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

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

The Tribunal rejected and disposed of the Interlocutory Application, holding that the Corporate Debtor's legal rights under the registered Lease-Cum-Sale ... Seeking to declare that the Lease Property is not an asset of the Corporate Debtor and shall not form part of the resolution plan - transfer of the Lease Property or continuation of the lease arrangement in relation to the Lease Property shall be subject to strict compliance with the Agreement and the express approval of the Applicant herein, or not - seeking direction to Respondent No. 1 and Respondent No. 2 to refrain from taking any action in relation to the Lease Property - HELD THAT:- The registered Lease Deed is not a mere Lease Deed and is a registered Lease-Cum-Sale-Agreement under which the Corporate Debtor has already acquired possessory legal rights under the registered document. It is also very clear from the above terms that the Lessee has a right to ask for extension of the lease or for purchasing the above property with absolute rights at the price determined by the Corporation. In fact, the Corporate Debtor has already requested the Applicant/KIADB to fix the price of the land that was allotted to them by means of letter dated 18.10.2016 so as to obtain Sale Deed by them for which the Applicant/KIADB vide their letter dated 28.11.2016 informed the Corporate Debtor that the board of the Applicant/KIADB has not yet fixed the final price to the said industrial area and hence the Sale Deed cannot be considered at this stage. Of course, the Applicant/KIADB also issued notice under Section 34 B of KIAD Act of 1966 to the Resolution Professional to remedy the alleged breaches said to have been committed by the Corporate Debtor in their notice. It is clear from the terms and conditions of the Lease Deed as well as the various correspondence relied by them that the Corporate Debtor is in physical possession and enjoyment of the land allotted to them under the above registered Lease Deed and both parties are alleging breach of terms and conditions of the registered Lease-Cum-Sale-Agreement against each other and the Applicant/KIADB could not evict the Corporate Debtor due to kicking of moratorium. Thus, it is held that whatever legal rights the Corporate Debtor had already acquired under the above registered Lease-Cum-Sale-Agreement shall continue to vest with the Resolution Applicant and the Resolution Applicant is entitled to continue in possession of the property till the Resolution Applicant is evicted under due process of law - application dismissed. 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.