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TMI Blog2024 (11) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... dvocate regarding vacation of the registered office, and till then the voting with respect to the same could not be done. It was further discussed that in view of applications filed by Nobel Dealcom and Sincere Securities before the AA, the RP should appear and take necessary steps. It is clear from the above, that there was no final decision of the CoC with proper voting, with regard to vacation of the registered office of the CD. The CoC does not appear to have taken a decision about vacation of registered office even in the 6th CoC meeting after which RP gave a statement in Court that the property is not required to be held based on which AA passed the impugned order. CoC at this stage also stated that they are in process of seeking legal opinion and till such time voting on the agenda could not be done. It is clear from the above that the decision to release the property by the RP was his own decision, which was not confirmed by CoC. The submission of CoC at this stage, that such decision was taken with 100% voting right does not seem to be based on records. The moratorium under Section 14 binds the AA also by the use of the word shall by order declare moratorium for prohibitin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editor) v. Nandini Impex Private Limited under Section 7 of IBC, 2016. 2. The Adjudicating Authority passed the following order in the IA (IBC)/1082(KB)2023 and IA (IBC)/1083(KB)2023 in the CP (IB) No. 1377/KB/2020: a) When these IAs were taken up for hearing today, it was stated by the Ld. Counsel appearing for the Resolution Professional that in terms of resolution passed by the CoC at Page No.38 of the Reply in I.A. (I.B.C.) No. 1082(KB)2023 and Page No.39 of the Reply in I.A. (I.B.C.) No. 1083(KB)2023, the property as mentioned in relief (Para-a) in both the IAs is not required to be held and the same shall be handed over to the Applicant. (b) In view of this statement made by Ld. Counsel appearing for the Resolution Professional, prayer-(a) in both the IAs is disposed of with a direction to the Resolution Professional to hand over this property, if already not handed over, within two weeks from the date of this order. (c) As far as other reliefs in the nature of payment of occupational charges is concerned, post these IAs for hearing on 04.09.2023. It is this order of AA which is under challenged in this appeal. 3. The brief facts of the case are as follows: i. Respondent Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt as this court has jurisdiction only upto Rs. 2 crores and due to amendment of the plaintiff as sought by plaintiff, the suit had gone beyond the jurisdiction of this court. iv. Respondent No. 2 to 4 have filed an application seeking review of the aforesaid order dated 30.08.2022 with the Commercial Court Tis Hazari and the same is still pending. v. In the meantime, UCO Bank filed a petition for initiating CIRP against CD under Section 7 of the Code which was admitted on 20.09.2022 by NCLT Kolkata Bench (AA). Accordingly, CP (IB) No. 1377/KB/2020 was admitted by AA and Respondent No. 1 was appointed as Resolution Professional. vi. During the pendency of CIRP, Respondent No. 2 (Sincere Securities Pvt. Ltd.) and Respondents Nos. 3 and 4 (Noble Dealcom Pvt. Ltd. and Jodhpur Properties and Finance Pvt. Ltd. respectively) filed eviction applications IA (IBC)/1083(KB)2023 and IA (IBC)/1082(KB)2023) concerning two office spaces in the White House property, which is currently occupied by the CD. The AA ordered the RP to hand over possession of the property within two weeks. Submission of the Appellant : 4. The counsel for the appellant contests the NCLT's ruling on two eviction appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without the same, it becomes lifeless. Recording of reasons is a part of fair procedure. Reasons are harbinger between the mind of maker of the decision in the controversy and the decision or conclusion arrived at. They substitute subjectivity with objectivity. Failure to give reasons amounts to denial of justice. The para 19 of the Judgment (supra) is extracted below : Para 19 Before we part with the case, we feel it necessary to indicate that non-reasoned conclusions by appellate courts are not appropriate, more so, when views of the lower court are differed from. In case of concurrence, the need to again repeat reasons may not be there. It is not so in case of reversal. Reason is the heartbeat of every conclusion. Without the same, it becomes lifeless. 9. The appellant has further cited the Para 9 of Judgment of Hon ble Supreme Court in M/s. Mangalore Ganesh Beedi Works vs The Commissioner of Income Tax, Mysore 2005 (2) SCC 329) that Failure to assign any reason warrants that the matter be remanded before the lower court, which in this case is the NCLT. This is more so when some of the prayers made in the Eviction Applications continue to be decided by the NCLT. The para 9 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e para 23 of Judgment of Hon ble Supreme Court in Rajendra K. Bhutta v. MHADA, (2020) 13 SCC 208 which is extracted below: ( Para 23 ) The conspectus of the aforesaid judgments would show that the expression occupied by would mean or be synonymous with being in actual physical possession of or being actually used by, in contradistinction to the expression possession , which would connote possession being either constructive or actual and which, in turn, would include legally being in possession, though factually not being in physical possession. The counsel stated that therefore, Section 14 (1) (d) of the Code is absolute and covers property which is in possession of the CD or which has been occupied by the CD. This is further evinced from a reading of Regulation 31(b) of the CIRP Regulations, which states that the amounts due to a person whose rights are effected under Section 14(1)(d) shall be treated as CIRP costs, the said provision reads as under: 31. Insolvency resolution process costs under Section 5(13)(e) shall mean (b) amounts due to a person whose rights are prejudicially affected on account of the moratorium imposed under section 14(1)(d). 12. The counsel stated that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 4. As such the appellant has does not have any locus to file this appeal and the appeal is required to be dismissed on this ground alone. 17. The final submission of counsel for Respondent No. 1 is that the decision of the CoC to hand over Delhi office is not required to be approved by the CoC by way of any resolution of the CoC as the same is not contemplated under Section 28 (1) of IBC, 2016. 18. The Counsel for Respondent No. 2 to 4 stated that appeal challenges the NCLT order dated 07.08.2023, which directed the RP to return the property at 1/18-20 M.M. Road, New Delhi, used as the CD corporate office, to Respondents 2-4. This property was licensed to the CD by Respondents 2-4 for a license fee of Rs. 6 lakhs for each portion, but due to non-payment, the license was terminated on 08.05.2020. Despite termination, the CD continued occupying the property, even after the insolvency process began, and the unpaid license fees were accounted as part of the CIRP costs. As of 31.08.2023, the license fees owed to each respondent stood at Rs. 73,51,300, with an additional Rs. 1,63,72,900 accruing until August 2024, totalling Rs. 3,27,45,800 excluding GST. Due to high maintenance costs a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office license for the CD was terminated on 08.05.2020 due to pre-insolvency non-payment, although the CD continued occupying the office. After insolvency commenced, the license fee for this period was recognized as CIRP costs, acknowledged by the Appellant. The outstanding license fees from the insolvency start date to 31.08.2023 amount to Rs. 73,51,300, payable to Respondents No. 2-4, with additional fees up to August 2024 totalling Rs. 3,27,45,800 (excluding GST). Given the high fees and the CD s lack of need for the office, the Committee of Creditors (CoC) unanimously decided to return the office to Respondents No. 2-4. Despite the Appellant s objections, the CoC s decision was consistently supported in CoC minutes, and through NCLT and NCLAT proceedings. As a suspended board member with no property ownership, the Appellant lacks legal standing and appears to be obstructing the CIRP process. Thus, dismissal of the appeal with exemplary costs is recommended. 21. The counsel for Respondent No. 5/CoC stated that the appeal challenges an NCLT order dated August 7, 2023, directing the RP to hand over possession of certain property to Respondents No. 2-4 within two weeks. Respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjections from the suspended board of directors, the CoC reaffirmed its decision to vacate the office to maximize the CD s asset value. The CoC s final decision was recorded in its reply, with a majority vote supporting the handover, though delays were caused by repetitive objections. 23. The counsel argued that the property in question is not an asset of the CD and is unnecessary for its operations, as only 8-9 employees used it for accounting tasks that could be performed at the CD s registered address. The high license fee for the property is unsustainable, as the CD does not generate sufficient income to cover it, and incurring such costs during CIRP would only increase expenses and hinder the resolution efforts. Although Section 14(1) of the Code prohibits recovery of possession during the moratorium, it does not prevent the CoC or RP from voluntarily relinquishing possession of non-asset properties, as established in Sangita Fiscal Services Pvt. Ltd. v. Duncan Industries. The CoC's decision to hand over the property was made after evaluating the CD's financial situation and is protected from judicial review, according to K. Sasidhar v. Indian Overseas Bank. Additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand over the property in possession of CD to third parties and whether AA has powers to allow such advice of CoC? 30. We first examine the locus of the appellant in the instant matter. The appellant is former Promoter Director of the CD and he also has filed a claim with RP as a Creditor which has been accepted by the RP. Hon ble Supreme Court has held in GLAS Trust Company LLC v. BY JU Raveendran Ors. (Civil Appeal No. 9986 of 2024) that insolvency proceedings under the Code become proceedings in-rem from the date of admission by the Adjudicating Authority. This inter alia means that the claims/applications of all the affected parties have to be adjudicated by the AA. In this case, the appellant is an affected party as erstwhile promoter Director of CD and a Creditor of CD, so his application is very much maintainable and is covered by the Judgment of Hon ble SC in GLAS Trust supra. Therefore, we answer this question in affirmative. 31. The second issue relates to resolution of the CoC to handover the property White House, which is the corporate headquarter of the CD to respondent 2,3 4. It is the submission of the appellant that there was no clear decision of the CoC in this reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvocate to express his opinion regarding the handover of the Delhi office matter and he started with that the CIRP is about to end in 3 to 4 months of time and questioning the decision to divest the Corporate Debtor principal's office at this juncture as all the corporate operations are carried out from there only. He also stated that the change at this stage will affect the going concern and smooth operation of the business. At this juncture Form-G has been Published and RFRP has been issued to PRA'S. As this matter concerned with pre CIRP and claim has been lodged and also there was a direction from Tis Hazari Court which was modified by Honorable High Court and High Court order will be revised, so whether this Cost of shifting or acquiring a new office or due diligence done for this will affect the whole purpose of the resolution that CD gets back to his position. At this Stage having such a big office and suddenly moving to a small office with very few staffs would not promote the going concern and business operations rather affecting the moral of employees but may also create panic among them. Until the RP finds anything which concrete evidence for vacate the Delhi Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... j Kumar Singhee, Director of Nobel Dealcom Private Limited and Mr. Bhagwandas Agarwal,Director of Sincere Securities Private Limited [Operational Creditor] to expresses his views and he referred the order of the court CS (COMM) No 1291/20 dated 01.10.2022 and as on 01.11.2022. He briefs the facts of the case before COC members. The another operational creditors representing B.D. Agarwal representing Sincere Securities Private Limited who is one of the owner of the Delhi office repeatedly questioning how can one hold office without payment of occupational charges and expresses his opinion similar to other operational creditor i.e., Mr. Manoj Kumar Singhee and after that COC member takes the note of it. After that COC members express their opinion that there is Specific rules and regulation that has to be followed by each and every one. Every decision of the COC is being taken after the recommendation of the COC and by the RP, so COC members with 100% voting shares have taken the decision that Delhi office should be vacated in the last meeting/and they may take various legal opinions at various sources but the legal opinion presented by M/s. Nandini Impex Private Limited can force CO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was further discussed that Nobel Dealcom and Sincere securities has also moved an application before the Hon 'ble NCLT. The undersigned was requested to appear and take necessary steps. ( Emphasis supplied ) 36. It is seen from the extract of minutes of the 6th CoC that the CoC was seeking legal opinion from the advocate regarding vacation of the registered office, and till then the voting with respect to the same could not be done. It was further discussed that in view of applications filed by Nobel Dealcom and Sincere Securities before the AA, the RP should appear and take necessary steps. It is clear from the above, that there was no final decision of the CoC with proper voting, with regard to vacation of the registered office of the CD. 37. In our view the CoC does not appear to have taken a decision about vacation of registered office even in the 6th CoC meeting after which RP gave a statement in Court that the property is not required to be held based on which AA passed the impugned order. CoC at this stage also stated that they are in process of seeking legal opinion and till such time voting on the agenda could not be done. It is clear from the above that the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Duncan Industries (supra). The order in the instant case is reproduced below: 04.01.2023: Heard Learned Counsel for the Appellant. 2. This Appeal has been filed against the Order dated 14th September, 2022 passed by the Adjudicating Authority in I.A. No. 557(KB)2021. The Application was filed by the Lessor seeking the possession of the Flat which was in the possession of the Corporate Debtor and now in the possession of the Resolution Professional. A reply was filed to the said I.A. in which Resolution Professional made a statement in paragraph 9 which has been extracted by the Adjudicating Authority in paragraph 3(b) which is to the following Effect : b. In para 9 of this Affidavit reads as It is submitted that the said property has not been included in the pool of assets of the Corporate Debtor by the Resolution Professional. Hence, the Resolution Professional shall not transfer the possession of the property and/or create any third party rights on the said property during the course of the Corporate Insolvency Resolution Process of the Corporate Debtor. 3. The Adjudicating Authority after noticing the aforesaid statement made, directed the Resolution Professional to hand over t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en file an application before the AA for recovery of such property? In our view, such application before AA is not maintainable in terms of Section 14 (1) (d). 46. The situation might have been different, if such a prayer was made by the RP with express consent of Committee of Creditors. 47. The respondents have also referred to explanation to Section 18 (1) of the Code to argue that the term assets does not include the assets owned by a third party but in possession of the CD. They have argued that the corporate office is not an asset of the CD and cannot form part of the pool of the asset of the CD. The explanation to Section 18 (a) is extracted below: Explanation- For the purposes of this [Section], the term assets shall not include the following, namely:- (a) Assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment; 48. It should be mentioned that this definition of asset is in the context of duties of Interim Resolution Professional under Section 18 and such definition of asset is specific to Section 18 only. It is not connected to Section 14 (1) (d) in any manner. It is an admitted fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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