Resolution Professional gets possession of tea gardens with valid leasehold rights under Section 18(f) IBC

NCLAT held that Resolution Professional was entitled to take possession of three tea gardens (Garganda, Kilcott, and Bagracote Div-I) where Corporate Debtor had valid subsisting leasehold rights through renewed lease deeds. The tribunal found that leasehold rights constitute intangible assets under Section 18(f) of IBC. Non-payment of Salami under West Bengal Estate Acquisition Rules 1954 did not invalidate the renewals as executed lease deeds did not specify Salami amounts. NCLAT partially set aside lower court orders rejecting RP's applications for these three gardens, while upholding rejection for expired leases. Possession taken by third parties after moratorium violated Section 14(1)(d) for Kilcott and Bagracote estates.

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Issues Involved:

1. Whether the Corporate Debtor has leasehold rights in the Tea Gardens, which are assets of the Corporate Debtor to be taken control by the Resolution Professional under Section 18(f) and Section 25 of the I&B CodeRs.
2. Whether the leases of Tea Gardens, whose period of lease had come to an end before the commencement of the CIRP, shall be deemed to be renewed if applications for renewal were filed by the Corporate Debtor and no decision was communicated by the StateRs.
3. Whether the renewal of the lease deed of Kilcott Tea Estate w.e.f. 15.11.1995 till 23.08.2025, Garganda w.e.f. 08.11.1996 to 18.09.2026, and Bagracote-I dated 19.06.1998 are valid renewalsRs.
4. Whether non-payment of Salami as required under West Bengal Estate Acquisition Rules 1954 by the Corporate Debtor while executing the renewal of the lease deed makes the renewal void and inoperativeRs.
5. Whether the order dated 28.05.2021 passed by the Adjudicating Authority in IA No.1256/KB/2020 rejecting the application with regard to four Tea Gardens - Dhumchipara, Garganda, Tulsipara, and Hantapara deserves to be set asideRs.
6. Whether the Adjudicating Authority committed an error in relying on the order dated 28.05.2021 in IA No.1256/KB/2020 while deciding the subsequent applications filed by the Resolution Professional for taking possession of different Tea EstatesRs.
7. Whether possession taken by Sammelan and Merico subsequent to the order dated 05.03.2020 is in violation of provisions of Section 14 of the I&B Code with respect to Tea Gardens except the four Tea Gardens which were the subject matter of IA No.1256/KB/2020Rs.
8. Whether Appellants are entitled to be handed over the possession of all the Tea Estates for which applications were filedRs.
9. Relief, if any, to which Appellant may be entitledRs.

Issue-wise Detailed Analysis:

Issue 1:
The Corporate Debtor's leasehold rights in the Tea Gardens are considered assets under Section 18(f) and Section 25 of the I&B Code. The leasehold rights are intangible assets, and the Resolution Professional (RP) is responsible for taking control and custody of such assets. The Hon'ble Supreme Court in 'Victory Iron Works Ltd. vs. Jitendra Lohia & Anr.' held that development rights created in favor of the Corporate Debtor constitute property within the meaning of Section 3(27) of the IBC.

Issue 2:
The leases of Tea Gardens whose period of lease had come to an end before the commencement of the CIRP do not automatically renew even if applications for renewal were filed and no decision was communicated by the State. The law requires execution of a document for renewal, and there is no concept of automatic renewal of leases. The Hon'ble Supreme Court in 'Hardesh Ores (P) Ltd. vs. Hede & Company' emphasized that renewal of an agreement or lease requires execution of a document evidencing the renewal.

Issue 3:
The renewal of the lease deed of Kilcott Tea Estate w.e.f. 15.11.1995 till 23.08.2025, Garganda w.e.f. 08.11.1996 to 18.09.2026, and Bagracote-I dated 19.06.1998 are valid renewals. The execution of these renewal lease deeds by competent authorities and their registration make them valid. The non-payment of Salami does not invalidate the renewal, although the State may demand Salami through appropriate legal channels.

Issue 4:
Non-payment of Salami as required under the West Bengal Estate Acquisition Rules 1954 does not make the renewal void and inoperative. The renewal lease deeds executed and registered are valid unless canceled by the State through due process. The State can demand Salami but cannot declare the lease deeds void solely on the basis of non-payment.

Issue 5:
The order dated 28.05.2021 passed by the Adjudicating Authority in IA No.1256/KB/2020 is partly set aside insofar as it relates to Garganda Tea Garden. The Corporate Debtor had a subsisting leasehold right in Garganda, and the RP was entitled to take custody and possession of this Tea Garden.

Issue 6:
The Adjudicating Authority committed an error in relying on the order dated 28.05.2021 in IA No.1256/KB/2020 while deciding subsequent applications filed by the RP for taking possession of different Tea Estates. The subsequent applications involved different grounds and Tea Gardens, and each case should have been considered on its own merits.

Issue 7:
The possession taken by Sammelan and Merico subsequent to the order dated 05.03.2020 violates Section 14 of the I&B Code with respect to Tea Gardens where the Corporate Debtor had subsisting rights, i.e., Kilcott and Bagracote. The enforcement of the moratorium under Section 14 prohibits recovery of property occupied by or in possession of the Corporate Debtor.

Issue 8:
The RP is entitled to be handed over the possession of Tea Gardens where the Corporate Debtor had subsisting leasehold rights, specifically Garganda, Kilcott, and Bagracote-I. The orders rejecting the IAs of RP with respect to these Tea Gardens are set aside.

Relief:
The appeals are disposed of as follows:
- Company Appeal (AT) (Insolvency) No. 672 of 2021 is partly allowed, setting aside the order dated 28.05.2021 in IA No.1256/KB/2020 concerning Garganda Tea Garden.
- Company Appeal (AT) (Insolvency) No.593 of 2022 is partly allowed, setting aside the order dated 21.04.2022 in IA No.1111/KB/2021 concerning Kilcott Tea Garden.
- Company Appeal (AT) (Insolvency) No.754 of 2022 is partly allowed, setting aside the order dated 09.05.2022 in IA No.665/KB/2021 concerning Bagracote Div.I Tea Garden.
- Company Appeal (AT) (Insolvency) No.628 of 2022 and Company Appeal (AT) (Insolvency) No.907 of 2022 are dismissed.
- The RP shall be deemed to be in possession of the Tea Gardens of Garganda, Kilcott, and Bagracote, and their operation shall be under the supervision and control of the RP till the CIRP continues.

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