AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 369
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs. and thereafter another deed of confirmation and modification dated 09-11-2011 between the same parties and the projects being in progress in the said land, this Bench having already passed an admission order dated 24-07-2017 (in CP 1061/2017 u/s 7 of IB Code - hereafter called as 'the Code') declaring moratorium u/s 14 of the Code, in pursuance thereof, CIRP being in progress, this Applicant/Resolution Professional sought the reliefs as follows: i. To direct this respondent to refrain from taking over the possession of the said land till the completion of corporate insolvency resolution process subject to the proviso u/s 14(1)(d) of the Code. ii. To pass an ex-parte ad-interim order directing the Respondent to continue the JDA and the deed of confirmation and modification agreement entered into with the Corporate Debtor till the completion of CIRP subject to the proviso u/s 14 of the Code. 2. To seek the reliefs aforementioned, the line of story RP put forward is that initially declared area of 1,65,805.80 Sq. Mtrs. is revised to cover an area of 1,93,599.90 Sq. Mtrs. (approx. 47 acres) for development by the Corporate Debtor within a time- frame of 60 mont....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Siddharath Nagar Co-Op. Hsg. Society 17463.30 44,611.11 B. Sub Total 17463.30 44,611.11 7. R-6 Ekta Everglade Homes Pvt. Ltd. 12137.20 45,191.32 8. R-7/A-1 Exiting Structure 269.00 63.74 9. R-7/A-2 Exiting Structure 1060.00 63.74 10. R-7/A-3 Free Sale FSI (Yet to be sold) 1794.00 5,777.77 11. R-7/A-4 Preet Gruh Nirman Pvt. Ltd. 2503.00 6,393.93 12. R-7/A-5 Gold Finger Realty Investors Pvt. Ltd. 3044.00 7,956.00 13. R-7/A-6 Exiting Structure 1473.64 63.74 14. R-7/A-7 720.00 63.74 15. R-7/A-8 1452.00 63.74 16 17 R-7/A-9 RNA NG Infrastructure & Development 2960.00 12,790.00 17. R-7/A-10 942.00 63.74 18. R-7/B-1 Exiting Structure 3589.00 63.74 19. R-7/B-2 KBJ Developers Ltd 4539.00 13,395.78 20. R-7/B-3 RNA NG Infrastructure & Development 2251.65 7,800.00 21. R-7/B-4 Fist Infra Pvt. Ltd. 1500.00 2,804.84 22. R-7/B-5 Exiting Structure 3235.00 63.73 23. R-8 Kiyana Ventures LLP 17458.50 6....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rate Debtor and tenants and MHADA. In pursuance of the agreement entered into, the tenants vacated the premises for the development work to be carried out in the said premises as stated in the agreement with a provision of a sector (R9) to these tenants. Hoping that they would be restored soon, vacated the said premises in 2008, till date, they have not been provided flats as agreed in the development agreement and their rent agreed to be paid by the Corporate Debtor (developer) has in fact not been paid for many years. This due outstanding itself is of Rs. 35crores due to the tenants. MHADA submits that it has not parted with the possession of the land in issue at any point of time, therefore, MHADA being a statutory body, it has to be construed as remained in possession of the same by virtue of ownership (It need not be separately said that the land belonging to government shall not be held as possessed by private people unless possessory right is transferred to such persons and it does not matter as to whether it is in the occupation of somebody or not. It is also an established proposition man coming to the possession of the land/property with consent, cannot claim adverse poss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ebtor, on the contrary MHADA side Counsel argues that it is an agreement of licence whereby even if it is assumed agreement has not been terminated, then also it could not be construed that the Corporate Debtor is in exclusive possession of the land in issue. 9. On hearing the submissions of either side the point for decision is as to whether MHADA land falls within the ambit of clause 'd' of section 14(1) of the Code or not? To dispel the case of MHADA side, Sr. Counsel Mr. Navroz Seervai appearing on behalf of RP has taken us through various material papers and to legal propositions to say that the agreement entered between the Corporate Debtor, the Co-operative Society and MHADA is a development agreement on 10-04-2008, wherein it has been mentioned in clause 1-1-4 that corpus fund of Rs. 25 crores was to be paid by the developer to the tenants society and in clause 1-1-10 it has been stated that the project shall mean the buildings to be constructed by the developer and handed over to the society for rehousing the tenants and to MHADA in terms of this agreement but shall not mean and include the free sale buildings that the developer is entitled to develop and construct i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Free Sale portion, where the proposed building called 'The Meadows' is being constructed (defined as "the said property" in the plaint) ("the said Meadows Residential Project"). The Wings A to C and E to G consist of Basement plus double height stilt plus 2 to 5 podiums plus 6 to 27 upper residential floors. The Wing D consist of basement plus double height stilt plus 2 to 5 podiums plus 6 to 33 (part) upper floors. The plans are already sanctioned as per above details. The Commencement Certificate for Wings A, B and C is granted up to 17 upper floors and D to G Wings for 18 upper floors. R11 to R13 Free Sale portion. 13. As to legal proposition, Sr. Counsel Mr. Seervai relied upon the definition of "property" given u/s 3(27) of the Code to say that property means not only the land but also the interest arising out of, or incidental to, property. Since the possessory right has been given to the Corporate Debtor for development, possession being one of the incidental rights to the property rights, the possession over MHADA land being with the Corporate Debtor, he says, it squarely falls under clause 'd' of section 14(1) of the Code. He further says, since section 238 of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elled. 18. MHADA Senior Counsel further submits that prayer in the application is in the nature of specific performance of the JDA, the Corporate Debtor being a person at fault in carrying the functions mentioned in the JDA, section 16(l)(b)(c) of the Specific Relief Act bars grant of any specific relief, because the corporate debtor has committed wilful breach of the contract of which performance is sought. He further says prayer "A" being consequential to prayer "B", since it is a well settled proposition that a consequential relief cannot be granted unless final relief is permissible to be granted, to which, he relied upon State of Punjab v. Mann Singh AIR 1983 SC 172. If the situation is pragmatically assessed, he says, the cost of construction at present has arisen approximately to Rs.l,400crores, therefore, the little free sale component available on the land is hugely insufficient to raise Rs.l,400crores, to which the banks are not ready to provide any further financial assistance for completion of the project. 19. The Corporate Debtor has not been in exclusive possession of the property, since development in question is admittedly for joint development by the society ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the exclusive possession of the property despite no right has been accrued to this Corporate Debtor. When the documents disclose granting licence to this Corporate Debtor for joint development, it is evident on record that this right given to the Corporate Debtor is for joint development by the Corporate Debtor and tenants therein. If it is for joint development, then it is to be understood that it is a right given for joint development not for exclusive development by the Corporate Debtor. Therefore, either by law, or by factual matrix, the possession claimed by the corporate debtor is not recognised under law. This is a demur argument on behalf of MHADA, on factual aspect, MHADA submits that JDA and supplementary documents conferring licence upon the corporate debtor has been terminated by MHADA on 12-08-2018. 23. If section 18 is r/w section 25 of the Code, it is evident in section 18 (1) (f) that IRP is endowed with duty to "take control & custody of any assets over which Corporate Debtor has ownership right as recorded in the Balance Sheet of the Corporate Debtor or with information utility or the depository of securities or any other registry that records the ownership....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orporate Debtor has ownership rights over the land. On looking at the licence agreement entered between the Corporate Debtor, tenants and MHADA, it appears a licence has been given to the Corporate Debtor for development of land. Though MHADA disputes second agreement entered between the same parties in the year 2011, for no action being taken in respect to this second agreement till date, and the agreement being entered in the year 2011 i.e. almost six years before, the argument of MHADA counsel submitting to this Bench to ignore second agreement appears to be not meritorious argument. It is trite law that giving a licence to somebody is a personal right attached to the person in whose favour such right is conferred upon, as to rights attached to the property such as safe, lease, mortgage, will run along with property. In this case only development right has been conferred upon the Corporate Debtor licencing the Corporate Debtor under the respective agreements, therefore, it cannot be understood that Corporate Debtor has any right over the property except to the extent of having personal right in favour of the Corporate Debtor. Possessory right will accrue to a person when propert....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the situation, there is no chance to conceive that the Corporate Debtor is in possession of the property. In the name of these agreements, this Corporate Debtor made money of more than Rs.l,000crores in the form of loan from the banks, not only that, the Corporate Debtor directly sold free sale component to seven purchasers to develop the free sale component. 26. Even if we go by the argument of the corporate debtor counsel, assuming that possession has been with the Corporate Debtor, since he has not developed the area that is to come to MHADA as well as tenants, it cannot be said that development is in progress in that place. As to free sale component, rightly or wrongly has already been sold to third parties, it cannot be said that this corporate debtor has been in possession of that free sale component. The only area said to have been in possession of this corporate debtor, if at all the argument of the Applicant's counsel is wholly taken as correct, then also it will be limited to sector R10 regarding which Hon'ble High Court has passed an order on the suit filed by flat purchasers in respect to sector R10. But this argument does not go well because there is no material bef....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pplicant has failed to prove that he has been in the possession of the property, therefore the Resolution Professional cannot invoke section 14(c) to wrest something from others under the cover of this provision. 30. A person can be said that he has been enjoying the possession of the property only when exclusive possession has been given to him. Here by virtue of the licence agreement, it is clear that it has been categorically mentioned that a joint possession has been given to the tenants and the Corporate Debtor. May be for this reason alone, this Resolution Professional/Applicant consciously not made tenants or their society as a party to this proceeding. Assuming the argument of the applicant is correct, then also joint possession cannot be called as exclusive possession of the person claiming it. A person in wrongful possession or a person having no right, cannot seek relief more than his entitlement. A person having joint possession cannot get the right of exclusive possession just by showing a provision of law. It is known to everybody; a provision of law will remain abstract as long as it has not been clothed with facts. When law is not fitting in the factual scenario,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave already been taken into custody to the Resolution Professional. For this reason alone, the clause (f) in section 18(1) specifically mentioned what assets the IRP can take control and custody of, therefore, by the time, it comes to section 25, it cannot be understood that Resolution Professional is entitled to take the custody of the assets not belonging to the Corporate Debtor. This makes it clear that assets and liabilities of the Corporate Debtor alone will come within the ambit of the Resolution Professional, he cannot take out somebody's property and value it for preparing Resolution Plan. It cannot be so. If that is so, there will be so many ramifications and implications by messing up the assets belonging to somebody else as the assets of the Corporate Debtor. To add further to this point, if you see, section 36(4) it is clear that the assets which do not stipulate transfer of title but only use of the assets shall not be included in the liquidation estate. When a property shall not be included as an asset, how such property could be shown as part of the liquidation value? When law clearly say such and such assets shall not be included in the liquidation estate, how this ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process: Time-limit for completion of insolvency resolution process. Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be." 36. By reading this section Moratorium prohibits institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authorities. The applicant counsel says that the word 'proceedings' mentioned in this clause will cover the termination of the contract by MHADA. But by reading this clause, the word 'proceedings' mentioned in this clause cannot be read different from the entire clause mentioned there. If this clause is read in full, it can be easily understood that proceedings mean....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tating that this enactment will have overriding effect against the laws which are inconsistent with the provisions of this Code. 39. Normally, each and every business transaction that happens in a company will remain recorded from time-to-time. Therefore, there is no chance for the corporate debtor to deny the debts and obligations recorded in the books of the company. Since NCLT has been dealing with IB Code over an year, we hardly come across any case wherein corporate debtor denying the claims filed by a Financial Creditor, likewise in the case u/s 9 as well whenever Operational Creditor makes a claim, for the legislature is conscious of the fact that there could be a possibility of dispute in respect to the items mentioned in the definition of dispute, an additional caveat has been introduced in the cases of Operational Debts stating that wherever a dispute as stated in the definition is in existence before receipt of section 8 notice, such claims shall not be entertained by this Adjudicating Authority. In both the situations, most of the times the defence from the corporate debtor side is only in respect to limitations about the proper documentation and other defences which....