Leave and licence disputes in insolvency: moratorium did not shield a defaulting occupant from eviction and dues directions.
A leave and licence occupant could not avoid licence fee by relying on unauthorised correspondence or an alleged set-off for approval and fit-out expenses; the contractual obligation to pay after the fit-out period continued. The adjudicating authority was competent to direct surrender of possession where the premises remained the corporate debtor's property and the dispute affected preservation of insolvency estate value. The moratorium under the Insolvency and Bankruptcy Code did not protect a third-party licensee from contractual default consequences, and action taken by the resolution professional with committee approval was not impermissible on the facts stated. The appeal was held to lack merit and the eviction and dues directions were left undisturbed.
Issues: (i) Whether the appellant was liable to pay license fee despite claiming adjustment of expenses allegedly incurred for approvals and fit-outs; (ii) Whether the Adjudicating Authority had jurisdiction to direct surrender of possession and deal with the dispute arising from the leave and licence arrangement; (iii) Whether the moratorium under the Insolvency and Bankruptcy Code barred termination of the leave and licence agreement or action against the appellant.
Issue (i): Whether the appellant was liable to pay license fee despite claiming adjustment of expenses allegedly incurred for approvals and fit-outs?
Analysis: The leave and licence agreement provided a 60-day fit-out period, with extension contemplated only in the event of pandemic-related restrictions. The correspondence relied upon by the appellant was held to be unauthorised and contrary to the agreement. The claimed arrangement for reimbursement or set-off against future licence fees was not accepted, and the appellant's obligation to pay licence fee after the fit-out period remained unchanged.
Conclusion: The issue was decided against the appellant.
Issue (ii): Whether the Adjudicating Authority had jurisdiction to direct surrender of possession and deal with the dispute arising from the leave and licence arrangement?
Analysis: The licensed premises remained the property of the corporate debtor, and the resolution professional was required to take control of assets and act on behalf of the corporate debtor. In insolvency proceedings, the Adjudicating Authority could entertain directions for handing over possession where title vested in the corporate debtor and the dispute impacted the insolvency process and preservation of value. The plea that only the Small Causes Court could decide the matter was rejected.
Conclusion: The issue was decided against the appellant.
Issue (iii): Whether the moratorium under the Insolvency and Bankruptcy Code barred termination of the leave and licence agreement or action against the appellant?
Analysis: The moratorium was held to protect the corporate debtor and its insolvency process, not to immunise a third-party occupant from contractual default consequences. The resolution professional, acting with committee approval, could issue notice and take action in accordance with the agreement and the Code. Termination of the agreement during moratorium was not found impermissible on the facts of the case.
Conclusion: The issue was decided against the appellant.
Final Conclusion: The appeal was found to be without merit, the impugned order was upheld, and the directions for eviction and payment of dues were left undisturbed.
Ratio Decidendi: In insolvency proceedings, the resolution professional may enforce contractual rights of the corporate debtor and seek repossession from a defaulting third party where the property belongs to the corporate debtor, and the moratorium does not bar action against such third party when taken in accordance with the contract and the Code.
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