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TMI Blog2024 (3) TMI 1292X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly. 3. Briefly stated the facts of this case are that a Lease Deed dated 22.12.2008 was executed between the appellant and Punjab Small Industries & Export Corporation Limited (hereinafter called the 'Respondent') with respect to Plot No.256-57, Phase- VIII, Focal Point, Ludhiana for a period of 99 years. 4. Insolvency proceedings were initiated against the appellant vide order dated 11.04.2018. The public announcement was made by the Insolvency Resolution Professional (IRP) and claims were invited. No claim was filed by the respondent before the Resolution Professional during the CIRP proceedings. The resolution plan submitted by Consortium of Arr Ess Industries Private Limited and Leading Edge Commercial FZE (hereinafter referred as Successful Resolution Applicant or SRA), was approved by the Adjudicating Authority on 10.02.2021. On 05.03.2021, the respondent issued a demand notice pertaining to Plot No. 256-57, Phase-VIII, Focal Point, Ludhiana (hereinafter called the 'subject plot') whereby it claimed an amount of Rs.1,12,97,128/-. The demand was raised in term of Clause 2(iii) of the Allotment Letter dated 01.12.1995 and Clause 2(i) of the Lease Deed dated 22.12.2008. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Manish Kumar vs. Union of India & Anr. (2021 SCC Online SC 30) (vi) NCLAT Judgment dated 12.01.2021 in Company Appeal (AT) (INS)No. 274 of 2020- Amit Bharana vs. Gian Chand Narang. (vii) New Okhla Industrial Development Authority Vs. Anand Sonbhadra 2022 SCC Online SC 631 (viii) Paschimanchal Vidyut Vitran Nigam Ltd. Raman Ispat Pvt. Ltd. & Ors. (Judgment dated 17.07.2023 in Civil Appeal No.7976/2019) 8. In oral and written submissions, the respondent has submitted that it is a public sector undertaking of Government of Punjab; that the demand raised by the respondent is only in terms of mutually agreed terms and conditions of the allotment letter in which there is a specific Clause that in the event of compensation of land being enhanced by the court of competent jurisdiction, the allotee or his successor has to make payment of enhanced amount as ordered by the Court; that the allottee and its assignees are legally bound to deposit the enhanced amount of compensation; that the respondent had to pay land owners enhanced amount of compensation in the proceedings under Land Acquisition. 9. The respondent drew our attention to Clause 2(iii) of the Allotment Letter dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Punjab & Haryana High Court dated 25.08.2008 and judgment of Hon'ble Supreme Court of India dated 25.03.2015, the additional amount was determined @ Rs.474/- per sq. yard and demand was raised accordingly vide letter dated 15.03.2016. Upon failure of the appellant to pay the demand a show cause notice of cancellation on account of failure to deposit enhanced amount of Rs.1,05,10,685/- was issued vide letter dated 08.03.2019. The said demand and show cause notice was challenged by the appellant by filing a civil suit before the learned Civil Judge, Ludhiana and the matter is still subjudice. The appellant was served with revised demand notice dated 27.09.2019, 02.12.2019 and 05.03.2021 and no payment was made by the appellant. The factum of charge and repeated demands of enhanced land cost compensation was not brought to the notice of either the Insolvency Resolution Professional (IRP) or the Committee of Creditors (CoC) by the appellant. It was submitted that the Corporate Debtor had not only cheated the answering respondent, but has also misled the IRP and CoC. The respondent, on the other hand, was not informed about the CIRP or the resolution plan and it was only on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T) (Insolvency) No. 1004 of 2021- Maharashtra Industrial Development Corporation Vs. Santanu T. Ray and Ors. (viii) NCLAT Judgment dated 19.04.2022 in Company Appeal (AT) (Insolvency) No. 998 of 2021- New Okhla Industrial Development Authority Vs. Abhishek Anand, Liquidator of Mega Soft Infrastructure Pvt. Ltd. 11. In the rejoinder filed on behalf of the appellant, the appellant firstly stated that the appeal was filed within the condonable period under Section 61(1) of the IBC, 2016. It was submitted that the CIRP Order dated 16.10.2019 as well as the public announcement made by the IRP subsequent to the admission were in public domain and the contention of the respondent that it was not aware about the Insolvency Proceedings does not hold water. The appellant reiterated respondent is only an Operational Creditor and should have filed its claim before Resolution Professional during CIRP and the respondent cannot be permitted to raise any claim at this belated stage. Since no claim was filed by the respondent, the same does not form the part of the approved resolution plan and as per the settled law all past dues are extinguished, including the claim of the respondent, on appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd price due to enhancement in respect of said plot, in view of enhanced compensation confirmed in the judgment of Hon'ble Punjab and Haryana High Court dated 25.08.2008 and Judgment of Hon'ble Supreme Court of India dated 25.03.2015. After the judgment of the Hon'ble Supreme Court, the appellant was informed vide letter dated 15.03.2016, much before the initiation of CIRP and was asked to pay the enhanced cost. It is the case of the respondent that the Corporate Debtor failed to inform the Interim Resolution Professional or the Committee of Creditors regarding the enhanced demand towards subject lease hold asset. As noted in para-11 above, the rejoinder filed by the appellant to the reply of respondent is silent on this issue, thereby confirming the allegation that despite demand of enhanced land price, the IRP and the CoC were never informed about it. The IRP had also not specifically informed about initiation of CIRP to the respondent and is taking the plea that publication of notice of CIRP should have been noticed by the respondent. 15. The respondent has stated that the adjudication against demand notice issued by it was pending before the Civil Judge (Senior Division), Ludh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land. In case of enhancement of compensation on account of acquisition of land of this Focal point by the Court or otherwise you shall have to pay the additional price of the plot, if any, as may be determined by the Corporation within 30 days from the dates of demand. ............. (xiv) As the land is to be given on Lease hold basis the ownership will vest in the Punjab Small Industries & Export Corporation Limited. ............. (xix) The Corporation shall have the first and paramount charge over the plot and without prior consent of the Corporation you shall have no rights to transfer your lease right by way of sale/ or otherwise of the plot or any right, title or interest. ............. (xxv) In the event of breach of any terms and conditions of the allotment the Corporation shall have right to cancel the allotment of plot, and take back possession of plot/ building also forfeited amount equivalent to earnest money and remaining deposited amount, if any, over and above the earnest money towards the cost of plot shall be refunded. It is clear from the lease deed that the 'subject plot' shall remain the property of the respondent; that the appellant only has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e executed within a month after completion. However, the deed was not executed as the project was not completed. Further, SevenHills had to pay lease rent at the annual rate of Rs 10,41,04,000. MCGM alleges that there were defaults in these payments. In these circumstances, MCGM issued a show-cause notice on 23-1-2018, proposing termination of the contract/agreement. It is submitted that SevenHills owed MCGM an amount of Rs 76,05,07,780. 3. On the strength of the contract, SevenHills had borrowed from banks and financial institutions. It had created security by way of mortgage of the said lands, citing Clause 5, which enabled the creation of such encumbrances. SevenHills' inability to repay its debts led to the initiation of insolvency proceedings by Axis Bank. On 13-3-2018, before the period given by MCGM'S show-cause notice ended, the petition [CP (IB) No. 282/7/HBD/2017) was admitted by the Hyderabad Bench of NCLT. The first respondent was appointe as the Resolution Professional (hereafter "RP"); this was approved by the Committee of Creditors (CoC) as required by the Code, on 12-4-2018. publication for expression of interest (EOP) was issued on 14-5-2018: late on 25- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-2018 when the petition was admitted and the period of 270 days expired on 8-9-2018; an extension of 90 days provided in Section 12(3) was granted by the adjudicating authority on 4-9-2018 and the extended period came to an end on 7-12-2018 thus the CIRP has lapsed by efflux of time........." 47. In the opinion of this Court, Section 238 cannot be read as overriding 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 92-A of the MMC Act. This Court is of the opinion that Section 238 could be of importance when the properties and assets are of a debtor and not when a third party like MCGM is involved. Therefore, in the absence of approval in terms of Sections 92 and 92-A 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, there are proposals which envision the creation of charge or securities in respect of MCGM's properties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rivate 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 lease was liable to be revoked if the Corporate Debtor had committed default in complying with the terms of the lease. On 08.11.2019, the Appellant issued a Notice to the Corporate Debtor cancelling the Lease Agreement dated 20.01.2015 directing the license holder to vacate the plot. Notice communicated that Authorised Officer will visit the plot on 14.11.2019 to take possession. The Resolution Professional filed an M.A No. 3691 of 2019 before the Adjudicating Authority praying for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r proceeding to stop off its current situation for purpose of Resolution. Similarly, under Section 14(1)(d), recovery of any property by any owner or lessor which is occupied by the Corporate Debtor is prohibited. 28. From the law of the Hon'ble Supreme Court as laid down in "Embassy Property Developments Private Limited" and "Tata Consultancy Services Limited" (supra), the Adjudicating Authority has no jurisdiction to judicial review of any action taken by the Government or Statutory Authority in relation to matters which is in the realm of public law. Thus, in the facts of the present case, the Appellant who had granted a lease to the Corporate Debtor is well within its jurisdiction to take appropriate action on account of breach of conditions by the Corporate Debtor but limited question for consideration is as to whether it has to stay its hand from taking such action during currency of CIRP. 29. After considering the facts on the record and arguments of the parties, we are of the considered opinion that in view of the fact that Moratorium has kicked in w.e.f. 11.03.2019 due to currency of Moratorium, the Appellant could not have taken possession of the leased property by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIRP is over, it shall be open for the Appellant to deal with the lease land which was leased to the Corporate Debtor in accordance with its rights as envisaged by the Lease Deed dated 20.01.2015. (iii) In event, the plot, in question, is included in the Resolution Plan, the Resolution Applicant shall not acquire any better right to the rights which were held by the Corporate Debtor in the lease land along with liabilities attached therein. After CIRP is over, there is no fetter in the rights of the Appellant to take appropriate action in accordance with law with regard to lease land. 33. The Appeal is disposed of with aforesaid directions." 19.3 NCLAT Principal Bench, New Delhi vide order dated 19.04.2022 in Company Appeal (AT) (Insolvency) No. 998 of 2021 has recognised the rights of the appellant (New Okhla Industrial Development Authority) to transfer plot to the successful Auction Purchaser only in accordance with the terms and conditions of their policy namely "The Policy & Procedure for Institutional Property Management- March 2009". The relevant para of the judgment giving the facts of the case and the decision are extracted below for ready reference:- "2. The fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, it was stated that Respondent (Appellant before us) has no objection in transferring Plot No.02/2, Sector 154 Noida, in case the Applicant makes an application in compliance with the terms and conditions of the Policy of the Respondent after adopting the procedure to be followed as per the Policy. (vii) The Adjudicating Authority heard the parties on the Application and disposed of the Application by issuing following direction in paragraph 8: "a. Respondent shall transfer the said plot in the name of the auction purchaser in terms of provisions of IB Code, 2016 and the IBBI (LP) Regulations. b. Respondent authority if it intends to recover any of its prior dues may prefer its claim in appropriate Form before the liquidator. c. The auction purchaser shall be liable to pay the Ground Rent and interest thereon and other charges, if any, to the Respondents arising after the date of auction purchase of the said institutional property." (viii) The Appellant aggrieved by the said direction has come upon in this Appeal. ............ 11. The learned Counsel for the Appellant has also placed reliance on judgment of Hon'ble Supreme Court in Municipal Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to apply under Section 7 of the Code. This is clear from a reading of Section 7 together with Section 238 of the Code which reads as follows: '238. Provisions of this Code to override other laws.-The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.' 20. Shri Dave's ingenious argument that since Section 434 of the Companies Act, 2013 is amended by the Eleventh Schedule to the Code, the amended Section 434 must be read as being part of the Code and not the Companies Act, 2013, must be rejected for the reason that though Section 434 of the Companies Act, 2013 is substituted by the Eleventh Schedule to the Code, yet Section 434, as substituted, appears only in the Companies Act, 2013 and is part and parcel of that Act. This being so, if there is any inconsistency between Section 434 as substituted and the provisions of the Code, the latter must prevail. We are of the view that NCLT was absolutely correct in applying Section 238 of the Code to an independent proceeding instituted by a secured financial creditor, namely, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding transfer of Plot in favour of auction purchaser does not obviate the consideration of transfer of Application as per the existent Policy namely the Policy & Procedure for Institutional Property Management - March, 2009. The Adjudicating Authority ought to have issued direction to consider the Transfer Application for transferring the auctioned Plot in accordance with the existent Policy. We, thus, are of the view that the direction of the Adjudicating Authority issued in paragraph 8(a) has to be read to mean that Adjudicating Authority directed the Appellant to consider the transfer of the Plot and expression "shall transfer" need not be read to mean that the Appellant has to transfer the Plot without the Respondent complying with the requirements of the Transfer Policy. The Respondent having already made an application on 16.02.2022 in the prescribed proforma and is ready to comply all the terms and conditions of the Policy, the Appellant may consider the Application made on 16.02.2022 on merits and take an appropriate decision at an early date without considering its order dated 03.03.2022, by which the Application was rejected on the ground of pendency of Court case. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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