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of <h1>Fresh lease signed during CIRP moratorium despite existing lease held invalid; tenants told to vacate and pay rent dues.</h1> The dominant issue was whether a fresh lease executed after commencement of CIRP was valid despite the moratorium. Applying the moratorium bar on creating ... Jurisdictional errors u/s 60(5) - contractual dispute arising out of operational terms of the lease deed and licence agreements and eviction from the subject premises and recovery of rent/licence fees - over-riding feature of IBC under Section 238 and the bar on the jurisdiction of the civil court in terms of Section 231 of IBC - wrongfully initiate coercive action of eviction - Corporate Insolvency Resolution Process (‘CIRP’) - Whether the directions of the Adjudicating Authority to both the Appellants to vacate the premises of the Corporate Debtor and recovery of rent/licence fees etc. from them is sustainable or not - HELD THAT:- We find that it is an undisputable fact that an unregistered lease agreement dated 29.09.2020 in respect of the Ahmedabad premises was already in place. It is also an admitted fact that the Adjudicating Authority had reserved its orders on the Section 7 application. There can be no reason to entertain any doubt that the Appellant inspite of being fully aware that the Adjudicating Authority had already admitted the Corporate Debtor into CIRP and moratorium had come into play, they still raced ahead with the registration of the fresh lease agreement and that too when the term of the existing lease agreement still remained unexpired. The explanation offered by the Appellant that it was sheer coincidence that the date of signing of the new lease agreement and the date of admission of the Corporate Debtor into CIRP had fused is therefore not as simple and honest as is sought to be portrayed. Once CIRP is commenced, there is complete prohibition on any action for transferring, encumbering, alienating or disposing of by the Corporate Debtor of any of its assets or creating any legal right or any beneficial interest therein. We are therefore of the view that the Corporate Debtor or the Appellant could not have executed the fresh lease agreement once CIRP was initiated and moratorium was ordered. The motive and intent of the Corporate Debtor and the Appellant with respect to the timing of the execution of the lease agreement and the tenure of the fresh agreement not only lacked transparency but was in the teeth of moratorium provisions of IBC. This by itself constituted sufficient basis for holding the fresh lease agreement to be invalid and unenforceable. There cannot be any dispute in the present case that application which was filed by the Liquidator to take possession of the assets of the Corporate Debtor arose out of insolvency/liquidation process against the Corporate Debtor. Since the issue of recovery of rent/other dues arose out of the liquidation proceedings initiated against the Corporate Debtor, it is the case of the Respondent that adjudication on this subject matter lay well within the jurisdiction of the Adjudicating Authority. The contention of the Appellant that the Adjudicating Authority lacked jurisdiction to decide the validity of the lease deed and licence agreement as well as breaches in the terms of the lease/licence agreement is without basis. As long as the residuary jurisdiction of the Adjudicating Authority is invoked in respect of a contract which has nexus with the insolvency/liquidation of the Corporate Debtor, the invocation of this jurisdiction cannot be questioned. We are guided by the judicial precedent laid down in the judgment of the Hon’ble Apex Court in the Gujarat Urja Vikas Nigam Limited vs Amit Gupta and Others [2021 (3) TMI 340 - SUPREME COURT] wherein it has held that the Adjudicating Authority may decide all questions of law or fact arising out of or in relation to insolvency or liquidation under the statutory framework of IBC. Section 60(5) of the IBC vests a wide jurisdiction on the Adjudicating Authority to decide any application by or against the Corporate Debtor on any question of priorities or any question of law or facts arising out of or in relation to the insolvency resolution of the Corporate Debtor. The expressions “relating to” and “arising out of” has to be interpreted to mean that it facilitates resolution of the Corporate Debtor or liquidation of the Corporate Debtor, as the case may be, in a manner that the speed in the resolution/liquidation process of the Corporate Debtor is not undermined nor the objective of preserving the maximum value of the assets of the Corporate Debtor is frustrated. Having said that in the present case, we do not find any infirmity in the decision of the Adjudicating Authority to allow the prayers contained in IA in exercise of its jurisdiction under Section 60(5) of the IBC. In this backdrop, we find no good reasons to interfere in the impugned order passed by the Adjudicating Authority. Both the Appeals are devoid of merit and stand dismissed. Issues: (i) Whether the Adjudicating Authority had jurisdiction under Section 60(5) of the IBC to order eviction and recovery of rent/license fees from parties occupying property of the corporate debtor under liquidation; (ii) Whether the lease agreement executed on 31.08.2021 (after initiation of CIRP/moratorium) was valid and enforceable; (iii) Whether the unregistered licence agreement for the Mumbai premises was void under the Maharashtra Rent Control Act and whether the Liquidator was entitled to possession; (iv) Whether the Adjudicating Authority could direct recovery of rental/licence dues as part of liquidation proceedings.Issue (i): Whether the Adjudicating Authority had jurisdiction under Section 60(5) of the IBC to decide eviction and recovery of rents/licence fees in relation to the corporate debtor's liquidation.Analysis: The Tribunal examined Section 60(5) and the requirement that questions must arise out of or relate to the insolvency or liquidation process; considered the non-obstante effect of Section 60(5) and Section 238 and the bar under Section 231; and applied the principle that NCLT/NCLAT may exercise jurisdiction when the dispute has a direct nexus with insolvency/liquidation, guided by the Supreme Court's exposition of the nexus requirement.Conclusion: The Adjudicating Authority had jurisdiction under Section 60(5) of the IBC to entertain and decide the applications for eviction and recovery of rent/licence fees. The conclusion is in favour of Respondent.Issue (ii): Whether the lease agreement executed on 31.08.2021 after the CIRP initiation and moratorium was valid.Analysis: The Tribunal considered moratorium prohibitions under Section 14 and the timing of registration and execution of the fresh lease (evidence showed registration after admission to CIRP and moratorium), assessed motives and transparency, and treated execution of instruments post-moratorium that create legal rights in the corporate debtor's assets as contrary to moratorium and the IBC scheme.Conclusion: The lease agreement dated 31.08.2021 was invalid and unenforceable as an attempt to circumvent the moratorium and keep the asset out of the liquidation estate. The conclusion is in favour of Respondent.Issue (iii): Whether the unregistered licence agreement for the Mumbai premises was void under the Maharashtra Rent Control Act and whether the Liquidator could take possession.Analysis: The Tribunal found the licence agreement was only notarised and not registered, noted the statutory registration requirement under the Maharashtra Rent Control Act, and observed that an unregistered compulsory-registrable instrument rendered the licence legally unenforceable; it also considered the Liquidator's statutory powers under Section 35 to take custody of assets and actionable claims.Conclusion: The unregistered licence agreement was void and unenforceable; the Adjudicating Authority properly directed handing over possession to the Liquidator. The conclusion is in favour of Respondent.Issue (iv): Whether the Adjudicating Authority could direct recovery of rental/licence dues as part of liquidation proceedings.Analysis: The Tribunal observed that the rent/licence dues related to assets of the corporate debtor and arose in the liquidation process; it noted communications and orders directing deposit of rents with the Liquidator and relevant High Court orders confirming dues payable, concluding that recovery of such dues fell within the Adjudicating Authority's jurisdiction under Section 60(5) and the Liquidator's powers under Section 35.Conclusion: The Adjudicating Authority was entitled to direct recovery of rental/licence dues and related charges. The conclusion is in favour of Respondent.Final Conclusion: The impugned orders allowing the Liquidator's applications for possession and recovery of rents/licence fees were lawful and founded on the nexus between the disputes and the liquidation process; there is no merit in the appeals and they are dismissed.Ratio Decidendi: Where a dispute over possession or contractual rights directly arises out of or relates to the insolvency or liquidation of a corporate debtor, the Adjudicating Authority under Section 60(5) of the IBC has jurisdiction to decide such disputes to protect the integrity and value of the liquidation estate, and transactions creating rights in the corporate debtor's assets executed after commencement of CIRP in breach of the moratorium are invalid.
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