Recovery of corporate debtor's property after resolution plan: s.60(5) jurisdiction upheld; MoU-based s.53A eviction defence rejected

The dominant issues were whether the AA retained jurisdiction under s.60(5) IBC to decide an application for recovery of a corporate debtor's asset after approval of the resolution plan, and whether an occupant could resist eviction by invoking s.53A TPA based on an MoU. The NCLAT held the AA could continue and decide the pending application, including after substitution of the SRA, since it concerned taking possession of the corporate debtor's asset; the jurisdictional objection failed. On merits, the MoU was unregistered, doubtful in contemporaneous existence, not an agreement to sell under applicable law, and could not support part-performance; s.53A protection was denied and eviction upheld. As possession was unauthorised, direction to pay usage charges (to be determined) was sustained and the appeal dismissed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the adjudicatory forum could continue to hear and decide the pending application for recovery of the corporate debtor's immovable asset after approval of the resolution plan, when the successful resolution applicant/corporate debtor was substituted in place of the resolution professional.

(ii) Whether the adjudicatory forum had jurisdiction under Section 60(5) of the IBC to examine the occupant's defence founded on a memorandum of understanding and decide entitlement to possession of an asset admittedly owned by the corporate debtor.

(iii) Whether the occupant could resist delivery of possession by invoking Section 53A of the Transfer of Property Act on the basis of an unregistered memorandum of understanding and asserted possession since 2020, particularly in light of the admitted ownership of the corporate debtor and the subsisting SEBI attachment prohibiting transfer/benefit.

(iv) Whether directions to vacate and hand over peaceful possession, and to pay fair usage charges (with permitted set-off of proven investments), were legally sustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Continuation of the asset-recovery application after resolution plan approval and substitution

Legal framework: The Court considered the effect of plan approval on continuation of a pending application originally filed by the resolution professional and later pursued after substitution of the successful resolution applicant/corporate debtor pursuant to an order permitting substitution.

Interpretation and reasoning: The Court found it decisive that the application seeking possession had been filed during the CIRP and was pending when the plan was approved. After plan approval, the pleadings were amended and substitution was allowed by a separate order, enabling the corporate debtor under new management/successful resolution applicant to prosecute the same relief. Since the application concerned taking control of an asset admittedly belonging to the corporate debtor, prosecution of the pending application was necessary and remained maintainable notwithstanding plan approval.

Conclusion: The Court rejected the objection that plan approval rendered the proceeding non-maintainable or that the adjudicatory forum could not decide it after substitution; continuation and adjudication post-approval were held valid.

Issue (ii)-(iv) (grouped): Jurisdiction under Section 60(5), validity of the possession-defence under Section 53A TPA, and sustainability of directions for handover and usage charges

Legal framework: The Court applied Section 60(5) of the IBC as conferring jurisdiction over questions of law/fact "arising out of or in relation to" insolvency, in the context of an application seeking control/custody of an asset of the corporate debtor. For the possession-defence, the Court examined Section 53A of the Transfer of Property Act, Section 54 of the Transfer of Property Act (contract for sale), and the Registration Act requirement (including the state amendment applicable in Gujarat) mandating registration of instruments purporting to effect a contract for transfer of immovable property, and the statutory impact of non-registration for Section 53A purposes. The Court also relied on the operative effect of the SEBI attachment order prohibiting transfer and prohibiting all persons from taking benefit under such transfer/charge in respect of attached properties.

Interpretation and reasoning: (a) Jurisdiction: Since the asset was acknowledged as an asset of the corporate debtor and the application sought recovery of possession for the insolvency/resolution process, the dispute fell within Section 60(5). The occupant's reliance on a memorandum of understanding was raised only as a defence; the adjudicatory forum necessarily had to examine that defence to decide whether possession could be recovered. The Court held this was not an impermissible adjudication of a stand-alone contractual dispute unrelated to insolvency, but a determination integral to recovery of corporate debtor assets.

(b) Section 53A claim: The memorandum of understanding relied upon was unregistered and was not treated as a legally effective "contract to transfer" satisfying prerequisites for invoking Section 53A. The Court held that, post-registration amendments, an unregistered document of this nature has no effect for Section 53A protection, and additionally found that the memorandum's terms were not properly read as a contract for sale. The Court also endorsed the finding that the memorandum's contemporaneous existence was doubtful in light of repeated non-disclosure to the resolution professional despite multiple communications, and the absence of contemporaneous steps asserting transfer rights.

(c) Effect of SEBI attachment: The Court treated the SEBI attachment (covering the resort property) as prohibiting transfer/alienation/creation of interests and prohibiting all persons from taking benefit under any such transfer/charge. This further undermined any claim that possession could lawfully be asserted or continued on the basis of the alleged arrangement.

(d) Unauthorised nature of the arrangement and entitlement to usage charges: Even on the occupant's own case, the memorandum was allegedly executed by a director; however, the Board Resolution produced did not authorise execution of an arrangement amounting to sale/transfer of the property, handing over possession, or receipt of consideration. The Court therefore treated the occupant as being in unauthorised and wrongful possession. On that basis, the direction to pay fair usage charges (to be determined and communicated) was sustained, with the clarification that proven investments could be claimed as set-off against usage charges as permitted by the impugned directions.

Conclusions: The Court held (i) Section 60(5) jurisdiction was properly exercised to decide the possession application and the memorandum-based defence; (ii) the occupant was not entitled to Section 53A protection because the memorandum was unregistered and not an agreement to sell, and the asserted possession could not defeat recovery of an admitted corporate debtor asset, especially under SEBI attachment; (iii) the direction to vacate and hand over peaceful possession was lawful; and (iv) the direction to pay fair usage charges was lawful in view of unauthorised occupation and lack of any valid right to retain possession.

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