2022 (5) TMI 312 - AT - Insolvency and Bankruptcy

Tribunal Rules Appellant Can't Cancel Lease During Moratorium Period

Maharashtra Industrial Development Corporation Versus Santanu T. Ray, Resolution Professional & Anr.

Maharashtra Industrial Development Corporation Versus Santanu T. Ray, Resolution Professional & Anr. - TMI Issues Involved:1. Whether after initiation of CIRP and enforcement of ‘Moratorium’ under Section 14, the Appellant could have cancelled the lease and taken possession of the plot during CIRP.2. Whether the Adjudicating Authority had jurisdiction to entertain MA No.3691 of 2019 praying for quashing the Notice dated 08.11.2019.3. Relief, if any, to which the Appellant is entitled in this Appeal.Detailed Analysis:Issue 1: Whether after initiation of CIRP and enforcement of ‘Moratorium’ under Section 14, the Appellant could have cancelled the lease and taken possession of the plot during CIRP.The tribunal examined Section 14 of the Insolvency and Bankruptcy Code, 2016, which imposes a moratorium prohibiting actions such as the institution or continuation of suits against the corporate debtor, transferring or disposing of any assets, and the recovery of any property by an owner or lessor. The tribunal referred to the Supreme Court's judgment in *Rajendra K. Bhutta vs. Maharashtra Housing and Area Development Authority* which emphasized the statutory freeze during the moratorium period to preserve the corporate debtor's status quo and facilitate its resolution process. It was held that the moratorium under Section 14(1)(d) prohibits the recovery of any property by an owner or lessor if it is occupied by or in the possession of the corporate debtor. The tribunal concluded that the Appellant could not have taken possession of the leased property during the moratorium period as it would violate Section 14(1)(d).Issue 2: Whether the Adjudicating Authority had jurisdiction to entertain MA No.3691 of 2019 praying for quashing the Notice dated 08.11.2019.The tribunal discussed the jurisdiction of the Adjudicating Authority under Section 60(5) of the Insolvency and Bankruptcy Code, which allows the NCLT to adjudicate disputes related to the insolvency resolution process. The tribunal referred to the Supreme Court's judgment in *Gujarat Urja Vikas Nigam Limited vs. Amit Gupta* which held that the NCLT can adjudicate disputes arising solely on the ground of the insolvency of the corporate debtor. The tribunal also noted the judgment in *Embassy Property Developments Private Limited vs. State of Karnataka* which clarified that the NCLT does not have jurisdiction over decisions taken by the government or statutory authorities in the realm of public law. The tribunal concluded that the Adjudicating Authority had jurisdiction to entertain the application for quashing the Notice dated 08.11.2019 as it was related to the insolvency resolution process and the moratorium under Section 14.Issue 3: Relief, if any, to which the Appellant is entitled in this Appeal.The tribunal upheld the Adjudicating Authority's order quashing the Notice dated 08.11.2019 during the currency of the moratorium. It clarified that the quashing of the notice does not create any fetter on the Appellant's rights to take appropriate action for breach of the lease terms after the CIRP is over. The tribunal also addressed the Appellant's apprehension that the plot might be dealt with in the Resolution Plan and handed over to the Successful Resolution Applicant. The tribunal stated that the Resolution Applicant cannot acquire better rights than those held by the Corporate Debtor under the lease deed, and after the CIRP is over, the Appellant can take appropriate action in accordance with the lease terms.Conclusion:The tribunal disposed of the appeal with the following directions:1. The direction issued by the Adjudicating Authority in paragraph 13 is upheld, as it was issued in reference to Section 14 of the Code.2. After the CIRP is over, the Appellant can deal with the lease land in accordance with its rights under the Lease Deed dated 20.01.2015.3. If the plot is included in the Resolution Plan, the Resolution Applicant shall not acquire any better rights than those held by the Corporate Debtor under the lease deed, and the Appellant can take appropriate action after the CIRP is over.The appeal was disposed of with the aforementioned directions.