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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 ..... lenging the impugned Order dated 07.08.2023 passed by the Learned National Company Law Tribunal, Kolkata Bench (in short AA) in respect of two applications being IA (IBC)/1082(KB)2023 Noble Dealcom Private Limited (Respondent No.3) v. Sree Santanu Bhattacharjee (Resolution Professional/Respondent No.1) and IA (IBC)/1083(KB)2023 Sincere Securities Private Limited (Respondent No.2) v. Sree Santanu Bhattacharjee preferred in CP (IB) No. 1377/KB/2020, UCO Bank (Financial Creditor) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions for non-compliance on 08.08.2022. Subsequently, on 30.08.2022, the Commercial Court allowed an amendment recognizing the White House Property's value exceeding Rs. 6 crore. The relevant portion of the order dated 30.08.2022 is extracted below: "Let the plaintiff to file the amended plaint with due changes in the valuation clause paragraph as ordered above along with necessary court fees by next date and thereafter plaint will be returned to plaintiff for filing before Hon'ble High Court 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 (Sincer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, this Appellate Tribunal observed that the AA's impugned order failed to provide reasoning for the direction to vacate the White House Property, despite submissions by the Appellant, and did not address the applicability of Section 14(1)(d) of the Code to the property. 8. The appellant has cited para 19 of the Hon'ble Supreme Court Judgment in Raj Kishore Jha vs State of Bihar 2003 (11) SCC 519 and stated that Hon'ble SC has time and again observed that reason is the heartbeat of every conclusion and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and that vacating the property without a CoC resolution contravenes the Code and CIRP Regulations, specifically Sections 14 and 74, which outline necessary CoC approval for property possession recovery and set penalties for violations. 11. The appellant has argued that CoC of the CD could not have passed a resolution acting against Section 14 (1) (d) of the Code. It is pertinent to note that Section 14 (1) (d) of the Code is mandatory in nature and not merely a directory provision. In this regard, the appellant has cited the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paramount and non-justiciable. Further, he cited Hon'ble Supreme Court Judgment in K.Sashidhar v. Indian Overseas Bank and Essar Steel Judgment. 16. The RP has also raised the issue about the locus of the appellant to challenge the decision of the CoC taken in their commercial wisdom. In this regard he has cited decisions of the CoC in 4th and 5th CoC meetings. The counsel further stated that it is the admitted position that the asset (corporate office in Delhi) does not belong to the CD and the ownership of the asset lies with Respondents No. 2 to 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession of premises by an owner or lessor, when the CD is occupying the premises during the moratorium period. However, Section 14(1)(d) allows the CoC to use its discretion to hand over possession of the property if it is in the best interest of the CD. This principle was demonstrated in the case of Sangita Fiscal Services Pvt. Ltd. v. Duncan Industries Company Appeal (AT)(Ins.) No. 1522 of 2022, where the Tribunal permitted the CoC/Resolution Professional (RP) to hand over possession as the office space was not required by the CD. 20. The corporate 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. Despit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tis Hazari Court's order of 09.12.2021. The appellant admitted that the license fee during the CIRP period constitutes CIRP costs, per Regulation 31(b) of IBBI regulations. In the first CoC meeting, the CoC directed the RP to evaluate the necessity of retaining the Corporate Office due to high rental costs. The RP visited the property on 21.03.2023 and found minimal operations, just accounting by 8-9 employees. Subsequently, in the 3rd and 5th CoC meetings, the CoC decided there was no need to retain the office and instructed the RP to hand it over. Despite objections 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 inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave cited the Judgment of this Tribunal in Sangita Fiscal Services Pvt. Ltd. v. Duncan Industries, Company Appeal (AT) (Ins.) No. 1522 of 2022. Respondents have also question locus of the appellant in the present appeal. 28. They have also argued that the appellant has no locus in the case as the matter is between CD and third parties. 29. There are two issues which need to be decided in this appeal: (i) Whether the application of the appellant is maintainable; (ii) Keeping in mind the provisions of Section 14 (1) (d) of the code, whether CoC can take a decision to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided by COC to vacate the possession of Delhi office as early as possible but after discussing with Mr. Chandra Kant Khemka, suspended director in the last meeting submitted the legal opinion of advocate Mr. Tamoghna Saha and also he requested for 2 to 3 days of time for submitting another legal opinion from M/s KHAITAN & Co. and he submitted the legal opinion of Mr. Aman Gupta few hours before this CoC meetings and in the 5th COC meeting undersigned shared the legal opinion of Advocate Aman Gupta with the COC member. After that RP asked the representative of Corporate Debtor i.e., Mr. S. Mitra, Advocate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty or past or future money 5) payable and they are under criminal investigation of police. As there is only 3 to 4 months left for the entire process (CIRP) and can closed the main office, as our Plant & Machinery spread all over India in various states & In various sites as you are telling to vacate the office in 2 to 3 days and it became very difficult to control and manage. Another unwanted situation may arise with various contracts made by the company with various parties for the business operations and a panic situation may arise whether their contracts will continue or not. The undersigned asks Mr. Manoj 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 express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mittee of Creditors as may be deemed necessary for the smooth functioning of the corporate insolvency resolution process: Since all the discussions had been made as per the items mentioned in the agenda. Hence there was no requirement to take up any other agenda. During the meeting the issue with respect to the vacation of registered office was pointed out by the COC. Since the agenda was not in the list, the undersigned with the permission of the COC, put the agenda in any other matter. The COC has informed that they are in a process of seeking legal opinion from the advocate till then the voting with respect to the same could not be done. It 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 Securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of submissions by RP. It has been stated that the submission of RP was based on the decision of the CoC. We have seen in the paragraphs above that CoC had not taken any decision to release the property before the RP made his submissions before AA allowing release of property by the AA to Respondents No. 2 to 4. 42. It is the submission of respondents that Section 14 (1) (d) does not prohibit the RP or the CoC in its commercial wisdom to handover possession of a property belonging to the 3rd party in possession of CD in the best interest of keeping CD as a going concern. In this regard they have cited the order of this Tribunal in Sangita Fiscal Services Pvt. Ltd. v. 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 Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) An order be made for delivery of possession of the said premises situated at the Ground Floor (part of rear portion) comprising of 2400 sq. ft. of property at 1/18, 1/19 and 1/20, Ward No. XV at M.M. Road (Eastern Rear Portion) bearing municipal no.1/ 18-20, White House, Rani Jhansi Road, New Delhi-110055 by the Respondent No.1 to the applicants forthwith." 45. The main prayer in the I.A filed by the Respondents relates to recovery of possession. Section 14 (1) (d) of the code specifically prohibits the recovery of any property by the owner of lessor where such property is occupied by or in the possession of the CD. In such a situation, where there is a prohibition on recovery of property, can the owner/lessors even 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 poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the applications regarding prayers (b) and (c) shall be subject to the outcome of the present appeal and in case prayers made by the Applicant (Respondent No. 2 -4) is allowed then no payment shall be made to the applicant till the decision of this appeal. It is needless to mention that the Tribunal shall also consider the application i.e I.A. No. 1412 of 2023 filed by the Appellant. The application is disposed of accordingly." 51. The following emerges from the discussion above: i. the appellant has locus to file this appeal ii. The order of AA in the I.A No. 1083 filed by Respondent No.2 and I.A. No. 1082 filed by Respondent No. 3 to 4 has been passed on the prayer of owner/lessor. The RP has only supported the contention of Respondents No. 2 to 4. The AA has not examined the maintainability of such application by owner/lessor in view of express provision under Section 14 (1) (d) of the Code. iii. The issue of supremacy of commercial wisdom of CoC could not be considered at this stage as the prayer in the I.As was filed by owners/lessors and not by RP/ Respondent No.1 acting with express consent of CoC. iv. The order of AA does not give detailed reasons fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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