NCLAT reverses property transfer order finding IBC tribunal lacked jurisdiction over disputed property under Section 18(f)

The NCLAT set aside an NCLT order directing transfer of Igatpuri Unit property to the corporate debtor's nominee within 45 days. The tribunal held that since the appellant retained title under a 1998 agreement to sale where full consideration was never paid, neither the IRP/RP nor NCLT had jurisdiction over the property under Section 18(f) of IBC. The dispute regarding payment of remaining consideration and execution of sale deed predated the CIRP proceedings and required determination by a competent civil court, not under insolvency proceedings.

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Issues Involved:
1. Jurisdiction of NCLT in directing the transfer of property.
2. Validity and fulfillment of the agreement to sell.
3. Ownership and title of the Igatpuri property.
4. Compliance with the approved Resolution Plan.
5. Applicability of the doctrine of part performance.
6. Admissibility of claims during CIRP.

Summary:

1. Jurisdiction of NCLT in directing the transfer of property:
The NCLT exceeded its jurisdiction by directing the appellant to transfer the Igatpuri property to the Corporate Debtor (CD). The dispute regarding the agreement to sell, which was entered into in 1998, and its alleged breach, is beyond the scope of IBC proceedings and should be adjudicated by a competent civil court. The NCLT cannot adjudicate on pre-existing contractual disputes unrelated to insolvency, as established by the Supreme Court in Tata Consultancy Services Ltd vs. Vishal Ghisulal Jain and Embassy Property Developments Pvt Ltd vs. State of Karnataka.

2. Validity and fulfillment of the agreement to sell:
The agreement dated 03.09.1998 stipulated that the CD would pay Rs.2.25 Crores for the Igatpuri property in installments. The appellant claims the CD defaulted on payments, leading to the termination of the agreement. The CD argues that it settled the dues through a one-time settlement (OTS) by paying Rs.2 Crores and issuing Non-Convertible Debentures (NCD) worth Rs.31 Lakhs. The dispute over whether the OTS was fully honored remains unresolved and should be addressed in a civil court.

3. Ownership and title of the Igatpuri property:
The title of the Igatpuri property remains with the appellant as no sale deed has been executed in favor of the CD. As per Section 18(f) of the IBC, the Resolution Professional (RP) cannot take control of assets owned by third parties. The CD's possession of the property under the agreement to sell does not transfer ownership, which remains with the appellant until a registered sale deed is executed.

4. Compliance with the approved Resolution Plan:
The Resolution Plan approved by the NCLT on 07.12.2018 mentioned that the Igatpuri property dispute would be resolved post-approval. The appellant was not included in the Committee of Creditors (CoC) and was not provided with the entire Resolution Plan. The NCLT's directive to transfer the property without resolving the underlying dispute contradicts the plan's stipulations and the Supreme Court's rulings in Essar Steel and Ghanashyam Mishra cases.

5. Applicability of the doctrine of part performance:
The doctrine of part performance under Section 53-A of the Transfer of Property Act protects the possession of a transferee against the transferor but does not confer ownership. The CD's possession of the Igatpuri property does not entitle it to ownership without a registered sale deed. The CD can only protect its possession against the appellant, not claim ownership.

6. Admissibility of claims during CIRP:
The appellant's claim of Rs.40.86 Crores, including the Inter Corporate Deposit (ICD) and interest, was rejected by the RP. The appellant did not file a claim for the Igatpuri property, asserting that the agreement was terminated. The NCLT's reliance on the Resolution Plan to settle the property dispute is misplaced as the plan itself acknowledged the ongoing dispute.

Conclusion:
The NCLT's order directing the transfer of the Igatpuri property is set aside. The dispute over the agreement to sell and the fulfillment of the OTS should be adjudicated by a competent civil court. The title of the property remains with the appellant until a registered sale deed is executed. The appeal is allowed without any cost.

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