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Issues: (i) Whether the long-term lease granted by the corporate debtor in favour of the related party, without the secured creditor's consent and with a renewal covenant, was illegal and liable to be declared void. (ii) Whether the attachment made by the Economic Offences Wing over the corporate debtor's property could be directed to be released in view of the insolvency proceedings.
Issue (i): Whether the long-term lease granted by the corporate debtor in favour of the related party, without the secured creditor's consent and with a renewal covenant, was illegal and liable to be declared void.
Analysis: The property was already mortgaged to the bank when the corporate debtor executed the lease. The rent fixed for a valuable commercial property for a 10-year period was found to be grossly inadequate, and the lessee was given the unilateral right to seek renewal. The lease was entered into with an associated person of the corporate debtor, which supported the finding of a preferential and fraudulent arrangement. The covenant for renewal was held to be impermissible under the relevant property law principle applied by the Tribunal. The absence of prior written consent from the secured creditor, despite a contractual restriction in the mortgage deed, further rendered the transaction invalid.
Conclusion: The lease agreement was held to be illegal, mala fide, null and void, and the relief was granted in favour of the petitioner.
Issue (ii): Whether the attachment made by the Economic Offences Wing over the corporate debtor's property could be directed to be released in view of the insolvency proceedings.
Analysis: The Tribunal held that the Insolvency and Bankruptcy Code has overriding effect by virtue of its non-obstante clause. Since continuation of the attachment would impede the corporate insolvency resolution process and prejudice the interests of creditors, the attachment was treated as having no binding force in law. The Tribunal therefore directed release of the attached assets to facilitate resolution proceedings.
Conclusion: The attachment was directed to be released and the relief was granted in favour of the petitioner.
Final Conclusion: The miscellaneous application succeeded, and the Tribunal granted possession-related reliefs, ordered release of attached assets, and invalidated the impugned lease arrangement.
Ratio Decidendi: A related-party lease of mortgaged property, executed without the secured creditor's consent and containing an impermissible renewal covenant, can be declared void, and any inconsistent attachment must yield to the overriding effect of the Insolvency and Bankruptcy Code.
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