Leasehold rights may enter the liquidation estate when they are transferable corporate assets under a valid amalgamation scheme.

Leasehold rights under a lease deed can form part of a corporate debtor's insolvency estate where they are transferable property interests and have been brought within the debtor's asset schedule through a valid amalgamation scheme. The Tribunal held that deciding whether an asserted asset belongs to the corporate debtor is an insolvency question within the jurisdiction of the adjudicating authority and appellate tribunal. It further held that only the leasehold interest, not the underlying land owned by the lessor, was included in the liquidation estate, and that the liquidator could take custody and advertise the leasehold asset for sale. The appeal therefore failed and the rejection of the appellant's application was upheld.

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Issues: (i) Whether the Appellate Tribunal could examine inclusion of the leased land and leasehold rights in the liquidation estate of the corporate debtor. (ii) Whether the leasehold rights in the subject land formed part of the corporate debtor's assets and could validly be included in the liquidation estate.

Issue (i): Whether the Appellate Tribunal could examine inclusion of the leased land and leasehold rights in the liquidation estate of the corporate debtor.

Analysis: The dispute concerned whether the subject land, though owned by the lessor, had been validly brought within the corporate debtor's insolvency estate through the lease and subsequent amalgamation. The Tribunal held that determining whether an asserted asset belongs to the corporate debtor is a question arising out of or in relation to the insolvency process and can be examined by the adjudicating authority and appellate tribunal. The Tribunal distinguished cases where the forum was asked to enter into the validity of a lease grant or an independent governmental decision, and held that the present issue was confined to whether the corporate debtor had leasehold rights capable of being treated as assets in insolvency. The Tribunal also noted that the lessor had not initiated steps to determine the lease before CIRP and that the challenge to the amalgamation scheme itself could not displace the insolvency forum's power to decide whether the leasehold interest formed part of the estate.

Conclusion: The issue was answered in favour of the respondent. The Tribunal held that the matter was within insolvency jurisdiction and could be adjudicated by the NCLT and NCLAT.

Issue (ii): Whether the leasehold rights in the subject land formed part of the corporate debtor's assets and could validly be included in the liquidation estate.

Analysis: The lease deed granted only leasehold rights, but those rights were valuable property interests. The Tribunal found that the original lessee's amalgamation with the corporate debtor, followed by rectification of the amalgamation order, brought the leased property within the schedule of assets transferred to the corporate debtor. From the correspondence between the parties and the conduct of the lessor, the Tribunal inferred implied consent to the inclusion of the leasehold property in the amalgamation scheme. It further held that the lease was never lawfully determined, that the leasehold rights were not ownership of the land but remained transferable intangible assets of the corporate debtor, and that the bar on including third-party assets in liquidation did not apply because only the leasehold interest, not the land itself, formed part of the estate. On that basis, the liquidator was entitled to take custody and control of the leasehold asset and advertise it for sale as part of the liquidation estate.

Conclusion: The issue was answered in favour of the respondent. The Tribunal held that the leasehold rights were assets of the corporate debtor and were validly included in the liquidation estate.

Final Conclusion: The appeal failed, and the order rejecting the appellant's application was upheld, leaving the leasehold interest to remain within the liquidation estate of the corporate debtor.

Ratio Decidendi: Leasehold rights created under a lease deed and transferred through a valid amalgamation scheme constitute an asset of the corporate debtor for insolvency purposes and may be included in the liquidation estate, while the adjudicating authority has jurisdiction to decide whether such rights form part of that estate.

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