2022 (4) TMI 1478 - HC - Insolvency and Bankruptcy

Inclusion of Leasehold Rights in Liquidation Estate Upheld, Alternative Remedy Available

MK RESELY S/O M.S. KOCHUTHAMPI, M.K. FAISAL S/O M.S. KOCHUTHAMPI, MK ANAS S/O M.S. KOCHUTHAMPI, ANCY MOL, AMINA S MURICKOLLI HOUSE, DR MOHAMMED ISMAIL SON OF M.K MOHMAMMED ALI, MADAVANA, PATHAIKKARA, PERINTHALMANNA, KERALA, MK NABEEL, SHAILA ISMAIL, KERALA Versus UNION BANK OF INDIA ERATTUPETTA BRANCH, MEENACHIL EAST CO-OPERATIVE BANK, REPRESENTED BY ITS CHIEF MANAGER, C.A. MAHALINGAM SURESH KUMAR LIQUIDATOR OF MS. RAIHAN HEALTHCARE PRIVATE LIMITED, MS. SPP & CO., CHARTERED ACCOUNTANTS, NATIONAL COMPANY LAW TRIBUNAL COMPANY LAW BHAVAN, KAKKANAD KOCHIREPRESENTED BY ITS REGISTRAR

The High Court upheld the NCLT's order directing the inclusion of the leasehold rights in the Liquidation Estate, emphasizing the need for possession to ... Maintainability of petition - availability of alternative remedy - Mortgaged property of the petitioners mortgaged to 1st and and 2nd respondents as guarantors - to be included in liquidation estate of the Company M/s.Raihan Health Care Private Limited. or not - HELD THAT:- This Court finds that against Ext.P14 order of the NCLT, the petitioners have an alternate remedy of appeal to the NCLAT under Section 61 of the IBC. It is true that a writ petition was found maintainable earlier as is seen from Ext.P4 judgment. In Ext.P4 judgment, this Court found that the order of the NCLT impugned therein lacks clarity inasmuch as whether what is directed to be included in the liquidation estate is leasehold rights of the corporate debtor or the ownership rights of the petitioners or both. If the ownership rights of the petitioners are included in the liquidation estate that would be against Section 36 of IBC and that would give rise to a cause of action to the petitioners to invoke Article 226 of the Constitution of India, especially when the order is passed without hearing the petitioners. What is directed to be included in the Liquidation Estate, is the leasehold rights given to the Bank. Such leasehold rights can be included in the Liquidation Estate. The Tribunal passed the order after hearing the petitioners. In the facts and circumstances of the case, the judgments in Embassy Property Developments Private Limited [2019 (12) TMI 188 - SUPREME COURT] and Pushpa Shah [2019 (3) TMI 1688 - BOMBAY HIGH COURT] are of no assistance to the petitioner, fromwhere it can be inferred that when there is lack of jurisdiction in NCLT to include 3rd party's properties in Liquidation Assets, a writ petition under Article 226 is maintainable. This Court does not find any reason to entertain a writ petition under Article 226 of the Constitution of India, when the petitioners have alternate remedy of appeal as provided under the IBC - Petition dismissed. Issues:1. Inclusion of personal properties of petitioners in the liquidation estate under the Insolvency and Bankruptcy Code, 2016.Detailed Analysis:Issue 1: Inclusion of personal properties of petitioners in the liquidation estate under the Insolvency and Bankruptcy Code, 2016:The petitioners mortgaged their properties to secure the dues of M/s. Raihan Health Care Private Limited, which led to the National Company Law Tribunal (NCLT) appointing a Liquidator. The main contention was whether the personal properties of the petitioners, which were mortgaged to the Banks as guarantors, could be included in the Liquidation Estate. The High Court found that the leasehold rights of the corporate debtor, which were mortgaged to the Banks, could be included in the Liquidation Estate as per Section 36(3) of the IBC. However, the ownership rights of the petitioners, which were still with them but mortgaged to the Bank, raised doubts on their inclusion in the Liquidation Estate. The High Court set aside the NCLT's order allowing the Liquidator to add the mortgaged land of the petitioners into the Liquidation Estate, directing the NCLT to reconsider the issue after giving an opportunity of hearing to the petitioners.The NCLT later affirmed its order directing the Banks to hand over the physical possession of the mortgaged leasehold land of the corporate debtor to the Liquidator for the Liquidation Estate. The Liquidator argued that the personal properties of the petitioners, being assets mortgaged to financial creditors, were bound to be included in the Liquidation Estate to maximize realization value for stakeholders. The NCLT emphasized the necessity of obtaining possession of the property for the Liquidator to dispose of the assets and settle claims.The High Court reiterated that the leasehold rights of the corporate debtor could be included in the Liquidation Estate, as directed by the NCLT after hearing the petitioners. The Court found that the judgments cited by the petitioners were not applicable in this case, and since the petitioners had an alternate remedy of appeal to the NCLAT under the IBC, a writ petition under Article 226 was not maintainable. Therefore, the writ petition challenging the inclusion of personal properties in the Liquidation Estate was dismissed.In conclusion, the High Court upheld the NCLT's order directing the inclusion of the leasehold rights in the Liquidation Estate, emphasizing the need for possession to maximize realization value, and dismissed the writ petition due to the availability of an alternate remedy through appeal under the IBC.