2022 (9) TMI 1343 - Tri - Insolvency and Bankruptcy

Tribunal upholds Resolution Applicant's rights under Lease-Cum-Sale Agreement

Karnataka Industrial Areas Development Board Versus Shri. Nandkishor Vishnupant Deshpande Resolution Professional, Etco Denim Pvt. Ltd., Committee of Creditor Etco Denim Pvt. Ltd.

Karnataka Industrial Areas Development Board Versus Shri. Nandkishor Vishnupant Deshpande Resolution Professional, Etco Denim Pvt. Ltd., Committee of ... Issues Involved:1. Whether the reliefs sought by the Applicant/KIADB are capable of being granted by this TribunalRs.2. Whether the subject matter of property can be treated as the asset of the Corporate DebtorRs.Issue-wise Detailed Analysis:Issue 1: Whether the reliefs sought by the Applicant/KIADB are capable of being granted by this TribunalRs.The Applicant, Karnataka Industrial Areas Development Board (KIADB), sought reliefs including the declaration that the Lease Property is not an asset of the Corporate Debtor and should not form part of the resolution plan. They also requested that any transfer or continuation of the lease arrangement should comply strictly with the Agreement and require express approval from the Applicant. Additionally, they sought to restrain the Respondents from taking any action in relation to the Lease Property.The Tribunal noted that the lease period expired on August 11, 2020, and the lease was neither extended nor terminated due to the moratorium imposed from the date of admission of the Company Petition on February 14, 2020. The Tribunal examined the terms and conditions of the registered Lease-Cum-Sale Agreement, highlighting clauses that provided the Corporate Debtor with possessory legal rights and the option to purchase the property at a price determined by KIADB. The Tribunal concluded that the Corporate Debtor had already acquired legal rights under the registered document and was in physical possession of the land. Therefore, the Tribunal held that the Corporate Debtor's legal rights would continue to vest with the Resolution Applicant, and the Resolution Applicant could continue in possession of the property until evicted under due process of law.Issue 2: Whether the subject matter of property can be treated as the asset of the Corporate DebtorRs.The Tribunal examined the Lease-Cum-Sale Agreement and noted that it was not a mere lease deed but a registered agreement under which the Corporate Debtor had acquired possessory legal rights. The Corporate Debtor had requested KIADB to fix the price of the land for obtaining a sale deed, but KIADB had not yet fixed the final price. The Tribunal observed that both parties were alleging breaches of the terms and conditions of the agreement against each other. The Tribunal cited the Supreme Court's decision in M/s Embassy Property Developments Pvt. Ltd. Vs. State of Karnataka & others, emphasizing that no person in settled possession of immovable property could be evicted by force except under due process of law. Consequently, the Tribunal held that the remedy for KIADB was to approach a competent Civil Court for the reliefs claimed, and the Corporate Debtor's legal rights under the agreement would continue to vest with the Resolution Applicant.Conclusion:The Tribunal rejected and disposed of the Interlocutory Application 957/2022, holding that the Corporate Debtor's legal rights under the registered Lease-Cum-Sale Agreement would continue to vest with the Resolution Applicant, who could remain in possession of the property until evicted under due process of law. The Resolution Applicant was also at liberty to approach KIADB for either an extension of the lease period or for purchasing the property, which KIADB could consider at their discretion as per their rules.