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TMI Blog2022 (5) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... possession of the land till completion of the CIRP which was dismissed by the NCLT - The Hon ble Supreme Court in the above case held that after imposition of Moratorium there is statutory freeze limited by Section 31(3) of the Code i.e. till the period, all the things referred to under Section 14 must be strictly observed so that the Corporate Debtor may finally be put back on its feet albeit with a new management. The present is a case where CIRP was initiated on 11.03.2019 and the Notice dated 08.11.2019 terminating the lease agreement and Notice for taking possession was issued on 08.11.2019 i.e. after the imposition of Moratorium - All the institution of suits or continuation of pending suits and proceedings against the Corporate Debtor are prohibited under Section 14(1)(a) of the Code with the object that status quo regarding Corporate Debtor be maintained and further proceedings against the Corporate Debtor be not permitted during the continuance of the CIRP to preserve the Corporate Debtor from any financial assault or other proceeding to stop off its current situation for purpose of Resolution. Similarly, under Section 14(1)(d), recovery of any property by any owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion within two years i.e. from 20.01.2015 till 19.01.2017. Tri-partite Agreement was executed between the Corporate Debtor, the Appellant and DHFL, whereunder the Plot was mortgaged to DHFL and loan amount of Rs.7,22,80,214/- was disbursed to the Corporate Debtor. A Notice dated 01.11.2018 was issued by the Appellant to the Corporate Debtor asking it to show cause as to why action as provided in Clause 5(b) (i) of the Agreement to lease should not be taken against it since the Corporate Debtor has not completed the construction work of the factory building. By order dated 11.03.2019, Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor on an Application filed by Kay Bee Foundry Services Private Limited - (Operational Creditor). On 29.01.2019, the Appellant had issued a letter to DHFL informing that the Corporate Debtor had committed the breach and the Appellant would be taking possession of the plot. The Respondent No.2- Asset Reconstruction Company (India) Limited assignee of the DHFL filed Writ Petition No. 2470 of 2019 challenging the letter dated 29.01.2019 in the Bombay High Court which petition was dismissed on 04.11.2019 holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to repossess the plot. It is submitted that the proceeding for cancellation of the lease was initiated prior to the commencement of the CIRP. It is submitted that the Adjudicating Authority has no jurisdiction to set aside the Notice dated 08.11.2019 cancelling the Lease Agreement. The cancellation of the lease by the Appellant is not on account of initiation of CIRP but on the ground of breach of terms and conditions by the Corporate Debtor which cannot be subject matter of an Application before the Adjudicating Authority. The decision to terminate the lease of the Corporate Debtor fell outside the purview of the Code and was a question within the public law domain. The Resolution Professional could not implicate the plot of the Appellant in the Resolution Plan without the consent of the Appellant. The Adjudicating Authority committed error in holding that the Appellant despite being owner of the plot could not take possession even though conditions of lease have been violated by the Corporate Debtor. 5. Learned Counsel appearing for the Resolution Professional refuting the submission of the Counsel for the Appellant contends that after initiation of the CIRP on 11.03.2019, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing off 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 (54 of 2002); (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. [Explanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that upon expiry of 30 days from the date of receipt of the notice, the joint development agreement would stand terminated issued by Maharashtra Housing and Area Development Authority (MHADA). An Application was filed before the NCLT to restrain MHADA from taking over possession of the land till completion of the CIRP which was dismissed by the NCLT. The relevant facts have been noticed in the judgment in paragraphs 1.7 and 1.9: 1.7. On 12.01.2018 - after the imposition of the moratorium period under Section 14 of the Code - MHADA issued a termination notice to the Corporate Debtor stating that upon expiry of 30 days from the date of receipt of the notice, the Joint Development Agreement as modified would stand terminated. It was further stated that the Corporate Debtor would have to handover possession to MHADA, which would then enter upon the plot and take possession of the land including all structures thereon. xxx xxx xxx 1.9. On 01.02.2018, the Appellant filed M.A. No. 96 of 2018, seeking a direction from the NCLT to restrain MHADA from taking over possession of the land till completion of the CIRP, contending that such a recovery of possession was in derogat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a resolution 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 Section 14 must be strictly observed so that the corporate debtor may finally be put back on its feet albeit with a new management. 14. The Hon ble Supreme Court ultimately allowed the Appeal and set aside the judgment of the NCLAT. 15. Learned Counsel for the Respondents has placed reliance on the judgment of the Hon ble Supreme Court in Municipal Corporation of Greater Mumbai (MCGM) vs. Abhilash and Others- (2020) 13 SCC 234 . In the above case, the Municipal Corporation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e MMC Act may be forthcoming for a separate scheme formulated by that corporation (MCGM). 16. No issue had arisen regarding Section 14 of the Code. It was held by the Hon ble Supreme Court that MCGM was entitled to deal with its properties in accordance with MCGM Act, 1888. 17. The next judgment of the Hon ble Supreme Court which has been relied by the Counsel for the Respondents is Embassy Property Developments Private Limited vs. State of Karnataka and Others- (2020) 13 SCC 308 where the issue pertaining to jurisdiction of NCLT in relation to a matter covered by Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act, 1957) was under consideration. In paragraphs 37 and 40, following was laid down:- 37. From a combined reading of Subsection (4) and Sub section (2) of Section 60 with Section 179, it is clear that none of them hold the key to the question as to whether NCLT would have jurisdiction over a decision taken by the government under the provisions of MMDR Act, 1957 and the Rules issued thereunder. The only provision which can probably throw light on this question would be Subsection (5) of Section 60, as it speaks about the jurisdiction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... significance in view of the language used in Sections 18 and 25 in contrast to the language employed in Section 20. Section 18 speaks about the duties of the interim resolution professional and Section 25 speaks about the duties of resolution professional. These two provisions use the word assets , while Section 20(1) uses the word property together with the word value . Sections 18 and 25 do not use the expression property . Another important aspect is that under Section 25 (2) (b) of IBC, 2016, the resolution professional is obliged to represent and act on behalf of the corporate debtor with third parties and exercise rights for the benefit of the corporate debtor in judicial, quasi judicial and arbitration proceedings. Section 25(1) and 25(2)(b) reads as follows: 25. Duties of resolution professional (1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. (2) For the purposes of subsection (1), the resolution professional shall undertake the following actions: (a) . (b) represent and act on behalf of the corporate debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In paragraph 43, two issues which arose for consideration before the Hon ble Supreme Court has been noted as follows:- 43. The following two issues arise for determination: 43.1. (i) Whether the NCLT/NCLAT can exercise jurisdiction under the IBC over disputes arising from contracts such as the PPA; and 43.2. (ii) Whether the appellant s right to terminate the PPA in terms of Article 9.2.1(e) read with 9.3.1 is regulated by the IBC. 22. In paragraphs 74, 75 and 91, following has been laid down:- 74. Therefore, we hold that the RP can approach the NCLT for adjudication of disputes that are related to the insolvency resolution process. However, for adjudication of disputes that arise dehors the insolvency of the Corporate Debtor, the RP must approach the relevant competent authority. For instance, if the dispute in the present matter related to the non-supply of electricity, the RP would not have been entitled to invoke the jurisdiction of the NCLT under the IBC. However, since the dispute in the present case has arisen solely on the ground of the insolvency of the Corporate Debtor, NCLT is empowered to adjudicate this dispute under Section 60(5)(c) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of corporate debtor as the owner or lessor of such property as envisioned under Section 14(1)(d). It is availing of the services of corporate debtor and is using the property that has been leased to it by corporate debtor. Thus, Section 14 is indeed not applicable to the present case. 25. The proceedings initiated before the NCLAT to challenge the termination notice issued by the Appellant was set aside. 26. The present is a case where CIRP was initiated on 11.03.2019 and the Notice dated 08.11.2019 terminating the lease agreement and Notice for taking possession was issued on 08.11.2019 i.e. after the imposition of Moratorium. 27. The purpose and object of Moratorium is to temporarily freeze all actions as contemplated under Section 14 to enable the Corporate Debtor to resolve its Insolvency and to revive it. Prohibition on action against the Corporate Debtor is only to preserve the status quo as it exists on the date of initiation of CIRP so that all claims against the Corporate Debtor on the date of initiation of CIRP be collated and dealt with to take steps to revive by approving appropriate Resolution Plan, if any, to bring it back. All the institution of suits or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of lease after CIRP is over. The Adjudicating Authority with regard to prayers (b) to (d) has directed the Appellant not to take any coercive action till the Application for approval of the Resolution Plan is heard by the Adjudicating Authority. The above direction was also to protect the status quo which was existing on the date of initiation of CIRP. We, however, make it clear that as soon as the CIRP is over, the Appellant shall have all powers to take appropriate action. 31. Learned Counsel for the Appellant has expressed its apprehension that in event the plot, in question, which is the subject matter of the lease by the Appellant is dealt in Resolution Plan and is handed over to the Successful Resolution Applicant, the rights of the Appellant shall be fettered. We find that the said apprehension is without any basis. What rights and liability Corporate Debtor had to the plot, in question, the same at best can be transferred to the Resolution Applicant in event any Resolution Plan is approved. The Resolution Applicant cannot acquire better right nor can wash out its liability under the lease deed merely on the ground that Resolution Plan has been approved. 32. We, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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