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TMI Blog2019 (11) TMI 844X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, the resolution plan does not contemplate any disposal of the said land or creation of any additional rights and obligations of MCGM or the Corporate Debtor in relation to the lands. It is merely the shareholding of the Corporate Debtor which undergoes a change pursuant to the resolution plan. MCGM cannot place any embargo on such shareholding changes by resorting to proceeding under the Code. It was urged that SNMC does not acquire any interest in the said land and only acquires managerial control over the Corporate Debtor by way of holding equity shares in the Corporate Debtor. Therefore, there arises no question of Section 92 of the MMC Act being violated through the resolution plan. Discussion regarding the insolvency process and relevant provisions of the MMC Act - HELD THAT:- In this case, it is not the provisions of the IBC which this court has to primarily deal with; it is rather whether the process and procedure adopted by the NCLT and later the NCLAT, in overruling MCGM s concerns and objections with regard to the treatment of its property (i.e. the lands) is in accordance with law. The show cause notice in this case preceded admission of the insolvency re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court, cannot prevail - As held earlier, there is no approval for the plan, in accordance with law; in such circumstances, the written plea accepting the plan, by a counsel or other representative who is not demonstrated to possess the power to bind MCGM, is inconclusive. This court holds that the impugned order and the order of the NCLT cannot stand; they are hereby set aside - Appeal allowed - decided in favor of appellant. - CIVIL APPEAL NO. 6350 OF 2019 - - - Dated:- 15-11-2019 - JUSTICE ARUN MISHRA, JUSTICE VINEET SARAN And JUSTICE S. RAVINDRA BHAT For the Appellant : Ms. Aruna Savle, Adv. Ms. Preeti Purandhar, Adv. Ms. Pallavi Pratap, Adv. For M/s Pratap And Co., AOR For the Respondent : Mr. C.A. Sundaram, Sr. Adv. Mr. P.S. Narasimha, Sr. Adv. Mr. Jitesh Mukherjee, Adv. Mr. Siddarth Ranade, Adv. Ms. Prerna Priyadarshini, AOR Ms. Shivani Rawat, Adv. Ms. Priyashree Sharma, Adv. Supriyo Ranjan Mahapatra, Adv. Mr. Rahul G. Tanwani, Adv. Ms. Sindoora V.N.L., Adv. Ms. Aditi Tripathi, Adv. Mr. K.V. Viswanathan, Sr. Adv. Ms. Rachna Jain, Adv. Mr. Samiron Borkataky, Adv. Ms. Nitya Chadha, Adv. Ms. Kritika Angirish, Adv. Mr. Apoorv Singhal, Adv. Mr. Gag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the Code, on 12 April, 2018. A publication for expression of interest ( EOP ) was issued on 14 May, 2018; later, on 25th June, 2018 and 16th July, 2018, the terms of the Request for Proposal (RFP) and criteria for evaluation (of RFPs received) were approved. As a result of the RFP published, a resolution plan was submitted by Dr. Shetty s New Medical Centre ( SNMC ). After discussion with the CoC, a revised RFP was submitted by the RP. The revised resolution plan was approved by the CoC on 4th September, 2018. 4. The resolution plan projected infusion of over ₹ 1000 crores by SNMC. That amount was to be borrowed; for this purpose, SevenHills properties movable and immovable, were proposed to be secured by hypothecation and mortgage respectively. Operational creditors were to be paid off to the extent of 75%. Further, the plan proposed payout to the tune of ₹ 102.3 crores to MCGM as against its total claim of ₹ 140.88 crores, and also committed to honouring the terms of the agreement entered into by SevenHills and providing 20% of the beds (of the hospital to be constructed) to the poor and weaker sections of society. The net worth certificate fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual submissions. The final prayer of MCGM is to reject the 'resolution plan' and order for liquidation of the Corporate Debtor. The RP in his submissions has clearly pointed out as to why the averments of MCGM are erroneous and incorrect. For the sake of briefness, the submissions made by RP as stated supra are not discussed in detail once again. This Adjudicating Authority is of the view that the contentions raised by MCGM cannot be accepted due to the conflicting and contradictory stands taken by it in the course of hearings. Further, the contention of MCGM relating to expiry of the period of 270 days is untenable and unacceptable for the reason that the Application by the Resolution Professional for the approval of the Resolution Plan has been made well before the expiry of the period of CIRP and the same is in accordance with the provisions of the Code. Therefore, the objections raised by the MCGM are hereby rejected. 7. The NCLT also held that the plan filed along with the application met the requirements of Section 30(2) of the Code, and Regulations 37, 38, 38(IA) and 39(4) of IBBI (CIRP) Regulations, 2016. It also held that the resolution plan did not cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to the lease deed, had to be necessarily dealt with in accordance with law. This meant that unless MCGM, expressly approved the revised plan, whereby a lease deed could be executed in favour of the SevenHills Healthcare Pvt. Ltd. (or in favour of the resolution applicant SNFC), neither the adjudicating authority nor the NCLAT could issue any direction seeking to bind MCGM with respect to the manner it had to deal with properties that belonged to it. 11. It was emphasised that the effect of the impugned order is to prevent MCGM from violating the law. The direction which was highlighted was in violation of Section 92 of the MMC Act. Learned senior counsel underlined that the written submissions filed on behalf of MCGM could not be construed as an admission, or that MCGM was bound to agree to the revised proposal. It was alternatively argued that at best, these submissions could be considered as concessions of law which were never binding on MCGM. 12. It was argued that there was no question of incorporating any direction or approving the revised plan, which in any manner affected MCGM s properties. In this context, Mr. Neeraj Kaul, learned Senior Counsel, urged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tings due to its position as owner of the land on which the Mumbai hospital of the Corporate Debtor is located. The issue of whether or not the corporate debtor has any leasehold rights under the contract (of 2005) is a disputed question of fact which can only be adjudicated upon in civil proceedings after conducting a civil trial. 16. It is also argued alternatively, that assuming for the purpose of argument that no leasehold rights were created in favour of the Corporate Debtor, the resolution plan does not create any leasehold rights in favour of the respondent applicant/SNMC. Learned senior counsel argued that the resolution plan merely envisages a change in the shareholding of the Corporate Debtor but does not transfer any of MCGM s assets to SNMC. Therefore, it is false to suggest that the resolution plan transfers MCGM s assets to SNMC. It was argued furthermore that though MCGM was not entitled to, nor treated as a financial creditor, it was nevertheless invited to participate in CoC meetings, interact as well as negotiate favourable terms with potential resolution applicants. To further safeguard MCGM s interests, the RFP also required all prospective resolution a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved by the NCLT, and later, NCLAT, were sound and did not call for interference. 21. It was argued, furthermore, that the reliance on Section 92 of the MMC Act is misguided as it seeks to superimpose provisions of the MMC Act on the provisions of the Code. This is clearly impermissible in terms of the non obstante provision contained in Section 238 of the Code. 22. Mr. K.V. Vishwanathan, learned senior counsel for SNFC, argued that the plan approved provided the best solution for the financial woes of the Corporate Debtor. It was argued that SNFC never represented that it would mortgage or obtain any loan on the strength of the lease. Nor did it ever urge that MCGM s permission was not necessary. He pointed to the terms of the resolution plan and submitted that they were subject to MCGM s obligations to follow the law. 23. It was submitted that the proposed plan contemplates compliance with the various conditions of the contract agreement including without limitation, 20% reservation of beds for MCGM's employees and settlement of MCGM's claimed dues. The resolution plan proposed payment to MCGM (which was enhanced to 100% by a later proposal) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh information collection regarding assets, finances and operations. Information may include data relating to operations, payments, list of assets and liabilities. The IRP further has to receive and collate claims submitted by creditors. 27. The RP selected by the NCLT has to constitute a committee of creditors (CoC) comprising all the financial creditors of the corporate debtor. This provision is aimed at creditors adopting a collective approach towards insolvency resolution instead of proceeding individually. Key decisions of the process, and the plan to be eventually finalized are to be approved by the CoC upon its satisfaction that the provisions of the most acceptable plan would ensure that their dues are cleared. 28. The Code is principally aimed at aiding a corporate debtor in the resolution of its insolvency condition without approaching liquidation. The key to this process is the finalization of an insolvency resolution plan. A suitably structured plan would provide for repayment of the debtor s outstanding liabilities after evaluating its financial worth, at the same time ensuring its survival as a going concern. The resolution plan must necessarily prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spose off any moveable property held by the Corporation, the value of which exceeds rupees two crores ; (iii) with the sanction of the concerned Committee, grant a lease (other than a lease in perpetuity) of any immovable property belonging to the Corporation, including any such right as aforesaid; or sell, or grant a lease in perpetuity of any immovable property, the value of which does not exceed 50,000 rupees or the annual rent of which does not exceed 3,000 rupees ; (c) with the sanction of the corporation, the Commissioner may lease, sell or otherwise convey any immovable property belonging to the corporation (cc) the consideration for which any immovable property or any right belonging to the corporation may be sold, leased or otherwise transferred shall not be less than market value of such premium, rent or other consideration; (d) sanction of the corporation under clauses (b) and (c) may be given either generally for any class of cases or specially in any particular case ; (dd) notwithstanding anything contained in this section, the Commissioner may, with the sanction of the Corporation, and with the approval of the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions in addition to the conditions stipulated in the Lease deed or Lease agreement executed by the corporation, namely: - (i) Leasehold rights in respect of the properties belonging to the corporation and given on lease may be further assigned or transferred only with the prior permission of the Commissioner, on payment of such premium on account of unearned income and transfer fees or charges at such rates as may be specified by the corporation, from time to time. (ii) In the case of any contravention of the provisions of sub clause (i), the lessee or transferor of such leasehold rights, shall be liable to pay penalty in addition to such premium and transfer fees or charges, at such rates as may be specified by the corporation, from time to time. (e) the aforesaid provisions of this section shall apply, respectively, to every disposal of property belonging to the Corporation made under or for any purpose of this Act; Provided that nothing in this section shall apply Dr. Bhau Daji Lad Museum or to the site thereof referred to in section 89C except with the previous sanction of 5[the 6[State] Government]. Section 92A. Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions commercial and other establishments within the Frame work of Development Control Regulations in force, in such Buildings, their running, maintenance, renovation, reconstruction etc. For this purpose, the SHCL shall have to apply for permission not mortgage and/or create charge to Municipal Commissioner two months in advance and if the approval is not received within two months from the date of receipt of such a request by the Commissioner, it will be deemed as approved and SHCL shall be at liberty to create the mortgage of the Schedule Property in favour of the Lenders without any recourse to the Owner. 31. Clause 15(a) which stated that the lease deed had to be entered into upon on completion of the project and contained other conditions, pertinently, reads as follows: 15. LEASE OF PLOT: a) Lease period: i) The SHCL shall enter into a Lease Deed on completion of project period for leasing the plot to SHCL for the period of 60 years. After 60 years, the lease period will be extended with the mutual consent of Owner and SHCL on the terms that may be mutually agreed upon by both the parties for further period. ii) The lease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . MORTGAGE OF PLOT AND BUILDINGS a) The SHCL is hereby allowed to sublease; mortgage and create a charge on the said plot and buildings either in part or in total to the satisfaction of lenders for the purpose of raising financial assistance to commence, progress, complete, commission and run the hospital complex and other commercial activities during the Pendency of the lease period, from the financial institutions/ FIIS/Banks/Mutual Funds/Co operative Societies, Trusts/individuals/HUFs/Partnership Firms, other lending institutions and lenders of any constitution for the said Project with the prior permission of the Commissioner, which permission shall not be unreasonably withheld, during the Project period and/or during the subsistence of the lease and the Owner shall be kept informed of such deals after permission by the Commissioner and SHCL shall file relevant documentary evidence to that effect for record of the owner. The permission which shall be granted by the Owner to SHCL to mortgage the Schedule Property in favour of the lender (s) for raising finance will remain irrevocable and irreversible during the tenure of the Project period and lease period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y manner, been affected by the resolution plan. Equally in the opinion of this Court, the adjudicating authority could not have approved the plan which implicates the assets of MCGM especially when SevenHills had not fulfilled its obligations under the contract. 34. The argument of the RP, the financial institutions (CoC), and the SNMC with regard to MCGM's interest not being affected, in this court's opinion is insubstantial. SNMC's proposed insolvency plan on the one hand no doubt provided for the liquidation of MCGM s liabilities initially to the tune of ₹ 102 crores (later revised to over ₹ 140 crores). However, the provisions of the resolution plan clearly contemplated infusion of capital to achieve its objectives. One of the modes spelt out in the plan for securing capital was mortgaging the land. Initially, no doubt, SNMC stepped into the shoes of SevenHills and assumed its control. What is important to notice is that the corporate restructuring was a way of taking over of the company s liquidation by SNMC as it was not only Seven Hills project with shares and liquidation of debts, but also the restructuring of the company s liabilities if n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oratorium was declared by NCLT on 13th March, 2018. According to MCGM, in terms of Clause 26 (of the contract), even the agreement stood terminated due to default by SevenHills. This court does not propose to comment on that issue, as that is contentious and no finding has been recorded by either the adjudicating authority or the NCLAT. 37. In Ram Singh Vijay Pal Singh Ors. v. State of U.P. Ors (2007) 6 SCC 44, this court dealt with a similar provision, requiring prior approval of the statutory authority without which the property could not be disposed of. The court held that: The proviso to Sub section (1) of Section 12 of the Act would show that the Mandi Samiti (Committee) is not empowered to transfer any immovable property without the previous approval in writing of the State Agricultural Produce Markets Board (Mandi Parishad). Section 26 L of the Act deals with the powers and functions of the Board. The Director of Mandi Parishad (Board) has not been conferred any power whereunder he may issue a general direction that the shops, godowns and sheds of the Mandi Parishad shall be transferred or sold to the traders on hire purchase basis. Therefore, the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission to the Appellants to use the same. We are afraid that it is difficult for us to accept this line of argument. Section 35(1) is couched in negative language and does not refer to private rights being created. Section 35(2) cannot be read so as to throw light on Section 35(1), as Under Section 35(2), the GMB is only given a discretionary power to require a person, who has acted in contravention of Section 35(1), to remove the illegal erection. The wide language of Section 35(1) cannot be whittled down by Section 35(2) in the manner argued by Shri Joshi, as the GMB may or may not utilise the discretionary power granted to it Under Section 35(2). The plain language of Section 35(1) cannot be curtailed by reading by inference, into Sub section (2), the fact that the GMB may, by notice, require a person to remove an erection, only when it has been made without previous permission, so as to create a private asset in the hands of a private person. The wide language of Section 35(1) makes it clear that any reclamation within the limits of the GMB cannot be carried out except with the previous permission in writing of the GMB. It is clear, therefore, that dredging to a depth of belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own cost, which was next to their captive jetty, for their own purposes, for which they obtained the necessary permission. However, since dumping of earth, which would emerge as a consequence of dredging, into the open sea would be extremely expensive, it was stated that instead this earth could be dumped to create reclaimed land next to the captive jetty, which would then benefit both the Appellants and the GMB. In point of fact, 140 hectares out of 195 hectares that is reclaimed by the Appellants is allocated to the Appellants for their own purposes, the balance to be given as and when a jetty of 1100 meters plus 3700 meters of waterfront is constructed. The argument that huge amounts had been spent to reclaim land is wholly fallacious huge amounts were spent to dredge a canal which was permitted as the Appellants alone were to bear the cost, and as an increased draft would benefit all, as the canal was open to all to use. Therefore, any plea as to a legitimate expectation of reclaimed land being allocated for the Appellants' own use, thanks to large amounts being spent, is contrary to the correspondence by the Appellants themselves. An identical approach was adopt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mphasis supplied) 12. ......Apart from the same, by granting NOC it cannot be construed that the Corporation has also mortgaged its property in favour of Axis Bank in any manner.... 15. ....It is clarified that this order is passed without prejudice to the rights and contentions of both the sides and it will have no effect so far as deciding the matter on merit is concerned..... *************** ************* 41. The material placed on record by MCGM before this Court also reveals that the meeting held by the Corporation on 14th December, 2018, referred back to the resolution proposal given by SNMC. The minutes of the meeting records that three members were unanimous in their view that since SevenHills had not complied with the terms and had even sought to encumber the property by mortgage, SNMC, a UAE based company, ought not be granted approval to take over the plot and proceed with its project. 42. Now, this court proposes to deal with the contention that the provisions of the Code override all other laws and hence, that the resolution plan approved by the NCLT acquires primacy over all other legal provisions. Facially, this ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 238 of the Code to an independent proceeding instituted by a secured financial creditor, namely, the Alchemist Asset Reconstruction Company Ltd. This being the case, it is difficult to comprehend how the High Court could have held that the proceedings before the NCLT were without jurisdiction. On this score, therefore, the High Court judgment has to be set aside. 44. In the recent judgment in Duncans Industries v. A.J. Agrochem 2019 SCC Online (SC) 1319, the issue was that action under Section 16D(4) of the Tea Act, which provides that the Central Government could take such steps as may be necessary for the purpose of efficiently managing the business of the undertaking, had been taken. It was urged that any notification under Section 16D has effect for five years, which could only be extended if the Central Government was of the opinion that it is expedient to do so in public interest, for such period not exceeding one year at a time, and for total period not exceeding six years. It was submitted that Section 16E refers to the power of the Central Government to restart the tea undertaking if it is found necessary in the interest of the general public. The argument wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the RBI issuing directions to a banking company to initiate insolvency resolution process under the Insolvency Code, it could have issued such directions Under Sections 21 and 35A. But after Section 35AA, it may do so only within the four corners of Section 35AA. 31. The matter can be looked at from a slightly different angle. If a statute confers power to do a particular act and has laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in any manner other than that which has been prescribed. This is the well known Rule in Taylor v. Taylor, [1875] 1 Ch. D. 426, which has been repeatedly followed by this Court. Thus, in State of U.P. v. Singhara Singh, (1964) 4 SCR 485, this Court held: The Rule adopted in Taylor v. Taylor [(1875) 1 Ch D 426, 431] is well recognised and is founded on sound principle. Its result is that if a statute has conferred a power to do an act and has laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in any other manner than that which has been prescribed. The principle behind the Rule is that if this were not so, the statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serious impediment to MCGM s independent plans to ensure that public health amenities are developed in the manner it chooses, and for which fresh approval under the MMC Act may be forthcoming for a separate scheme formulated by that corporation (MCGM). 48. The last contention of the respondents, that MCGM was bound by the statement made by its counsel, in the opinion of this court, cannot prevail. As held earlier, there is no approval for the plan, in accordance with law; in such circumstances, the written plea accepting the plan, by a counsel or other representative who is not demonstrated to possess the power to bind MCGM, is inconclusive. In this regard, the court notices the well known principle that there can be no estoppel against the express provisions of law. (Ref. Kasinka Trading v. Union of India (1995) 1 SCC 274, Darshan Oils (P) Ltd. v. Union of India (1995) 1 SCC 345, Shrijee Sales Corporation v. Union of India (1997) 3 SCC 398, Shree Sidhbali Steels Ltd. v. State of U.P. (2011) 3 SCC 193, Pappu Sweets and Biscuits v. Commr. of Trade Tax, U.P. (1998) 7 SCC 228 and Commr. of Customs v. Dilip Kumar Co. (2018) 9 SCC 1.) 49. In view of the foregoing re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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