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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 ..... es are to be dealt with. It is public duty of MCGM to control and regulate how its properties are dealt with. The provisions of Section 238 could be of importance when the properties and assets are of debtor and not when a third party like MCGM are involved and therefore in the absence of approval in the terms of Sections 92 and 92-A of the Mumbai Municipal Corporation Act, 1880 (MMC), the Adjudicating Authority under IBC, 2016 cannot create a fresh interest in respect of MCGM s property and lands. From the perusal of the aforesaid judgment, it follows that the rights of the Public Sector/ State Land Development Authorities on assets owned by them cannot be overridden by provisions of IBC, 2016 and any transfer to the successful Auction Purchaser or Successful Resolution Applicant has to be in accordance with the terms and conditions of the original allotment or lease deed or policy of the Authority. The demand for enhanced land cost was raised much before initiation of CIRP and evidently, it was not brought to the notice of the IRP or the CoC. Even the pending litigation before Civil Judge (Senior Division), Ludhiana regarding the subject plot was not brought to the notice of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RA), 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. In the oral arguments and the written submissions, the appellant has submitted that the subject plot forms a part of the resolution plan and has to be sold to pay the creditors. The appellant had filed IA No. 598 of 2021 before National Company Law Tribunal, Chandigarh seeking quashing of the said demand, which was dismissed vide impugned order dated 03.06.2022. The appellant submitted that they have furnished demand draft of Rs.1,05,34,414/- to the respondent (without prejudice to the legal rights and contentions of the Company) on 27.06.2022, which was returned by the respondent on the premise that the Amnesty Scheme under which the amount is being paid had expired. The respondent vide communication dated 27.06.2022 have enhanced the demand to Rs.2,17,74,283/-. 6. The main p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssor 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 01.12.1995, which provides as under:- 2(iii) the above price of the plot is subject to variation with reference to the actual measurement of the plot and cost of acquisition of 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. Further Clause 2(ii) provides as under:- 2(ii) The plot has been allotted on lease hold basis for 99 years in the first instance, as such you shall also pay annual Lease rent of Rs.1/- per 1000 sq. yards in advance for 99 years at the time of execution of lease deed agreement. 10. The respondent submitted that the appellant had purchased the said lease hold land from M/s Preet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 27.10.2021 while requesting for issuance of No Due Certificate, the appellant informed about the approval of resolution plan by the learned Adjudicating Authority. It was submitted by the respondent that the learned Adjudicating Authority had rightly observed that the vendor cannot pass on a better title than the one he has. There was already a clog on the ownership of lease holder s rights due to non- payment of enhanced compensation and that neither the original allottee nor the Financial Creditor or the CoC can pass on a clear title in favour of the SRA. Inspite of full knowledge that demand for enhanced land cost was pending, this was not brought to the knowledge of IRP, CoC or the Adjudicating Authority before approval of the resolution plan. It was submitted that the appellant has resorted to forum hunting by seeking approva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution 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 approval of resolution plan. The new management cannot be saddled with new liability of the past dues which are not incorporated in the resolution plan. However, the rejoinder is silent on the issue raised by the respondent that the Corporate Debtor had not informed the IRP or the CoC regarding pending demand raised by the respondent and have thus misled the IRP and CoC. 12. We have gone through the submissions of the appellant and the respondent including the judgments relied upon by them. The appellant has mainly relied upon the clean slate principle enunciated in the judgments of Ghanshyam Mishra and Sons Pvt. Ltd. v. Edelweiss Assets Reconstruction Company Limited and Committee of Creditors of Essar Steel India Limited Through Authorised Signatory vs. Satish Kumar Gupta Ors. cited supra by the appellant. It is appellant s contention that under the said princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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), Ludhiana in the Civil Suit filed by the Corporate Debtor, at the time of initiation of CIRP. A copy of Resolution Plan is annexed in the appeal paper book. Ongoing through the resolution plan, we find that Schedule 8 of the Resolution Plan at page 237 to 255 of the appeal paper book contains list of pending litigations. This Schedule of 17 pages lists litigations pending in various courts and before various Authorities such as Income-Tax Department, Enforcement Directorate, Central Bureau of Investigation, etc,. It also lists ligations pending before Court s abroad. We find that litigation before Civil Judge (Senior Division), Ludhiana relating to the subject plot is not listed in Schedule 8 of the Resolution Plan, though otherwise it is a list running into 17 pages regarding all pending litigation matters. Further the Resolution Plan at 02 places mentions about the subject pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey 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 leasehold right over the subject asset; that the lessee would be required to pay the enhancement of land cost within 30 days of the demand and that without consent of the Corporation/ Respondent, the lessee will have no right to transfer the lease rights of the land. The Respondent also has the right to cancel the allotment in case of breach of any terms and conditions. 18. The demand for enhanced land cost was raised by the Respondent on 15.03.2016 and was payable much before the initiation of CIRP. The letter of Respondent raising the said demand is reproduced below : 19. Before deciding the issue in hand, we refer to the following judgments on this issue: 19.1 Hon ble Supreme Court in the Municipal Corporation of Greater Mumbai vs. Abhilash Lal and Ors. (2020) 13 SCC 234, through order dated 15.11.2019 has held that the provisions of Section 238 of IBC, 2016 do not override the rights of Municipal Corporation of Greater Mumbai (MCGM) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 25-6-2018 and 16-7-2018, the terms of the request for proposal (RFP) an 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 Cen (SNMC). After discussion with CoC, a revised RFP was submitted by RP. The revised resolution plan was approved by CoC on 4-9- 2018. 4. The resolution plan projected infusion of over Rs 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 mortgage respectively. Operational creditors were to be paid off to the ex of 75%. Further, the plan proposed payout to the tune of Rs 102.3 crore to MCGM as against its total claim of Rs 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Nevertheless. the authorities under the Code could not have precluded the control that MCGM undoubtedly has, under law, to deal with its properties and the land in question. which undeniably are public properties. The resolution plan, therefore, would be a 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). 19.2 In the case of Maharashtra Industrial Development Corporation Vs. Santanu T. Ray Ors., NCLAT Principal Bench, Delhi in Company Appeal (AT) (Insolvency) No. 1004 of 2021 in order dated 04.05.2022, after going through the facts of the case and relevant judgments has held that the appellant MIDC can take appropriate action, once the CIRP is over, as per terms and conditions of the lease. The relevant portion of the judgment giving facts of the case and the decision ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice 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 resolution process or to take any further step in this respect; c. To direct the Respondent to extend their co-operation in concluding the corporate insolvency resolution process in terms of the Insolvency and Bankruptcy Code, 2016; d. Till the disposal of this MA, to pass an order directing and injuncting the Respondent from taking possession of the said leasehold land till such time this MA is disposed of. e. For interim and ad interim orders in terms of prayers (1) to (3) above. 2. The Adjudicating Authority heard the parties on MA 3691 of 2019 and by impugned order, allowed the prayer (a) in the Application. Following is the operative portion of the order in paragraph 13:- 13. In view of the above discussion the Application is accordingly allowed. Prayer (a) is allowed. As far as prayer (b) to (d) are concerned, R1 shall not take any coercive steps till the Application for appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um 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 virtue of restrain under Section 14(1)(d). Further continuation or initiation of any other proceeding under Section 14(1)(a) which also prohibited the Appellant to cancel the lease during currency of the Moratorium. Although after CIRP is over, there is no fetter on the right of the Appellant to take proceeding for breach of terms of the lease by the Corporate Debtor. 30. We have noticed that the Adjudicating Authority by its impugned order has allowed the prayer (a) i.e. quash the Notice dated 08.11.2019. The order having passed during the currency of the Moratorium, no exception can be taken to the order passed by the Adjudicating Authority. We however, hasten to add that the quashing of the Notice dated 08.11.2019 does not create any fetter on the rights of the Appellant to pass appropriate order for breach of terms 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 Adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment giving the facts of the case and the decision are extracted below for ready reference:- 2. The facts and sequence of events giving rise to this Appeal are: (i) The Appellant had allotted the Plot No.02/2 admeasuring 4615.13 sq. mtrs located at Sector 154, Gautam Buddh Nagar, Noida in favour of Corporate Debtor M/S Mega Soft Infrastructure Pvt. Ltd. (ii) The Adjudicating Authority in Company Petition filed by Neelam Singh against the Corporate Debtor initiated the Corporate Insolvency Resolution Process ( CIRP ) by an order dated 23.08.2017. The Adjudicating Authority vide order dated 28.02.2018 ordered the liquidation of the Corporate Debtor and appointed the Respondent as Liquidator. (iii) Liquidator issued an E-Auction Sale Notice of the Plot. The Appellant had sent letter to the Liquidator that its total pending dues are Rs.20,50,000/- and also informed about the pendency of the Original Suit No.184/2018 titled M/s. Mahavir Hanuman Developers Private Limited vs. M/s. Mega Soft Infrastructure Pvt. Ltd. Before the Court of Ld. Civil Judge (Senior Division) Gauttam Budh Nagar. (iv) Liquidator vide its letter dated 13.02.2021 informed the Appellant that Plot No.02/2 at Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in Municipal Corporation of Greater Mumbai vs. Abhilash Lal and Ors. (2020) 13 SCC 234. In the above case, an Appeal was filed by the Municipal Corporation of Greater Mumbai ( Corporation ) against the order of the NCLAT. In the Appeal it was contended on behalf of the Corporation that direction of the Adjudicating Authority was in violation of Section 92 of the Municipal Corporation of Greater Mumbai Act, 1888 ( MMC Act ), which was the provision governing the disposal of municipal property. Section 92 of the MMC Act provided that with sanction of the corporation, the Commissioner may by lease, sell or otherwise convey any immovable property to the corporation. The Hon ble Supreme Court after considering the provision of Section 238 of the IBC, laid down following in paragraph 42 and 43: 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 NCLT acquires primacy over all other legal provisions. Facially, this argument appears merited. Section 238 enacts that: 238. Provisions of this Code to override other laws. The provisions of this Code shall have effect, notwit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amely, 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 NCLT were without jurisdiction. On this score, therefore, the High Court judgment [Jaipur Metals Electricals Ltd., In re, 2018 SCC OnLine Raj 1472] has to be set aside. The Hon ble Supreme Court further held that Section 238 cannot be read as overriding Municipal Corporation of Greater Mumbai s right in its public duty to control and regulate how its properties are dealt with. In paragraph 47, following has been laid down: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of foregoing discussions, we dispose of this Appeal with following directions: (i) The Application dated 16.02.2022 filed by the Respondent in terms of existent Transfer Policy be considered by the Appellant on merits in accordance with law. (ii) The Appellant to dispose of the Application dated 16.02.2022 at an early date preferably within a period of two months from the date of this order. Parties to bear their own costs. From the perusal of the aforesaid judgments, it follows that the rights of the Public Sector/ State Land Development Authorities on assets owned by them cannot be overridden by provisions of IBC, 2016 and any transfer to the successful Auction Purchaser or Successful Resolution Applicant has to be in accordance with the terms and conditions of the original allotment or lease deed or policy of the Authority. 20. We find that demand for enhanced land cost was raised much before initiation of CIRP and evidently, it was not brought to the notice of the IRP or the CoC. Even the pending litigation before Civil Judge (Senior Division), Ludhiana regarding the subject plot was not brought to the notice of the CoC and the successful Resolution Applicant. 21. In our opin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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