2022 (3) TMI 408 - Tri - Insolvency and Bankruptcy

Tribunal Rules in Favor of NOIDA in Lease Agreement Breach Case

The Tribunal found in favor of the Applicant, NOIDA, stating that the Corporate Debtor had breached the terms of the lease agreement by creating a ... Seeking to direct the Respondent to not accept any resolution plans which propose a composite Scheme - seeking to grant a stay on the voting of the resolution plan - whether without permission of this Authority a Composite Scheme can be considered? - HELD THAT:- It is the case of the Applicant that there are no other provisions for creating any interest whatsoever in favour of a third party, other than the ones that are provided in the Lease and the Sub-Lease Deeds, therefore, the Respondent has violated the terms provided under the Lease Deed as well as the Sub Lease Deed as the Lessee had to take prior permission of the Lessor for transferring the Plot to a third party or for creating any interest of a third party in the Plot. Further, no permission from the Applicant was taken to enter into the Collaboration Agreement; therefore, it is non-est in the eyes of law and is an instrument of fraud to deprive Applicant of the rights over the Plot as a Lessor - The Clause II (h) of the Lease Deed provides for construction of the building and development on the property had to be done as per development norms and controls prescribed under the Scheme/Building regulations and as per the directions of the Lessor. The Applicant has referred to the Clause III of the Lease Deed and other clauses which provide for obtaining prior approval from the Applicant. The Clause provides that the Lessee was entitled to sublease the sports, other facilities and instrumental activity only after obtaining the prior approval of the Lessor and the commercial, residential area can be leased after executing a tripartite agreement between the Lessee, the proposed Sub-Lessee and the Lessor, as per prevailing transfer policy, at time of such transfer. In terms of Clause 111(3) of the Sub-lease Deed, in case of breach by the Lessee of any of the terms and conditions of the Sub-Lease Deed, building bye laws or other rules framed or directions, the Lessor had the rights to cancel/terminate the sub-lease Deed and forfeit the deposits paid by the Sub-lessee. The Corporate Debtor has violated the terms of the lease agreement, when a sublease has been created between the parties, the Corporate Debtor ought to have taken permission from NOIDA, since there is no such permission, the contention of the Applicant is correct - application is allowed. Issues:1. Violation of terms of lease agreement by Corporate Debtor in creating a sublease without permission.2. Consideration of a composite scheme without permission of the Authority.Analysis:Issue 1:The Applicant, New Okhla Industrial Development Authority (NOIDA), filed an application under Section 60 of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) seeking various reliefs related to the Corporate Debtor's actions regarding a lease agreement and subsequent sublease. The lease agreement involved a plot of land for the development of a sports city, and a sublease was later created involving M/s. Brys International Pvt. Ltd. The Applicant argued that the Corporate Debtor did not seek approval for this sublease, which was a violation of the terms of the lease agreement. The Respondent, on the other hand, contended that the sublease was in line with industry practices and did not require NOIDA's approval. The Respondent also highlighted that the Collaboration Agreement for the sublease was executed before the initiation of the Corporate Insolvency Resolution Process (CIRP), and therefore, did not impact the resolution proceedings. The Tribunal found that the Corporate Debtor indeed violated the terms of the lease agreement by creating a sublease without NOIDA's permission.Issue 2:The key issue for consideration was whether a composite scheme involving the Corporate Debtor and M/s. Brys International Pvt. Ltd. could be considered without permission from the Authority. The Applicant argued that the Collaboration Agreement transferring development rights to M/s. Brys International was invalid as it was done without NOIDA's approval, which was required as per the lease agreement. The Respondent, however, maintained that the Collaboration Agreement did not violate any insolvency resolution laws or practices and that the Applicant had participated in the resolution process, including approving a common process advisor. The Tribunal ultimately sided with the Applicant, stating that the Corporate Debtor's actions were indeed in violation of the lease agreement terms, and therefore, the application was allowed.In conclusion, the Tribunal found in favor of the Applicant, NOIDA, stating that the Corporate Debtor had breached the terms of the lease agreement by creating a sublease without proper permission. The application was allowed, and relief was granted to the Applicant in accordance with the violations identified in the judgment.