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TMI Blog2021 (4) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... perty. The dismissal of the Writ Petition filed by R2 does not have any bearing on these proceedings - application allowed. - M. A. No. 3691 of 2019 in C.P. (IB) No. 2298/MB/2018 - - - Dated:- 12-4-2021 - Janab Mohammed Ajmal, Hon ble Member (Judicial) And Shri V. Nallasenapathy, Hon ble Member (Technical) For the Applicant: Mr. Rohit Gupta with Ms. Rubina Khan, Advocates i/b Fortis India Law. For the Respondent No. 1: Mr. Chetan Kapadia with Mr. Rahul Sarda and Ms. Khushbu Marwadi, Advocates i/b Jay Co For the Respondent No. 2: Mr. Nikhil Rajani, Advocate i/b M/s. V. Deshpande and Co. ORDER Per : V. Nallasenapathy, Member (Technical) 1. This is an Application under section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 (the Code) by the Resolution Professional seeking the following reliefs: a. To quash and set aside the notice dated 8.11.2019 issued by the Respondent as null and void and to restrain the Respondent from taking any steps in further of the said notice dated 8.11.2019; b. To direct the Respondent to restrain from terminating the lease agreement dated 21.1.2015 till the completion of the corporate insolvency resolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 5 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), vide registered Assignment Agreement dated 20.01.2018. The said agreement is annexed as Annexure XI. i. On 29.01.2019, R1 issued a show cause notice to R2 as to why action should not be initiated and allotment of the plot be not cancelled, since the conditions of lease requiring building to be constructed by 19.01.2017 had been violated. j. R2 filed Writ Petition No. 2470 of 2019 on the file of Hon ble Bombay High Court against R1 challenging the show cause notice. The Writ Petition was dismissed by order dated 04.11.2019 with the observation that R1 had the right to issue a show cause notice to ARCIL and the same could not be faulted. k. In the meantime, the CIRP intervened on 11.03.2019. On 08.11.2019, the R1 issued a notice to the Applicant stating that the lease agreement was terminated and an officer of the R1 would come on 14.11.2019 to take possession of demised land. l. The Counsel for the Applicant submits that while the CIRP is going on, the moratorium provided under Section 14 would be effective. The R1 is prohibited un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor continued to hold leasehold rights, ownership and title of the land and they never got vested with R2. 6. The Counsel for the R1 submitted as below: a. R1 is a Government of Maharashtra Undertaking, established with the object of ensuring planned and accelerated industrial development in the State under the provisions of MIDC Act. b. The land was allotted to the Corporate Debtor by the Land Allotment Committee as per Maharashtra Industrial Development Corporation Disposal of Land Regulations, 1975 which regulates the procedures for disposal of plots in the industrial areas and estates. c. Clause 2(d) of the Lease Deed dated 12.05.2015 provided that the Corporate Debtor had to complete construction of at least 8,224 sq. mtrs of building and other structures on or before 19.01.2017. d. Since the Corporate Debtor violated the clause 2(d) referred above, R1 issued show cause notice to the Corporate Debtor on 01.11.2018, calling upon as to why action of termination of lease deed and repossessing the subject plot should not be taken. On 29.01.2019, R1 issued notice to DHFCL and R2 on the same subject. e. R2 challenged the notice in the Writ Petition before the Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different kinds. Primarily Section 8A applies only to minerals other than those specified in Parts A and B of the First Schedule. In so far as minor minerals are concerned, the State government is empowered to make Rules for regulating the grant of mining leases. 27. The liberties and privileges granted to the Corporate Debtor by the Government of Karnataka under the mining lease, are delineated in Part IV of the mining lease. The mining lease was issued in accordance with the statutory Rules namely Mineral Concession Rules, 1960. Therefore the relationship between the Corporate Debtor and the Government of Karnataka under the mining lease is not just contractual but also statutorily governed. 28. Therefore as rightly contended by the learned Attorney General, the decision of the Government of Karnataka to refuse the benefit of deemed extension of lease, is in the public law domain and hence the correctness of the said decision can be called into question only in a superior court which is vested with the power of judicial review over administrative action. The NCLT, being a creature of a special statute to discharge certain specific functions, cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrangements, is specifically kept out of the definition of the term assets under the Explanation to Section 18. This shows that wherever the corporate debtor has to exercise rights in judicial, quasi-judicial proceedings, the resolution professional cannot short-circuit the same and bring a claim before NCLT taking advantage of Section 60(5). 41. Therefore in the light of the statutory scheme as culled out from various provisions of the IBC, 2016 it is clear that wherever the corporate debtor has to exercise a right that falls outside the purview of the IBC, 2016 especially in the realm of the public law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right. h. The correctness or otherwise of R1 s action in terminating the lease agreement and/or repossessing Plot No. B-11 from R2 is not questionable. i. The Corporate Debtor have been granted license only to enter upon the plot for the purpose of building and executing works and until grant of lease, the Corporate Debtor would be deemed to be a mere licensee. j. If the Corporate Debtor failed to build and complete construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Completion of vesting condition and notice has been shown therein. 13. In the present case, as we find that the vesting of the Coal Mines is not complete in absence of any agreement with the State Government in respect to the mines in question, we hold that the Resolution Professional on behalf of the Corporate Debtor cannot claim that pursuant to lease the mines are under occupation or in possession of the Corporate Debtor . 14. The Government of India by its letter dated 13th April, 2017 issued show cause notice to the Corporate Debtor before issuance of the termination letter dated 30th December, 2017 i.e. much prior to initiation of the Corporate Insolvency Resolution Process (18th July, 2017). The Corporate Debtor having failed to act in terms with the said show cause. If the order of cancellation have been passed by the Government of India on 30th December, 2017, it cannot be held to be in violation of Section 14(1)(d) of the I B Code . 15. In view of the aforesaid findings, no interference is called for against the impugned order dated 16th January, 2018. The appeal is dismissed. Interim order passed by this Appellate Tribunal on 8th Feb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solvency resolution process began, and before the moratorium 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. 47. In the opinion of this Court, Section 238 cannot be read as overriding the MCGM's right - indeed its public duty-to control and regulate how its properties are to be dealt with. That exists in Sections 92 and 92A of the MMC Act. This Court is of opinion that Section 238 could be of importance when the properties and assets are of a debtor and not when a third party like the MCGM is involved. Therefore, in the absence of approval in terms of Section 92 and 92A of the MMC Act, the adjudicating authority could not have overridden MCGM's objections and enabled the creation of a fresh interest in respect of its properties and lands. No doubt, the resolution plans talk of seeking MCGM's approval; they also acknowledge the liabilities of the corporate debtor; equally, however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIRP i.e., on 11/03/2019. u. Even as per Regulation 17 of MIDC Disposal of Land Regulations, 1975, R1 is entitled to resume possession of the plot due to the contravention by the Corporate Debtor of the terms and conditions of the lease. Panchnama dated 14th November 2019 was prepared by R1 at the time of taking possession of Plot B-11. v. Since on the date of initiation of CIRP, Plot B-11 was not in possession of the Corporate Debtor, the protection under Section 14 is not available. The protection is available only in respect of property which is occupied by or in the possession of the corporate debtor . The provisions of section 14(1)(d) do not have any impact on taking over possession from a third party. Furthermore, as stated above, the lease stood determined. The right of revoking the lease upon breach of conditions was recognised by the Hon ble Bombay High Court in its Order dated 4th November 2019. w. The ratio laid down in para 16 of the judgement dated 19th February 2020 passed by the Supreme Court in the case of Rajendra K. Bhutta (supra) is not applicable to the facts of the present case. In this judgement, the Supreme Court distinguished its judgemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a show cause notice of the Municipal Corporation, which preceded admission of the insolvency resolution process, made it clear that assets of MCGM could not possibly be subsumed within a resolution plan without its approval/permission. It was in this context that this Court, in para 47 of the said judgment, stated that Section 238 of the Code cannot be read as overriding the MCGM's right-indeed its public duty-to control and regulate how its properties are to be dealt with. Properties was referred to in this judgment as referring to assets of the corporate debtor. We have seen how, in the facts of this case, we are not concerned with the assets of the corporate debtor, least of all the assets of MHADA. The limited question before us is as to whether Section 14(1)(d) of the Code will apply to statutorily freeze 'occupation' that may have been handed over under a Joint Development Agreement. x. The Hon ble Supreme Court in Para 8 of the judgement in Rajendra K. Bhutta (supra), have clearly stated that for section 14(1)(d) to apply, the property should either be occupied by or be in possession of the corporate debtor, which is not the case in the facts before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 14(1)(a) expressly stops institution or continuation of pending proceedings against corporate debtors. The Supreme Court held that: the mandate of the new Insolvency Code is that the moment an insolvency petition is admitted, the moratorium that comes into effect under Section 14(1)(a) expressly interdicts institution or continuation of pending suits or proceedings against corporate debtors. d. Reliance is also placed on the judgement of Hon ble NCLAT in the case of Bohar Singh Dhillon v. Rohit Sehgal (Company Appeal (AT) Insolvency No.665 of 2018 (paragraph 7), wherein it is held that till the period of moratorium continues, agencies such as the SEBI cannot recover any amount nor can sell the assets of the corporate debtor. e. It relied on the judgement of Hon ble Supreme Court in Rajendra K Bhutta (supra) wherein it has held that: However, when it comes to any clash between the MHADA Act and the Insolvency Code, on the plain terms of Section 238 of the Insolvency Code, the Code must prevail. This is for the very good reason that when a moratorium is spoken of by Section 14 of the Code, the idea is that, to alleviate corporate sickness, a statutory stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has to give the financial institution, i.e. DHFCL, a notice in writing, of 6 months, specifying the breach committed by the lessee and the lessor shall not re-enter the said property, unless the lessee or the financial institution has failed to remedy the breach within 6 months of receipt of the said notice. k. In spite of having issued two show cause notices and a Termination/Possession Notice, MIDC has not adjudicated upon any of the notices. No cure period is available to the financial institution under the Tripartite Agreement to remedy the alleged breach. The possession of the said property can be taken only by due process of law after adhering to principles of natural justice, i.e., adequate notice, a fair hearing and no bias. R1 did not follow due process. l. There was no determination of the leasehold interest of the Corporate Debtor before taking purported possession of the said property and thus the re-possession is illegal, an abuse of process of law and in flagrant violation of principles of natural justice. To the extent that it conflicts with the Code, it is void and non-est. As such, the MIDC s claim to possession is disputed and denied. m. The value maxim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 10% of the total premium amount and such other dues and outstanding which please note. b. The above notice given by R1 unequivocally shows that the Corporate Debtor/Applicant is in the possession of leased land. In view of this, the contention of R1 that possession under SARFAESI Act was taken by DHFCL and subsequently by R2, falls to the ground. We hold that the Applicant is in possession of the property. c. The Applicant is right in saying that termination notice dated 08.11.2019 is hit by Section 14(1)(d) of the Code. He rightly relied on the judgement of Hon ble Supreme Court in the case of Rajendra K. Bhutta (supra) which is an authoritative pronouncement on the applicability of Section 14(1)(d). It is beneficial to extract the following paragraphs of the judgement for better understanding of this proposition: 1. This appeal raises a question as to the correct interpretation of Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the Code ). The facts necessary to appreciate the setting in which this question arises are as follows: i ii. iii. . iv . v vi . vii. On 12.01.2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a result of which the entire discussion of Section14(1)(d) would now become academic. However, it also decided: 14. On perusal of record, we find that pursuant to the 'Joint Development Agreement' the land of the 'Maharashtra Housing and Area Development Authority' was handed over to the 'Corporate Debtor' and 'except for development work' the 'Corporate Debtor' has not accrued any right over the land in question. The land belongs to the 'Maharashtra Housing and Area Development Authority' which has not formally transferred it in favour of the 'Corporate Debtor'. Hence, it cannot be treated to be the asset of the 'Corporate Debtor' for application of provisions of Section 14(1)(d) of the 'I B Code'. 7. A bare reading of Section 14(1)(d) of the Code would make it clear that it does not deal with any of the assets or legal right or beneficial interest in such assets of the corporate debtor. For this reason, any reference to Sections 18 and 36, as was made by the NCLT, becomes wholly unnecessary in deciding the scope of Section 14(1)(d), which stands on a separate footing. Under Section 14(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 238 of the Insolvency Code, the Code must prevail. This is for the very good reason that when a moratorium is spoken of by Section 14 of the Code, the idea is that, to alleviate corporate sickness, a statutory status quo is pronounced Under Section 14 the moment a petition is admitted Under Section 7 of the Code, so that the insolvency resolution process may proceed unhindered by any of the obstacles that would otherwise be caused and that are dealt with by Section 14. The statutory freeze that has thus been made is, unlike its predecessor in the SICA, 1985 only a limited one, which is expressly limited by Section 31(3) of the Code, to the date of admission of an insolvency petition up to the date that the Adjudicating Authority either allows are solution plan to come into effect or states that the corporate debtor must go into the liquidation. For this temporary period, at least, all the things referred to Under Section14 must be strictly observed so that the corporate debtor may finally be put back on its feet albeit with a new management. 17. My learned brother S. Ravindra Bhat, J.'s judgment in Municipal Corporation of Greater Mumbai (supra), which has been stro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HADA. The limited question before us is as to whether Section 14(1)(d) of the Code will apply to statutorily freeze 'occupation' that may have been handed over under a Joint Development Agreement. 19. As we have pointed out herein above, it is clear that Section 14(1)(d) of the Insolvency Bankruptcy Code, when it speaks about recovery of property occupied , does not refer to rights or interests created in property but only actual physical occupation of the property. For this reason also, this judgment is wholly distinguishable. 20. Regard being had to the above, we allow the appeal and set aside the impugned order of the NCLAT. Considering that this matter has been pending for some time, we direct the NCLT to dispose of the resolution professional's application (I.A. No.21433/2018) within a period of six weeks from today. 9. From the above, it is clear that R1 s action in seeking possession of the leased land, during the currency of CIRP, is hit by Section 14(1)(d) of the Code. 10. R1 s reliance on the judgement of the Hon ble Supreme Court in the case of Municipal Corporation of Greater Mumbai v. Abhilash Lal Ors., (supra) at this stage ..... X X X X Extracts X X X X X X X X Extracts X X X X
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