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TMI Blog2018 (5) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... djudicating Authority. The impediment that comes to this Bench for deciding such claim is, some other creditor may say that it has filed case before some other court, another creditor may say it has filed case before DRT under SARFAESI, which normally causes delay either for resolution or for liquidation of the corporate debtor, to avoid such kind of defences and to bring all creditors under one umbrella, an overriding provision has been set out u/s 238 of the Code which can never be construed that it is a provision come into existence to bulldoze the rights of the parties. It is understandable those creditors who are prevented to go before various forums are entitled to come before this Bench. Their right of remedy will not get extinguished by the overriding effect given under section 238, but what will happen to other persons having some other rights against this company because they may not fall under the category of creditors so by showing 238 if their rights are denied it will become nothing but extinguishment of rights of the parties, which is not permissible under any law. Whether this Bench can ignore such situation saying that since it is Section 7 or 9 petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put forward is that initially declared area of 1,65,805.80 Sq. Mtrs. is revised to cover an area of 1,93,599.90 Sq. Mtrs. (approx. 47 acres) for development by the Corporate Debtor within a time- frame of 60 months from the date of JDA. Considering the business environment and economic scenario, this timeline has been extended from time to time for completion of this project, in the meanwhile, on the Company Petition filed by Union Bank of India (Financial Creditor) u/s 7 of the Code on 24-07-2017, this Bench passed admission order declaring moratorium in reference to section 14 of the Code. Subsequently, on 12-01-2018 MHADA served a notice terminating the JDA as well as the deed of confirmation and modification claiming the possession of land along with all the structures standing on as is where is basis . Looking at that notice, RP being in-charge of carrying functions of the Corporate Debtor as well as CIRP as envisaged u/s 25 of the Code, filed this MA stating that since possession of MHADA land is lying with the Corporate Debtor as on the date the termination notice was given by MHADA, RP says, for duty is cast upon him to ensure that the property in possession of the Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exiting Structure 269.00 63.74 9. R-7/A-2 Exiting Structure 1060.00 63.74 10. R-7/A-3 Free Sale FSI (Yet to be sold) 1794.00 5,777.77 11. R-7/A-4 Preet Gruh Nirman Pvt. Ltd. 2503.00 6,393.93 12. R-7/A-5 Gold Finger Realty Investors Pvt. Ltd. 3044.00 7,956.00 13. R-7/A-6 Exiting Structure 1473.64 63.74 14. R-7/A-7 720.00 63.74 15. R-7/A-8 1452.00 63.74 16 17 R-7/A-9 RNA NG Infrastructure Development 2960.00 12,790.00 17. R-7/A-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also stated that the respective developers have sold and entered into agreements with flat buyers for sale of those flats. He says Hon ble Bombay High Court in a suit bearing No. 40/2017 vide order dated 20-03-2017 dealt with this particular issue directing MHADA to finalize and approve revised plans submitted by the Corporate Debtor in respect to balance units to be constructed for MHADA, for which new timeline was drawn up for completion of the units, but all of sudden, MHADA unlawfully terminated the Development Agreement frustrating the efforts of the Corporate Debtor for completion of the project. 5. In view of the reasons mentioned above, if the reliefs sought above are not granted, the Corporate Debtor will suffer irreparable loss and damage to its reputation and flat purchasers will be severely prejudiced, hence this application. 6. In reply to the above application, MHADA submits that it is a statutory authority established u/s 3 of Maharashtra Housing and Area Development Act, 1977 (MHAD Act) with an object to provide comprehensive and co-ordinated approach to the problem of housing and to carry out activities of repair, construction and reconstruction of houses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation has been provided to the original tenants, not even rent paid, as to the sector (R10) retained to itself, flat purchasers of Sector (R10) filed case before Hon ble High Court stating that this Corporate Debtor has not provided housing to them despite money has been taken from them. 7. As per the development agreement, MHADA says, the Corporate Debtor was required to commence the work within 6 months from the date of JDA and the completion must be done within 36 months from the date of JDA but whereas this Corporate Debtor miserably failed in completion of the project. On having the Corporate Debtor failed to comply with timelines of performance of its obligation even after lapse of 9 years from the execution of JDA, MHADA vide its termination notice dated 12-01-2018 terminated the JDA and the subsequent agreement thereto stating that it was terminated because the Corporate Debtor failed to adhere to the agreements entered into. MHADA says that RP has essentially averred that except sector R10, no other Sector is developed by the Corporate Debtor; it is evident that remaining sectors given to the strangers for development admitting that Corporate Debtor are not in the posse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehold rights in favour of society formed by various flat purchasers of Meadows Residential Project within 60 days of the Municipal Corporation granting occupation certificate. 11. In the above order, two points to be seen - one it is in respect to a project said to have been raised in sector R10 which has been kept by the Corporate Debtor to itself. The plaintiffs of the suit are flat purchasers of that project. In the table given in this order, it is clear that the sectors (R1-R5) which are to come to MHADA, have not yet been handed over to MHADA, likewise buildings to be handed over to MHADA for rehabilitation of tenants are also not yet handed over to MHADA. In the conclusion para, it has been mentioned that the present order is passed without prejudice to the contents and rights of the parties to that suit, wherein MHADA is one of the defendants). 12. In the order passed by Hon ble High Court of Bombay on 20-03-2017, a table has been given to reflect the ground position of the sanctioned layout indicating no progress in sectors R1-R5 R9, the only sector where development is in progress is sector R10, which the corporate debtor kept to itself, this suit is only in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cence u/s 52 of Indian Easements Act to clarify that the right of licence will not amount to an easement or an interest in the property, therefore he says that right of licence is a personal right not transferable to anybody, because no interest is created over the property in favour of the Corporate Debtor, to substantiate this proposition, he relied upon (a) B.N. Lall v. Dunlop Rubbers Co. (India) Ltd. AIR 1968 SC 175 (b) Puran Singh Sahini v. Sundari Bhagwandas Kripalani [1991] 2 SCC 180 and (c) Chandu Lal v. Municipal Corpn. of Delhi AIR 1978 Delhi 174 (FB) 16. In addition to the arguments aforementioned, MHADA counsel has argued that this agreement of licence dated 10-04-2008 has already been terminated on 12-01-2018 directing the Corporate Debtor not to enter upon the project sites mentioning that the Corporate Debtor has, failed to re-house a single tenant, failed to pay arrears of rent to the tenants for their temporary accommodation for years, failed to construct 672 tenements for the tenants, defaulted in repaying Rs.l,350crores raised from the banks and financial institutions, fraudulently sold away the free sale component for a consideration of Rs.l,095crores, insp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment, it has no place either under Transfer of Property Act or under Easement Act to say that some right has been accrued to the petitioner over the property. If at all any violation to the personal right i.e., right of licence occurred, the Corporate Debtor will only have a right to sue against the land owner for damages but not to cling to the property stating that it has interest in the property. Since the Sr. counsel appearing on behalf of Resolution Professional has pinned down his argument to clause (d) of section 14(1) of the Code, the right of license is a right accrued to the Corporate Debtor to say that possession over the property lies with the corporate debtor. Possession u/s 14(l)(d) has to be construed as lawful possession over MHADA property. As I said earlier, the personal right of licence will never become a possessory right to claim the Corporate Debtor has been continuing with the possession of the property. If at all it is a tenant, or sub-tenant, it could be understandable that this Corporate Debtor has right of possession over the property. A person continuing with possession unlawfully cannot be considered as a man having possession over the property, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip rights. Since duties of RP u/s 25 are in tandem with the duties of Interim Resolution Professional u/s 18, for no clause u/s 25 is in conflict with any clauses of section 18, Resolution Professional is bound to take custody and control of all the assets of the Corporate Debtor already held with IRP. Even if RP takes control of any asset subsequently, such RP shall follow the same principle IRP followed. In the licence agreement, it has been categorically mentioned that the flat purchasers will get leasehold rights only when lease has been executed by MHADA to the said flat purchasers, meaning thereby, the possessory rights will get accrued to the flat purchasers only when MHADA executed tenancy agreements in favour of the flat purchasers. It is a fact that this Corporate Debtor inspite of taking over Rs.l,000crores from the banks and over Rs.l,000crores collected from the free sale, this Corporate Debtor till date neither paid money to the bankers nor provided flats to either to the tenants or to MHADA as agreed in the agreement. This postponement has been continuing for the last nine years, no respite to the tenants, the rent has not been paid for the last several years, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Corporate Debtor, at the most, it can become a right to claim damages for having the development agreement executed with the Corporate Debtor is terminated. Once licence is terminated, it is to be considered the right conferred upon a person is terminated, it cannot be construed that some right vested with the Corporate Debtor over the property is terminated. In view of this legal proposition, the Corporate Debtor in any case cannot say that he has been continuing with the possession of the property. It is no doubt long time has lapsed after execution of development agreement in favour of the Corporate Debtor, but solely by this reason, a right of licence cannot become a right of possession in favour of the Corporate Debtor. In view of this, the Corporate Debtor cannot say by virtue of licence agreement entered in favour of it, it has to be construed that the Corporate Debtor has been in the possession of the property. 25. Even in the documents entered between these three parties, it has been categorically mentioned that the Corporate Debtor is allowed to develop the property and it has been said that the said property will remain in the joint possession of tenants and the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et out saying that the moratorium will remain in force prohibiting the recovery of any property by an owner or lessor where such property is occupied or on the possession of the Corporate Debtor. Now if at all the Resolution Professional wants to place before CoC, it has to show the land of MHADA as the asset of the corporate debtor, upon which no right has been accrued to the corporate debtor. By doing so, the consequence is haircut to the debt payable to the creditors in the name of Resolution Plan, by showing an asset upon which this corporate debtor has no right. What is the investment of this corporate debtor? Land does not belong to the corporate debtor. Loan has been taken from bank, money has been taken from other developers, so it made money from all fronts. Now this land will go to somebody else through Resolution Plan. Ultimately who are beneficiaries out of all these transaction is the Corporate Debtor because Corporate Debtor will be made free from all these liabilities, if so, the Corporate Debtor need not pay anything to the banks. Since the area to be developed for the tenants and MHADA is not developed, again the new man coming will not develop this area because th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gful possession before any court of law, because he cannot do that under law. So is the position here. 32. The point that is not seen is, the rights over the property of MHADA will go to somebody else through Resolution Plan though neither Corporate Debtor nor Resolution Professional nor third party has any right over the land belong to MHADA. 33. To supplement the arguments, the counsel appearing on behalf of the applicant submits that by virtue of section 25, the Resolution Professional can take immediate custody and control of all the assets of the Corporate Debtor, the counsel says by virtue of this provision, applicant is duty bound to take the custody of the property and prepare a Resolution Plan basing on it. In the normal course, Interim Resolution Professional (IRP) who comes immediately after admission will exercise his duty including taking control of the assets over which the Corporate Debtor has ownership rights as recorded in the balance sheet of the Corporate Debtor or with information utility or the depository or security or any other registry that records the ownership of the assets. This clause clearly mentioned that IRP will take control of the assets only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the agreement is hit by moratorium already declared. 35. As to this argument, MHADA counsel has made it clear that it is a section solely dealing with the assets of the Corporate Debtor to understand this proposition, I believe, it is necessary to read the text of section 14 which is as below: 14. (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: - (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (d) the recovery of any prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the section. It cannot be liberally used to apply to something that is not mentioned in the section. Therefore, when a party exercises its right of termination, it will not fall within the ambit of section 14(l)(a), here there is no scope to apply the object or purpose of Code or purpose of the section to extend the purview of this section. As to (b) and (c), no arguments have been made by the applicant counsel, therefore, we have not dealt with those clauses. As to (d) is concerned, the argument of the applicant counsel is that MHADA should not terminate the licence agreement because such termination may give right to MHADA to take possession of the property. As to this argument, it has already been held above that property has not been considered as property of the corporate debtor (developer), therefore to develop construction will not become an exclusive right of possession. So, this argument of what is not directly permitted cannot be permitted indirectly will not fit into the present context. Because termination of agreement will not fall within the ambit of 14(l)(a). 38. As to application of section 238, I must say that section 238 has been introduced not to dil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rriding provision has been set out u/s 238 of the Code which can never be construed that it is a provision come into existence to bulldoze the rights of the parties. It is understandable those creditors who are prevented to go before various forums are entitled to come before this Bench. Their right of remedy will not get extinguished by the overriding effect given under section 238, but what will happen to other persons having some other rights against this company because they may not fall under the category of creditors so by showing 238 if their rights are denied it will become nothing but extinguishment of rights of the parties, which is not permissible under any law. 41. Therefore, onerous duty is cast upon the Adjudicating Authority to examine into as to which issue is hit by section 238, which is not, if that discretion is not properly exercised, then it will jeopardise the rights of the parties. One must not get lost sight of the fact that the rights vested with the parties will not be extinguished by a statute much less by a court of law unless it has been legislated that a particular right vested with the parties has been held as extinguished by virtue of a legislatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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