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TMI Blog2024 (4) TMI 969X X X X Extracts X X X X X X X X Extracts X X X X ..... the lease period shall be through a Lease deed executed between the parties herein and that if no terms are agreed upon, the lease period shall stand automatically expired at the end of the lease period. It is pertinent to point out that the RP had sent a letter to the erstwhile management on 03.08.2023 seeking information on the arrangement under which the Lease Deed had been extended to the Corporate Debtor and whether the store in the subject property was in the possession of the Corporate Debtor as maybe seen at page 156 of Appeal Paper Book (APB). However, no response was admittedly received from the erstwhile management. Neither have any proof of rental payments to the Appellant by the Corporate Debtor after the expiry of the lease has been placed on record to substantiate that the lease continued to subsist - there are no documentation available on record which reliably establishes the extension of lease term beyond the original period. On looking at the legal notice of vacant possession which was served upon the FSWL by the Appellant on 24.05.2022, the same was undisputedly addressed by them to FSWL and not to the Corporate Debtor. Thus, when this legal notice for vacating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral for the success of the CIRP and Corporate Debtor's survival as a going concern. Assets owned by a third party in possession of the Corporate Debtor is excluded from the scope of CIRP and moratorium in view of Explanation (a) to Section 18 of the IBC. As the Appellant is a third party and undisputedly the subject property is owned by the Appellant and there is nothing foolproof to show that the Corporate Debtor was in occupation of the same, the subject property clearly fell outside the scope of CIRP and consequently the moratorium - no compelling reasons have been made out before the Adjudicating Authority by the RP to allow access into the subject property and inspection of stock/assets lying therein failing which the CIRP would have been jeopardised. The impugned order is set aside - appeal allowed. - [ Justice Ashok Bhushan ] Chairperson And [ Barun Mitra ] Member ( Technical ) For the Appellant : Ms. Jayna Kothari , Sr. Advocate with Mr. Rohit Sharma , Mr. Ms. Aparna Mehrotra , Mr. Raghav Gupta , Mr. Nikhil Purohit , Mr. J. Lalwani , Advocates For the Respondents : Mr. Vaijayant Paliwal , Ms. Charu Bansal , Advocates JUDGMENT [ Per : Barun Mitra , Member ( Technical ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er or assignment of the lease deed could have been done by the FWSL only after providing prior written intimation to the Lessor. However, the Appellant was never kept informed of any such Deed of Assignment purportedly entered into between FWSL and FRL. Claiming that no assignment of the lease deed to the Corporate Debtor had occurred, it was asserted that Corporate Debtor therefore had no rights or interest in the said Lease Deed and the subject property. Furthermore, as the Lease Deed in respect of the subject property with FWSL had already expired prior to the commencement of CIRP, the RP had no authority to issue any notice for inspection of any inventory or assets in the subject property. It was further claimed that the subject property was not the asset of the Corporate Debtor and that it was in the vacant possession of the Appellant in their capacity as the owners. FWSL had already vacated the store and cleared all inventory. In such circumstances, when the property had been vacated nearly four years back and the store being completely non-operational and the lease having lapsed prior to commencement of CIRP of FRL, the notice of inspection issued by the RP was not maintaina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Corporate Debtor since there is no subsisting contract between the Appellant and Corporate Debtor which would entitle the RP to claim any right, title or interest in the subject property. The lease deed of the Appellant was with FWSL and not with FRL. It was also contended that the Adjudicating Authority had failed to appreciate that the lease period between FWSL and the Appellant had ended on 14.11.2021 and the subject property was in the peaceful possession of the Appellant. Hence, any demand by the RP for inspection of subject property and any inventory/stock lying therein was not permissible under the IBC. 8. On the other hand, it is the case of the RP that FWSL had assigned the lease to FRL and the assignment deed in respect of the subject property leased by FSWL to the Corporate Debtor was valid. There was no requirement in terms of Clause 14.7 of the Lease Deed for the FSWL to take NOC from the Appellant before assigning of the lease by them to FRL. In any case, the Deed of Assignment contained a clear and categorical recital that NOC from the Appellants had been obtained towards the assignment of the Lease Deed by FSWL to FRL. 9. Before we dwell into the validity of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order, we notice that the Adjudicating Authority has observed that the Appellant has not disputed the deed of assignment between the FWSL and FRL as they had given their NOC. The findings recorded by the Adjudicating Authority is to the effect: There is no dispute between the parties as regards execution of Lease Deed dated 19.07.2018 by the Applicants in favour of M/s. Food World Super Markets Private Limited and granting of rights to Food World to assign the Leasehold rights to the Corporate debtor or any subsidary/ holding/ affiliate/ group company of Corporate Debtor or to any third party companies of Food World. The only requirement for such assignment was that Food World had to give written intimation of such transfer/assignment of rights to the Applicants. In this connection it is observed that the Lease Deed neither requires fresh consent/NoC for such assignment nor provides that failure to give such written intimation to Food World would make the assignment invalid. (Emphasis supplied) 11. When we see the material on record, it is an undisputed fact that the RP had issued a notice to the Appellant on 29.03.2023 requesting for cooperation in accessing the subject p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... makes it abundantly clear that the Appellant has clearly stated that their Lease Deed was with FWSL and not with FRL-Corporate Debtor and had questioned the assignment of the lease deed in no uncertain terms. This letter clearly and emphatically states that neither the Lease Deed was executed in the name of FRL nor was any written request sent to them about the transfer of the leasehold rights to FRL. 13. Given such unambiguous reservations expressed by the Appellant to the assignment of the Deed of Lease in their reply, we are constrained to observe that the Adjudicating Authority has erred in overlooking these observations and in concluding that the assignment of the lease deed to FRL has not been disputed by the Appellant. 14. We also notice that that even prior to the receipt of the notice from the RP, the Appellant had sent a legal notice dated 24.05.2022 upon FWSL asking them to handover the possession of the subject property to them and in return a response was received on 22.06.2022 from the successor entity of FSWL stating the transfer of lease hold rights to the Corporate Debtor. Even at that stage, the Appellant had in their counter-reply on 01.03.2023 reiterated that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant by the Corporate Debtor after the expiry of the lease has been placed on record to substantiate that the lease continued to subsist. 17. We therefore do not hesitate to add here that we do not find any documentation available on record which reliably establishes the extension of lease term beyond the original period. 18. Having said so, we now choose to dwell on the rival submissions made by the Appellant and the RP with regard to who was in actual possession of the subject property. It is the case of the RP that the subject property was a part of a common premises which was nomenclated as Cambridge Layout . The RP was provided with the list of retail stores of the Corporate Debtor by the suspended management which included a store on the subject property and that three active employees on the pay roll of the Corporate Debtor stood mapped to this store at the Cambridge Layout premises as placed at page 158 of APB. Furthermore, it is the case of the RP that since a legal notice had been served on 24.05.2022 on FSWL by the Appellant demanding the handing over of the subject property, the legal notice implies that the possession of the subject property had not been relinquishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets of the Corporate Debtor, preserving the value of the property of the Corporate Debtor and managing the operations of the Corporate Debtor as a going concern. The letter issued by the Respondent is apparently an effort in this regard. The Respondent, as stated in his reply, is faced with constraints with regard to availability of information/documents and would like to rely upon further communications between the Respondent and suspended board as and when received, and further sought the cooperation of the Applicants to provide the whereabouts and access to the assets of the Corporate Debtor which remained in their custody. 20. At the outset, we like to make a prefatory observation that ownership of the subject property by the Appellant is not a bone of contention. What is contentious is the entity which happens to be in actual physical possession of the subject property. When we look at the legal notice of vacant possession which was served upon the FSWL by the Appellant on 24.05.2022, the same was undisputedly addressed by them to FSWL and not to the Corporate Debtor. Thus, when this legal notice for vacating the subject property was addressed by the Appellant to the FSWL an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der moratorium in terms of Section 14 of the IBC. 23. Now that we have answered the three questions by holding that the Deed of Assignment was clearly in dispute; that facts on record do not substantiate that the Lease Deed in respect of the subject property, consequent on its expiry on 14.11.2021, was further extended and was subsisting and that there is no cogent proof or evidence that subject property was in clear possession of the Corporate Debtor at time of commencement of CIRP, we now proceed to examine the propriety of the RP to claim access to the subject property to take into custody the inventory/stock/assets of the Corporate Debtor lying therein. 24. Before we dwell upon this issue at hand, we may notice the statutory provisions of IBC in the context of the Sections 18 and 25 which lay down the duties of interim resolution professional and the resolution professional in the conduct of CIRP proceedings after the imposition of moratorium under Section 14 of the IBC. 25. The relevant provisions contained in Sections 18 and 25 of the IBC reads as under: 18. Duties of interim resolution professional.- (1) The interim resolution professional shall perform the following duties, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18(1)(f) of the IBC, undoubtedly the RP is required to take control and custody of any asset belonging to the Corporate Debtor. However, it is significant to note that this provision is subject to the exclusion of assets owned by a third party as provided for under the Explanation Clause. Further, Section 25(2)(a) of the IBC also mandates the RP to take immediate custody and control of all assets of the Corporate Debtor so as to determine the valuation of all the assets of Corporate Debtor. We have no doubts in our mind that the RP is entitled under the IBC framework to take custody of any property of the Corporate Debtor and to carry out inspection of the inventory of the Corporate Debtor lying therein so as to protect the assets/stock of the Corporate Debtor. We also have no doubt in our minds that with the declaration of moratorium, the prohibitions as envisaged in Section 14 of IBC come into force which includes prohibition of transferring, encumbering, alienating or disposing of by the Corporate Debtor of any of its assets. The legislative intent of IBC is that there should be a temporary freeze and prohibition of all actions against the Corporate Debtor to preserve the status ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right of the Corporate Debtor not to be dispossessed but not the right to have renewal of the lease of such property. Under Section 14(1)(d) of IBC, recovery of any property by any owner or lessor which is occupied by the Corporate Debtor is prohibited. The purpose of moratorium is only to preserve the status quo but not to create a new right. We have already expressed our considered opinion with underlying reasons at paras 21-22 above that the RP failed to establish beyond doubts that Corporate Debtor was in possession of the subject property at the time of issuing inspection notice to the Appellant. Under such circumstances, the RP could not have taken possession of the leased property by virtue of Section 14(1)(d) of IBC. In fact, the right of the Corporate Debtor not to be dispossessed as contemplated in Section 14(1)(d) of IBC will have no bearing on the present facts of the case given that the subject property was not under the possession of the Corporate Debtor at the time of admission of the Corporate Debtor into CIRP. Additionally, we note that neither any factual analysis has been done either by the RP or any application of mind shown by the Adjudicating Authority on how ..... X X X X Extracts X X X X X X X X Extracts X X X X
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