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2024 (4) TMI 969 - AT - Insolvency and BankruptcyCIRP - Validity of deed of assignment of lease - Seeking to set aside of the notice served upon them by the Respondent - Resolution Professional wanting to inspect and access certain premises belonging to the Appellant - whether the Deed of Assignment was disputed or not by the Appellant? - whether the Lease Deed in respect of the subject property, consequent on its expiry on 14.11.2021, was further extended? - whether the Corporate Debtor was in clear possession of the same at time of commencement of CIRP? HELD THAT - Clause 2.1 of the Deed of Lease as placed at para 9 states that the Lease deed clearly stipulated that any extension of the lease after expiry of the lease period shall be through a Lease deed executed between the parties herein and that if no terms are agreed upon, the lease period shall stand automatically expired at the end of the lease period. It is pertinent to point out that the RP had sent a letter to the erstwhile management on 03.08.2023 seeking information on the arrangement under which the Lease Deed had been extended to the Corporate Debtor and whether the store in the subject property was in the possession of the Corporate Debtor as maybe seen at page 156 of Appeal Paper Book (APB). However, no response was admittedly received from the erstwhile management. Neither have any proof of rental payments to the Appellant by the Corporate Debtor after the expiry of the lease has been placed on record to substantiate that the lease continued to subsist - there are no documentation available on record which reliably establishes the extension of lease term beyond the original period. On looking at the legal notice of vacant possession which was served upon the FSWL by the Appellant on 24.05.2022, the same was undisputedly addressed by them to FSWL and not to the Corporate Debtor. Thus, when this legal notice for vacating the subject property was addressed by the Appellant to the FSWL and not to the Corporate Debtor, it is clear that in the Appellant s mind the Corporate Debtor had no role or interface qua the subject property - There is nothing on record to substantiate that there is any evidence of renewal/extension of lease. The Adjudicating Authority has only held that there is no evidence to establish handing over of the subject property to the Appellant. In terms of Section 18(1)(f) of the IBC, undoubtedly the RP is required to take control and custody of any asset belonging to the Corporate Debtor. However, it is significant to note that this provision is subject to the exclusion of assets owned by a third party as provided for under the Explanation Clause. Further, Section 25(2)(a) of the IBC also mandates the RP to take immediate custody and control of all assets of the Corporate Debtor so as to determine the valuation of all the assets of Corporate Debtor - The legislative intent of IBC is that there should be a temporary freeze and prohibition of all actions against the Corporate Debtor to preserve the status quo as it exists on the date of initiation of CIRP so as to enable the Corporate Debtor to resolve its insolvency and bring it back from the throes of corporate death. The present is a case where CIRP was initiated on 27.02.2022. By virtue of the CIRP order, the IRP/RP was appointed and moratorium had kicked in w.e.f. 27.02.2022. The lease deed in respect of the subject property had been entered into by the Appellant with FSWL on 19.07.2018 for a duration of 3 years and 5 months. The lease deed of the subject property had been allegedly assigned by FWSL to FRL by a purported Deed of Assignment dated 06.08.2018 which is clearly disputed. The lease period between FWSL and the Appellant had ended on 14.11.2021 and documents regarding extension of lease period are not available. The right of the Corporate Debtor not to be dispossessed as contemplated in Section 14(1)(d) of IBC will have no bearing on the present facts of the case given that the subject property was not under the possession of the Corporate Debtor at the time of admission of the Corporate Debtor into CIRP. Additionally, neither any factual analysis has been done either by the RP or any application of mind shown by the Adjudicating Authority on how the assets located on the subject property was central for the success of the CIRP and Corporate Debtor's survival as a going concern. Assets owned by a third party in possession of the Corporate Debtor is excluded from the scope of CIRP and moratorium in view of Explanation (a) to Section 18 of the IBC. As the Appellant is a third party and undisputedly the subject property is owned by the Appellant and there is nothing foolproof to show that the Corporate Debtor was in occupation of the same, the subject property clearly fell outside the scope of CIRP and consequently the moratorium - no compelling reasons have been made out before the Adjudicating Authority by the RP to allow access into the subject property and inspection of stock/assets lying therein failing which the CIRP would have been jeopardised. The impugned order is set aside - appeal allowed.
Issues Involved:
1. Dispute over the assignment of the lease deed. 2. Expiry and extension of the lease deed. 3. Possession of the subject property at the time of commencement of CIRP. 4. Propriety of the RP's notice for inspection of the subject property. Summary: 1. Dispute Over the Assignment of the Lease Deed: The Appellant contended that the lease was never assigned to FRL and that any transfer or assignment could only be done by FWSL after providing prior written intimation to the Lessor, which was never done. The Respondent argued that the rights under the Lease Deed were validly assigned to the Corporate Debtor with the Appellant's NOC. The Tribunal observed that the Appellant had clearly disputed the assignment in their reply letter dated 09.05.2023, stating no such intimation was received, and the Adjudicating Authority erred in overlooking these observations. 2. Expiry and Extension of the Lease Deed: The lease period commenced on 01.06.2018 for 3 years and 5 months, expiring on 14.11.2021. The Tribunal noted that there was no documentation available on record to establish the extension of the lease term beyond the original period. The RP failed to provide proof of rental payments or any documentation to substantiate that the lease continued to subsist after its expiry. 3. Possession of the Subject Property at the Time of Commencement of CIRP: The Appellant claimed that the subject property was in their peaceful possession after FWSL vacated it. The Respondent argued that the property was in the possession of the Corporate Debtor, supported by the presence of employees mapped to the store. The Tribunal found that the legal notice for vacating the property was addressed to FWSL, not to the Corporate Debtor, indicating that the Appellant did not consider the Corporate Debtor to be in possession. The Tribunal concluded there was no substantive evidence to establish that the property was in the possession of the Corporate Debtor at the commencement of CIRP. 4. Propriety of the RP's Notice for Inspection of the Subject Property: The Tribunal examined Sections 18 and 25 of the IBC, which mandate the RP to take control and custody of the Corporate Debtor's assets. However, the Tribunal noted that the RP could not justify that the subject property was in the possession of the Corporate Debtor, especially after the lease expired. The RP's notice for inspection was found to be without proper groundwork on the lease assignment and actual possession. The Tribunal held that the subject property, owned by a third party (the Appellant), fell outside the scope of CIRP and moratorium. Conclusion: The Tribunal allowed the appeal, set aside the impugned order dated 05.10.2023, and directed the RP to withdraw the notice dated 29.03.2023. The RP and his staff were restrained from dealing with the subject property in any manner. No order as to costs.
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