TaxTMI 
TaxTMI 
2022 (5) TMI 312
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....harashtra Industrial Development Corporation' allotted Plot No. B-11 to the Corporate Debtor on 23.12.2014. A Lease Agreement was executed between the Appellant and the Corporate Debtor on 20.01.2015 whereunder license was granted in respect of the plot for two years subject to condition that it must complete 20% construction within two years i.e. from 20.01.2015 till 19.01.2017. Tri-partite Agreement was executed between the Corporate Debtor, the Appellant and DHFL, whereunder the Plot was mortgaged to DHFL and loan amount of Rs.7,22,80,214/- was disbursed to the Corporate Debtor. A Notice dated 01.11.2018 was issued by the Appellant to the Corporate Debtor asking it to show cause as to why action as provided in Clause 5(b) (i) of the Agreement to lease should not be taken against it since the Corporate Debtor has not completed the construction work of the factory building. By order dated 11.03.2019, Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor on an Application filed by 'Kay Bee Foundry Services Private Limited'- (Operational Creditor). On 29.01.2019, the Appellant had issued a letter to DHFL informing that the Corporate Debtor had com....
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....ing violated the terms and conditions of Lease Agreement had every right to cancel the Lease Agreement. A Notice dated 08.11.2019 cancelling the lease was well within the power of the Appellant. It is submitted that the Notice was already issued by the Appellant on 01.11.2018 asking the Appellant to show cause as to why action should not be taken to repossess the plot. It is submitted that the proceeding for cancellation of the lease was initiated prior to the commencement of the CIRP. It is submitted that the Adjudicating Authority has no jurisdiction to set aside the Notice dated 08.11.2019 cancelling the Lease Agreement. The cancellation of the lease by the Appellant is not on account of initiation of CIRP but on the ground of breach of terms and conditions by the Corporate Debtor which cannot be subject matter of an Application before the Adjudicating Authority. The decision to terminate the lease of the Corporate Debtor fell outside the purview of the Code and was a question within the public law domain. The Resolution Professional could not implicate the plot of the Appellant in the Resolution Plan without the consent of the Appellant. The Adjudicating Authority committed err....
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....d take possession of the plot in question. 10. Section 14 of the Code is as follows:- "14. Moratorium. - (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: - (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing off by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. [Explanation.-For the purposes of th....
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....idered before the Hon'ble Supreme Court in several cases? We may notice the judgment of the Hon'ble Supreme Court in "Rajendra K. Bhutta vs. Maharashtra Housing and Area Development Authority and Another- (2020) 13 SCC 208". In the above case, the CIRP against the Corporate Debtor was initiated on 24.07.2017. After imposition of the Moratorium under Section 14, 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 would stand terminated issued by Maharashtra Housing and Area Development Authority (MHADA). An Application was filed before the NCLT to restrain MHADA from taking over possession of the land till completion of the CIRP which was dismissed by the NCLT. The relevant facts have been noticed in the judgment in paragraphs 1.7 and 1.9: "1.7. 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....
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.... previous approval of the Authority, handover execution of any housing scheme under its own supervision. 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. 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 a resolution 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 Section 14 must be strictly observed so that the corpor....
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....f 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 separate scheme formulated by that corporation (MCGM)." 16. No issue had arisen regarding Section 14 of the Code. It was held by the Hon'ble Supreme Court that MCGM was entitled to deal with its properties in accordance with MCGM Act, 1888. 17. The next judgment of the Hon'ble Supreme Court which has been relied by the Counsel for the Respondents is "Embassy Property Developments Private Limited vs. State of Karnataka and Others- (2020) 13 SCC 308" where the issue pertaining to jurisdiction of NCLT in relation to a matter covered by 'Mines and Minerals (Development and Regulation) Act, 1957' (MMDR Act, 1957) was under consideration. In paragraphs 37 and 40, following was laid down:- "37. From a combine....
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....of the interim resolution professional in taking control and custody of an asset over which the corporate debtor has ownership rights, subject to the determination of ownership by a court or other authority. In fact an asset owned by a third party, but which is in the possession of the corporate debtor under contractual arrangements, is specifically kept out of the definition of the term "assets" under the Explanation to Section 18. This assumes significance in view of the language used in Sections 18 and 25 in contrast to the language employed in Section 20. Section 18 speaks about the duties of the interim resolution professional and Section 25 speaks about the duties of resolution professional. These two provisions use the word "assets", while Section 20(1) uses the word "property" together with the word "value". Sections 18 and 25 do not use the expression "property". Another important aspect is that under Section 25 (2) (b) of IBC, 2016, the resolution professional is obliged to represent and act on behalf of the corporate debtor with third parties and exercise rights for the benefit of the corporate debtor in judicial, quasi judicial and arbitration proceedings. Section 25(1)....
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....n entertaining the writ petition, on the basis that NCLT was coram non judice." 20. In the above case, the NCLT has directed the Government of Karnataka to execute supplemental lease deeds for the extension of the mining lease which was held by the Hon'ble Supreme Court was not within the jurisdiction of the NCLT. 21. The next judgment which need to be noticed is the judgment of the Hon'ble Supreme Court in "Gujarat Urja Vikas Nigam Limited vs. Amit Gupta and Ors.- (2021) 7 SCC 209". In paragraph 43, two issues which arose for consideration before the Hon'ble Supreme Court has been noted as follows:- "43. The following two issues arise for determination: 43.1. (i) Whether the NCLT/NCLAT can exercise jurisdiction under the IBC over disputes arising from contracts such as the PPA; and 43.2. (ii) Whether the appellant's right to terminate the PPA in terms of Article 9.2.1(e) read with 9.3.1 is regulated by the IBC." 22. In paragraphs 74, 75 and 91, following has been laid down:- "74. Therefore, we hold that the RP can approach the NCLT for adjudication of disputes that are related to the insolvency resolution process. However, for adjudicat....
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....ination notice to the Corporate Debtor under a facility agreement, Corporate Debtor was obliged to provide its premises with certain specifications and facilities to the Appellant. The Hon'ble Supreme Court had held that Section 14 is not applicable to the facts of that case. In paragraph 26, following has been observed:- "26. Admittedly, the appellant is neither supplying any goods or services to corporate debtor in terms of Section 14 (2) nor is it recovering any property that is in possession or occupation of corporate debtor as the owner or lessor of such property as envisioned under Section 14(1)(d). It is availing of the services of corporate debtor and is using the property that has been leased to it by corporate debtor. Thus, Section 14 is indeed not applicable to the present case." 25. The proceedings initiated before the NCLAT to challenge the termination notice issued by the Appellant was set aside. 26. The present is a case where CIRP was initiated on 11.03.2019 and the Notice dated 08.11.2019 terminating the lease agreement and Notice for taking possession was issued on 08.11.2019 i.e. after the imposition of Moratorium. 27. The purpose and object of ....
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....ding for breach of terms of the lease by the Corporate Debtor. 30. We have noticed that the Adjudicating Authority by its impugned order has allowed the prayer (a) i.e. quash the Notice dated 08.11.2019. The order having passed during the currency of the Moratorium, no exception can be taken to the order passed by the Adjudicating Authority. We however, hasten to add that the quashing of the Notice dated 08.11.2019 does not create any fetter on the rights of the Appellant to pass appropriate order for breach of terms of lease after CIRP is over. The Adjudicating Authority with regard to prayers (b) to (d) has directed the Appellant not to take any coercive action till the Application for approval of the Resolution Plan is heard by the Adjudicating Authority. The above direction was also to protect the status quo which was existing on the date of initiation of CIRP. We, however, make it clear that as soon as the CIRP is over, the Appellant shall have all powers to take appropriate action. 31. Learned Counsel for the Appellant has expressed its apprehension that in event the plot, in question, which is the subject matter of the lease by the Appellant is dealt in Resolution Plan....