TaxTMI 
TaxTMI 
2021 (4) TMI 588
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.... a. To quash and set aside the notice dated 8.11.2019 issued by the Respondent as null and void and to restrain the Respondent from taking any steps in further of the said notice dated 8.11.2019; b. To direct the Respondent to restrain from terminating the lease agreement dated 21.1.2015 till the completion of the corporate insolvency resolution process or to take any further step in this respect; c. To direct the Respondent to extend their co-operation in concluding the corporate insolvency resolution process in terms of the Insolvency and Bankruptcy Code, 2016; d. Till the disposal of this MA, to pass an order directing and injuncting the Respondent from taking possession of the said leasehold land till such time this MA is disposed of; e. For interim and ad interim orders in terms of prayers (1) to (3) above". 2. The Counsel for the Applicant submits that: a. Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor was initiated by order dated 11.03.2019 of this Tribunal on a petition filed by an Operational Creditor. The Applicant herein was confirmed as Resolution Professional (RP) by order dated 10.05.20....
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.... meantime, the CIRP intervened on 11.03.2019. On 08.11.2019, the R1 issued a notice to the Applicant stating that the lease agreement was terminated and an officer of the R1 would come on 14.11.2019 to take possession of demised land. l. The Counsel for the Applicant submits that while the CIRP is going on, the moratorium provided under Section 14 would be effective. The R1 is prohibited under Section 14(1) of the Code from recovering or taking over possession of the property in occupation or possession of the Corporate Debtor. The notice dated 08.11.2019 is invalid and illegal. Thus, deserves to be set aside. m. On the strength of the non obstante clause provided in Section 238 of the Code, it is submitted that the Code has an overriding effect on any other law for the time being in force. The MIDC Act being inconsistent with the provisions of the Code would not have precedence. n. The value of leasehold land is substantial and thus huge value has been attributed to it by the Successful Resolution Applicant in the Resolution Plan, pending approval before this Bench. o. If R1 is permitted to terminate the lease agreement and take back the possess....
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....st 8,224 sq. mtrs of building and other structures on or before 19.01.2017. d. Since the Corporate Debtor violated the clause 2(d) referred above, R1 issued show cause notice to the Corporate Debtor on 01.11.2018, calling upon as to why action of termination of lease deed and repossessing the subject plot should not be taken. On 29.01.2019, R1 issued notice to DHFCL and R2 on the same subject. e. R2 challenged the notice in the Writ Petition before the Bombay High Court and the Writ Petition was dismissed. f. Now the leasehold rights of the land are with R2 in view of the assignment by DHFCL in favour of R2. As the leasehold right of the subject plot was transferred to R2 on 20.01.2018, the question of moratorium being applied to the subject plot does not arise. This position was also fortified by the order of the Hon'ble Bombay High Court dated 04.11.2019 passed in the referred Writ Petition. g. This Application is not maintainable. The decision to terminate the lease and/or repossessing the plot is a decision which falls outside the purview of the Code and is in the public law domain and the decision can only be called in question in a court ve....
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....o statutorily governed. ... 28. Therefore as rightly contended by the learned Attorney General, the decision of the Government of Karnataka to refuse the benefit of deemed extension of lease, is in the public law domain and hence the correctness of the said decision can be called into question only in a superior court which is vested with the power of judicial review over administrative action. The NCLT, being a creature of a special statute to discharge certain specific functions, cannot be elevated to the status of a superior court having the power of judicial review over administrative action. ... 29. The NCLT is not even a Civil Court, which has jurisdiction by virtue of Section 9 of the Code of Civil Procedure to try all suits of a civil nature excepting suits, of which their cognizance is either expressly or impliedly barred. Therefore NCLT can exercise only such powers within the contours of jurisdiction as prescribed by the statute, the law in respect of which, it is called upon to administer. Hence, let us now see the jurisdiction and powers conferred upon NCLT. ... 37. ... The only provision which can probably throw li....
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....hrough the resolution professional, take a bypass and go before NCLT for the enforcement of such a right." h. The correctness or otherwise of R1's action in terminating the lease agreement and/or repossessing Plot No. B-11 from R2 is not questionable. i. The Corporate Debtor have been granted license only to enter upon the plot for the purpose of building and executing works and until grant of lease, the Corporate Debtor would be deemed to be a mere licensee. j. If the Corporate Debtor failed to build and complete construction within specified time in terms of the Lease Deed, R1 shall have power to resume the possession of the plot and the agreement shall cease and terminate. The Development Control Regulation prescribed by R1 will be applicable. The Corporate Debtor failed to comply with the covenants and stipulations regarding construction within the prescribed time limit under the allotment order. Thus, a Show Cause Notice was issued to the Corporate Debtor (lessee) on 01/11/2018, which is prior to the commencement of CIRP. To which no reply was filed by the Corporate Debtor. k. The Lease Agreement stood terminated and the lease stood determin....
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....etter dated 30th December, 2017 i.e. much prior to initiation of the 'Corporate Insolvency Resolution Process' (18th July, 2017). The 'Corporate Debtor' having failed to act in terms with the said show cause. If the order of cancellation have been passed by the Government of India on 30th December, 2017, it cannot be held to be in violation of Section 14(1)(d) of the 'I&B Code'. 15. In view of the aforesaid findings, no interference is called for against the impugned order dated 16th January, 2018. The appeal is dismissed. Interim order passed by this Appellate Tribunal on 8th February, 2018 is vacated. It will be open to the Respondent- 'Government of India' to accept any bid and to create third party interest with regard to mines in question which were earlier allotted vide 'Coal Mines Development and Production Agreement' dated 2nd March, 2015 to the 'Corporate Debtor'. ..." l. The plot was conditionally leased to the Corporate Debtor. Upon breach of the conditions, the Corporate Debtor stood divested of the plot. The corporate debtor did not have any subsisting interest in the plot which could have been implicated in the Resolution Plan. To support th....
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....to be dealt with. That exists in Sections 92 and 92A of the MMC Act. This Court is of opinion that Section 238 could be of importance when the properties and assets are of a debtor and not when a third party like the MCGM is involved. Therefore, in the absence of approval in terms of Section 92 and 92A of the MMC Act, the adjudicating authority could not have overridden MCGM's objections and enabled the creation of a fresh interest in respect of its properties and lands. No doubt, the resolution plans talk of seeking MCGM's approval; they also acknowledge the liabilities of the corporate debtor; equally, however, there are proposals which envision the creation of charge or securities in respect of MCGM's properties. Nevertheless, the authorities under the Code could not have precluded the control that MCGM undoubtedly has, under law, to deal with its properties and the land in question which undeniably are public properties. The resolution plan therefore, would be a serious impediment to MCGM's independent plans to ensure that public health amenities are developed in the manner it chooses, and for which fresh approval under the MMC Act may be forthcoming for a separ....
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....espect of property which "is occupied by or in the possession of the corporate debtor". The provisions of section 14(1)(d) do not have any impact on taking over possession from a third party. Furthermore, as stated above, the lease stood determined. The right of revoking the lease upon breach of conditions was recognised by the Hon'ble Bombay High Court in its Order dated 4th November 2019. w. The ratio laid down in para 16 of the judgement dated 19th February 2020 passed by the Supreme Court in the case of Rajendra K. Bhutta (supra) is not applicable to the facts of the present case. In this judgement, the Supreme Court distinguished its judgement in the case of Municipal Corporation of Greater Mumbai v. Abhilash Lal & Ors. (supra) on the ground that a show-cause notice preceded the admission of the insolvency resolution process which made it clear that the assets of MCGM could not be subsumed within a resolution plan without MCGM's approval. In that case, on a reading of para 1(vii) of the judgement, it is clear that the termination was made and possession was sought to be taken after the declaration of the moratorium. The relevant portions of the judgement in the case o....
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.... judgment as referring to assets of the corporate debtor. We have seen how, in the facts of this case, we are not concerned with the assets of the corporate debtor, least of all the assets of MHADA. The limited question before us is as to whether Section 14(1)(d) of the Code will apply to statutorily freeze 'occupation' that may have been handed over under a Joint Development Agreement." x. The Hon'ble Supreme Court in Para 8 of the judgement in Rajendra K. Bhutta (supra), have clearly stated that for section 14(1)(d) to apply, the property should either be occupied by or be in possession of the corporate debtor, which is not the case in the facts before this Tribunal. y. Therefore, it is submitted that this Application is not maintainable. The Respondent has correctly taken steps to resume the possession of the plot. z. Even as per Explanation to section 14(1)(d) of the Code (introduced w.e.f. 28th December 2019 i.e., after the termination and resumption of possession) makes the intention of the legislature very clear in this regard. It clarifies that during moratorium period, a license, permit, registration, quota, concession, clearance or a sim....
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....f Bohar Singh Dhillon v. Rohit Sehgal (Company Appeal (AT) Insolvency No.665 of 2018 (paragraph 7), wherein it is held that "till the period of moratorium continues, agencies such as the SEBI cannot recover any amount nor can sell the assets of the corporate debtor." e. It relied on the judgement of Hon'ble Supreme Court in Rajendra K Bhutta (supra) wherein it has held that: "However, when it comes to any clash between the MHADA Act and the Insolvency Code, on the plain terms of Section 238 of the Insolvency Code, the Code must prevail. This is for the very good reason that when a moratorium is spoken of by Section 14 of the Code, the idea is that, to alleviate corporate sickness, a statutory status quo is pronounced under Section 14 the moment a petition is admitted under Section 7 of the Code, so that the insolvency resolution process may proceed unhindered by any of the obstacles that would otherwise be caused and that are dealt with by Section 14." f. The termination/possession notice issued by R1 on 08.11.2019 directly addressed to the Corporate Debtor without even marking a copy to DHFCL or R2 is a clear indication that the possession of the plot is....
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....y of the notices. No cure period is available to the financial institution under the Tripartite Agreement to remedy the alleged breach. The possession of the said property can be taken only by due process of law after adhering to principles of natural justice, i.e., adequate notice, a fair hearing and no bias. R1 did not follow due process. l. There was no determination of the leasehold interest of the Corporate Debtor before taking purported possession of the said property and thus the re-possession is illegal, an abuse of process of law and in flagrant violation of principles of natural justice. To the extent that it conflicts with the Code, it is void and non-est. As such, the MIDC's claim to possession is disputed and denied. m. The value maximization of the assets of the Corporate Debtor and time bound revival of the Corporate Debtor are the core objects of the Code. If MIDC's purported possession of the said property is allowed to pass the muster of law, it would not only be a gross violation of the due process of law, but also contrary to and in derogation of the object of the Code. The Corporate Debtor's CIRP will be undermined and irretrievably prejudiced....
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....perty. c. The Applicant is right in saying that termination notice dated 08.11.2019 is hit by Section 14(1)(d) of the Code. He rightly relied on the judgement of Hon'ble Supreme Court in the case of Rajendra K. Bhutta (supra) which is an authoritative pronouncement on the applicability of Section 14(1)(d). It is beneficial to extract the following paragraphs of the judgement for better understanding of this proposition: "1. This appeal raises a question as to the correct interpretation of Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "the Code"). The facts necessary to appreciate the setting in which this question arises are as follows: i......... ii....... iii........ iv....... v...... vi.... vii. On 12.01.2018 - after the imposition of the moratorium period Under Section 14 of the Code - MHADA issued a termination notice to the Corporate Debtor stating that upon expiry of 30 days from the date of receipt of the notice, the Joint Development Agreement as modified would stand terminated. It was further stated that the Corporate Debtor would have to hand over p....
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....; and 'except for development work' the 'Corporate Debtor' has not accrued any right over the land in question. The land belongs to the 'Maharashtra Housing and Area Development Authority' which has not formally transferred it in favour of the 'Corporate Debtor'. Hence, it cannot be treated to be the asset of the 'Corporate Debtor' for application of provisions of Section 14(1)(d) of the 'I & B Code'." "7. A bare reading of Section 14(1)(d) of the Code would make it clear that it does not deal with any of the assets or legal right or beneficial interest in such assets of the corporate debtor. For this reason, any reference to Sections 18 and 36, as was made by the NCLT, becomes wholly unnecessary in deciding the scope of Section 14(1)(d), which stands on a separate footing. Under Section 14(1)(d) what is referred to is the "recovery of any property". The 'property' in this case consists of land, ad-measuring47 acres, together with structures thereon that had to be demolished. 'Recovery' would necessarily go with what was parted by the corporate debtor, and for this one has to go to the next expression co....
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....o that the insolvency resolution process may proceed unhindered by any of the obstacles that would otherwise be caused and that are dealt with by Section 14. The statutory freeze that has thus been made is, unlike its predecessor in the SICA, 1985 only a limited one, which is expressly limited by Section 31(3) of the Code, to the date of admission of an insolvency petition up to the date that the Adjudicating Authority either allows are solution plan to come into effect or states that the corporate debtor must go into the liquidation. For this temporary period, at least, all the things referred to Under Section14 must be strictly observed so that the corporate debtor may finally be put back on its feet albeit with a new management." "17. My learned brother S. Ravindra Bhat, J.'s judgment in Municipal Corporation of Greater Mumbai (supra), which has been strongly relied upon by Mr. Dave and Mr. Patil, dealt with an entirely different fact situation, as is clear from paragraphs 32 and 33 of the said judgment, which are set out herein below: 32. A cumulative reading of the stipulations reveals that the contract/agreement contemplates that the lease deed was to be....