2026 (3) TMI 1646 - AT - IBC

Recovery of possession in insolvency can proceed before the Adjudicating Authority when corporate debtor assets are unlawfully occupied.

Where premises belong to the corporate debtor and are in unauthorised occupation, the Resolution Professional may seek recovery of possession before the ... Jurisdiction of the Adjudicating Authority to direct recovery of assets of the corporate debtor - Proof of tenancy, lease or licence rights in corporate debtor's premises - Bar of civil court jurisdiction under the IBCJurisdiction under section 60(5) - Control and custody of corporate debtor's assets - Duties of resolution professional - The application filed by the Resolution Professional for eviction of the appellant from the corporate debtor's premises was maintainable before the Adjudicating Authority. - HELD THAT: - The Appellate Tribunal held that, once ownership of the premises by the corporate debtor was undisputed, the Resolution Professional was under a statutory obligation to take control, custody, preservation and protection of such asset. The relief sought had a direct nexus with the insolvency process because recovery of possession of the corporate debtor's own property formed part of the Resolution Professional's duties under the Code. The authorities relied on by the appellant were found inapplicable, while the principle recognised in the later decision of the Supreme Court supported the competence of the Adjudicating Authority to entertain proceedings for protecting or recovering possession of assets belonging to the corporate debtor. The earlier winding-up proceedings, in which the Official Liquidator had already taken symbolic possession steps, further reinforced that the property was an asset required to be brought under insolvency control. [Paras 16, 17, 18, 21, 22]The objection to jurisdiction was rejected, and the Adjudicating Authority was held competent to entertain and decide the eviction application.Oral tenancy - Permissive occupation - Absence of lease or licence - The appellant failed to establish any tenancy, leasehold or licence right in respect of the premises. - HELD THAT: - The only contemporaneous document relied on by the appellant merely showed that the corporate debtor had permitted it to stock marble at the premises. The Tribunal found no pleading or material showing the creation of a tenancy, payment and acceptance of rent, terms of lease, or any other indicia of a landlord-tenant relationship. The appellant's own case was that it continued in occupation because its supply dues remained unpaid and interest was to be adjusted, which was inconsistent with a claim of tenancy. Registrations obtained for carrying on business at the address were held incapable of conferring any proprietary or possessory right. At the highest, the appellant had permissive use for stocking goods, and in any event such permission could not survive the winding-up order, the possession steps taken by the Official Liquidator, and the subsequent notices issued by the Resolution Professional. [Paras 27, 28, 29, 30, 31]The appellant was held to be in unlawful occupation, having failed to prove any tenancy, lease or licence in its favour.Civil court jurisdiction bar - Due process of law - Effect of interim injunction - The interim order of the City Civil Court did not preclude the Adjudicating Authority from directing eviction. - HELD THAT: - The Tribunal held that the Code bars the jurisdiction of civil courts in matters over which the Adjudicating Authority or the Appellate Tribunal has jurisdiction. It further noticed that even the interim order of the City Civil Court protected possession only until disturbance otherwise than by due process of law. Since the Resolution Professional's application was maintainable and the direction for recovery of possession was made by the competent insolvency forum in accordance with law, the civil court's ad interim order did not operate as a restraint on the impugned order. [Paras 32, 33, 34]The appellant could derive no protection from the interim civil court order, and the eviction direction remained unaffected.Final Conclusion: The appeal was dismissed. The Appellate Tribunal upheld the Adjudicating Authority's order directing the appellant to vacate the corporate debtor's premises, and authorised the Resolution Professional to take possession with police assistance if possession was not handed over within the time granted. Issues: (i) Whether the application filed by the Resolution Professional seeking eviction of the Appellant from the Corporate Debtor's premises was maintainable and within the jurisdiction of the Adjudicating Authority; (ii) Whether the Appellant proved any tenancy, leasehold right, or licence in respect of the premises; (iii) Whether the interim order of the City Civil Court precluded the Adjudicating Authority from passing the impugned eviction order.Issue (i): Whether the application filed by the Resolution Professional seeking eviction of the Appellant from the Corporate Debtor's premises was maintainable and within the jurisdiction of the Adjudicating Authority.Analysis: The Resolution Professional is duty-bound to take control, custody, preserve, and protect the assets of the corporate debtor. Where the premises admittedly belong to the corporate debtor and are in the occupation of a third party claimed to be unlawful, the application for recovery of possession has a direct nexus with the insolvency process. The Adjudicating Authority's jurisdiction under the Code extends to such relief, and the need to avoid delay in the insolvency process supports adjudication before that forum rather than by a separate civil suit.Conclusion: The application was maintainable and the Adjudicating Authority had jurisdiction to entertain it.Issue (ii): Whether the Appellant proved any tenancy, leasehold right, or licence in respect of the premises.Analysis: The only material relied upon was a letter permitting the Appellant to stock marble at the premises. There was no written lease, no proof of rent, no rent receipts, and no adequate pleading or evidence showing creation of an oral tenancy or any subsisting licence or leasehold right. The Appellant's own pleadings indicated permission to occupy only for business convenience, and the record did not establish any legally enforceable interest in the immovable property.Conclusion: No tenancy, leasehold right, or licence was proved, and the Appellant was in unauthorised occupation.Issue (iii): Whether the interim order of the City Civil Court precluded the Adjudicating Authority from passing the impugned eviction order.Analysis: The interim order protected possession only until the next date and expressly preserved eviction in accordance with due process of law. Proceedings concerning possession of the corporate debtor's asset fell within the Adjudicating Authority's domain under the Code, and the civil court could not bar such adjudication. The interim order therefore did not obstruct the impugned directions.Conclusion: The City Civil Court's interim order did not bar the Adjudicating Authority from passing the eviction order.Final Conclusion: The appeal failed on all substantive grounds, and the direction to vacate the premises was sustained.Ratio Decidendi: Where premises owned by the corporate debtor are in unauthorised occupation, the Resolution Professional may seek recovery of possession before the Adjudicating Authority as part of the duty to preserve and protect the corporate debtor's assets, and a civil court's interim protection does not override that jurisdiction when relief is sought in accordance with due process of law.