subject Land:

The Applicants sought the release of 40.23 acres of land mistakenly allotted to the Corporate Debtor by APIICL. The Andhra Pradesh High Court had already ruled in favor of the Applicants, confirming their ownership and directing the release of the land. The Corporate Debtor, undergoing Corporate Insolvency Resolution Process (CIRP), claimed protection under Section 14(1)(d) of the I&B Code, which imposes a moratorium on the transfer or disposal of assets during the CIRP period.

The Tribunal noted that the High Court's order was final and unchallenged, affirming the Applicants' ownership. The Tribunal emphasized that Section 14(1)(d) applies only to lawful possession. As the Corporate Debtor's possession was wrongful, the moratorium did not apply. The Tribunal cited the Supreme Court's ruling in M/s. Embassy Property Developments Pvt. Ltd. vs. State of Karnataka, stating that the right under Section 14(1)(d) does not extend to wrongful possession. Thus, the Corporate Debtor could not invoke Section 14(1)(d) to retain the land.

2. Necessity of APIICL as a Party:

The Corporate Debtor argued that APIICL should be a party to the application, as it was responsible for the mistaken allotment. The Applicants contended that the High Court's order was final, and APIICL's involvement was unnecessary for compliance.

The Tribunal referred to the Supreme Court's ruling in Amit Kumar Shaw And Another vs. Farida Khatoon And Another, which held that a party's addition depends on whether their rights may be affected. Since APIICL had already accepted the High Court's order and agreed to release the land, its rights were not in question. Therefore, APIICL was not a necessary party, and the application was not bad in law for non-joinder.

Conclusion:

The Tribunal directed the Resolution Professional to hand over the 40.23 acres of land to the Applicants within two weeks and allowed the Resolution Professional to seek equivalent land or compensation from APIICL. The petition was allowed with no costs.