2021 (4) TMI 1305 - Tri - Insolvency and Bankruptcy

Owner/Lessor cannot reclaim leased property during moratorium; Rental arrears part of Insolvency Resolution Process

V. Karuppiah, K.R. Poomani Versus V. Mahesh Resolution Professional of M/s. Vasan Health Care Private Limited

V. Karuppiah, K.R. Poomani Versus V. Mahesh Resolution Professional of M/s. Vasan Health Care Private Limited - TMI Issues Involved:1. Whether the Owner/Lessor can recover the leased property from the Corporate Debtor during the moratorium period.2. Whether the Respondent should pay the Applicants the claimed rental arrears plus GST for the period of moratorium and future rents until possession is handed over.Issue-Wise Detailed Analysis:Issue 1: Recovery of Leased Property During MoratoriumThe primary question was whether the Owner/Lessor could recover the leased property from the Corporate Debtor during the moratorium period. The Tribunal referred to Section 14(1)(d) of the Insolvency and Bankruptcy Code (IBC), 2016, which explicitly prohibits the recovery of any property occupied by the Corporate Debtor during the moratorium period. The Tribunal cited the Hon’ble NCLAT's decision in M/s Navbharat Castings LLP vs. M/s Moserbear India Ltd., which held that 'the recovery of the property by the owner occupied by the Corporate Debtor is not permissible during the period of moratorium.'The Tribunal also referenced Section 14 of IBC, which provides for a moratorium as a sequel to the order of admission of an application under Sections 7, 9, or 10 of IBC, prohibiting recovery of any property by an Owner or Lessor where such property is occupied by or in possession of the Corporate Debtor. The moratorium lasts until the completion of the Corporate Insolvency Resolution Process (CIRP).Given these provisions, the Tribunal concluded that directing the Corporate Debtor to vacate the premises during the moratorium would violate Section 14 of IBC. Therefore, the first relief sought by the Applicants could not be granted.Issue 2: Payment of Rental Arrears and Future RentsRegarding the second relief, the Applicants sought payment of Rs. 99,12,000 plus GST for 12 months, and future rent at Rs. 7,00,000 plus GST per month until possession of the leased property was handed over. The Tribunal acknowledged that although the full amount claimed by the Applicants had not been paid, the Respondent had made partial payments. The Respondent argued that the rental dues during the moratorium should be treated as CIRP costs, which are paid in priority.The Tribunal noted that negotiations were ongoing with landlords for rent reduction and that the Respondent planned to downsize the number of operational centers. The Tribunal held that the rental arrears due during the moratorium would fall within the domain of CIRP costs, which are to be paid in priority, whether a Resolution Plan is approved or the Corporate Debtor is ordered for liquidation.Conclusion:The Tribunal concluded that the Corporate Debtor could not be directed to vacate the premises during the moratorium period, and the rental arrears due to the Applicants would form part of the CIRP costs, to be paid in priority. The application was disposed of accordingly.