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TaxTMI 
TaxTMI 
2022 (10) TMI 931
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....018, by which Order, the Adjudicating Authority has dismissed the Application preferred by Noida for removal of the Leasehold Land from the pull of Assets of the 'Corporate Debtor', observing as follows: "16. When it comes to Sec. 18 (f), it only deals with the duties of the Interim Resolution Professional. It deals with how the Insolvency Resolution Professional is to perform his duties. It has not been said anywhere that IRP is conferred with rights and he is entitled to take control and custody of any Asset of the corporate debtor. It is only a section that deals with what Assets he could take control of under section 18; it is not a section creating or taking away rights of somebody. It cannot be a section set against the restraints set up under section 14 of the Code, Section-18 is merely a procedure to be followed for smooth change-over from the suspended directors to the IP during CIRP period. In the present context, invocation of Sec. 18 (1)(f) will not arise because the Asset in issue right from the beginning is in the possession of the corporate debtor and thereafter in the possession and control of the IRP or the RP as the case may be. 17. Section 18 wi....
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.... It is submitted that the 'Corporate Debtor' is merely a lessee to the Appellant and nothing more. * Under the said Lease Deed, the 'Corporate Debtor' was liable to pay a total premium amount of Rs.5,26,74,58,680/- out of which an amount of Rs.52,67,45,868/- was paid by the 'Corporate Debtor' to the Appellant when the time of signing of the Lease Deed and the balance amount of Rs.4,74,07,12,812/- was to be paid by the 'Corporate Debtor' in 16 half yearly instalments commencing from 16.12.2012 onwards along with an interest @11% p.a. compounded half yearly from the date of allotment. It is submitted that the 'Corporate Debtor' was also liable to pay the annual ground rent and was allowed to transfer the whole Plot or building after obtaining the prior permission of the Appellant and after making payment of transfer charges. Any construction and development on the said premises was to be done in accordance with the norms prescribed by the Appellant. The 'Corporate Debtor' was to obtain the permission from the Appellant before mortgaging the said premises. * It is submitted that the Appellant had the first charge over the demised premises and had the right to terminate the Lease....
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.... 'Asset' under Section 18 of the Code and therefore an RP cannot be allowed to take control and custody over such Assets: 'Weather Makers Pvt. Ltd.' Vs. 'Parabolic Drugs Ltd.' CA 2016/2019 in C.P. (IB) No. 102/CHD/2018. 'Sangita Fiscal Services Private Limited & Ors.' Vs. 'Duncans Industries Limited & Ors. MANU/NC/1367/2021. 3. Submissions of the Learned Counsel appearing on behalf of the Respondent: * Learned Counsel submitted that the Adjudicating Authority rightly held that the purpose of CIRP is to preserve the value of the 'Corporate Debtor', existing as on the date of the admission and that the Application has been filed by the Appellant in violation of the express provisions of Section 14(1)d of the Code which prohibits recovery of 'any property' by an owner or lessor where such property is occupied by or in possession of the 'Corporate Debtor'. * Learned Counsel placed reliance on the ratio of the Judgement of the Hon'ble Supreme Court in 'Rajendra K. Bhutta' Vs. 'Maharashtra Housing and Area Development Authority' (2020) 13 SCC 208, in support of his argument that when a Moratorium is imposed by Section 14 of the Code, the idea is to elevate Corporate Sickne....
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....to obtain all statutory clearances from the concerned Authorities for its functioning and the Appellant would not be responsible for any consequence arising out of failure of Lessee to receive any statutory clearances. The 'Corporate Debtor' had spent a considerable amount of Financial Resources in order to develop the said Plot. In order to meet considerable Financial Resources required for a project, the 'Corporate Debtor'/Lessee had been given a specific right to mortgage the property in favour of a Scheduled Bank/Gov.t. organization/Financial Institution for the purposes of raising resources, for construction on the said Plot. 'Corporate Debtor' was vested with right to transfer plots/flats in project to third parties. Under the Lease Deed, if larger public interest so required, the Appellant could take back possession of the said Plot. However, the Appellant could take such an action only by making payments to the 'Corporate Debtor' at the prevailing market rates. * The argument to develop the property was not a Standard Construction Contract wherein the 'Corporate Debtor' was a developer and merely developing or constructing the property....
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....debtor has ownership rights 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 of assets including - (i) assets over which the corporate debtor has ownership rights which may be located in a foreign country; (ii) assets that may or may not be in possession of the corporate debtor; (iii) tangible assets, whether movable or immovable; (iv) intangible assets including intellectual property; (v) securities including shares held in any subsidiary of the corporate debtor, financial instruments, insurance policies; (vi) assets subject to the determination of ownership by a court or authority; Explanation. - For the purposes of this 1[section], the term "assets" shall not include the following, namely:- (a) assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment; (b) assets of any Indian or foreign subsidiary of the corporate debtor; and (c) such other assets as may be notified by the Central Government in ....
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.... The theoretical concept of 'ownership', therefore, appears to be that a person can be considered to be owner if he has absolute dominion over it in all respects and is capable of transferring such ownership. Heritability and transferability are not doubt some of the many and may be most important ingredients of ownership. But they by themselves cannot be considered as sufficient for clothing a person with absolute ownership. Their absence may establish lack of ownership but their presence by itself is not sufficient to establish it. The ownership concept does no accord with the status of a person who is paying the rent. A tenant under various legislations either urban or rural property, agricultural or otherwise, enjoys right of heritability and transferability. At the same time, he does not become owner of the property. Transfer of ownership is distinct and different from transfer of interest in the property. A licensee or even a tenant may be entitled by law to transfer his interest in the property but that is not a transfer of ownership. For instance, a lessee from a corporation or a local body or even State Government to raise building may have heritable and transferable right....
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....ich case it stops being a lease. Even in the cases of lease for long durations, the residuary rights of a leased land belong to the owner of the land and not the lessor. It is a settled law that the length of the lease is not indicative of even permanency of lease much less of ownership. Even the division bench of the Bombay High Court in 'The Collector of Bombay v. Khatizabai Dharsi Somji Dossa', 1962 (64) BOM LR 311 has observed:- "...The term of a lease may be 5 years, 50 years. 99 years or even 999 years. Nevertheless, the transaction is only a lease and there is always a reversion which continues to vest in the owner for the entire term of the lease". 10. In the instant case, Noida has never taken any steps to revoke the lease. It was vehemently argued by the Learned Counsel for the Respondent that 'it was never the case of the 'Corporate Debtor' that it had 'Ownership Right' over the said Plot'. It is only their case that if the Plot along with the development which has taken place thereon is a right to be taken out of pool of Assets of the 'Corporate Debtor', it would amount to violation of Section 14(1)d of the Code. 11. The Hon'ble Supreme Court in 'P. Mohan....
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.... situations some of these rights may be absent, the normal case of ownership can be expected to exhibit the following incidents(b)." 96. Thereafter, the following are treated as the rights associated with ownership. An owner of a property will have the right to possess the thing which he owns, it is stated. Secondly, the second principle is described as follows:- "Secondly, the owner normally has the right to use and enjoy the thing owned : the right to manage it, i.e., the right to decide how it shall be used; and the right to the income from it. Whereas the right to possess is a right in the strict sense, these rights are in fact liberties : the owner has a liberty to use the thing, i.e., he is under no duty not to use it, in contrast with others who are under a duty not to use or interfere with it." 97. The third right is described as follows:- "Thirdly the owner has the right to consume, destroy or alienate the thing. The rights to consume and destroy are straight-forward liberties. The right to alienate, i.e., the right to transfer his rights over the object to another, involves the existence of a power. A non-owner even though he has posses....
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....ansferred from the lessor to the lessee. However, we have noticed the example hereinbefore wherein the said concept is declared. That is, it is relevant when the lease term is for the major part of the economic life. Undoubtedly, ordinarily a financial lease would be a lease which is born as a lease but ends as a sale. The lease does involve transfer of ownership from the previous owner, namely the lessor to the lessee. In this context, Parliament has defined financial lease in two enactments through Amendment Act no. 44/2016 as hereinbefore noticed. 101. We may at once bear in mind two concepts, in the overarching principle. The two concepts are "substantially" and "all". In other words, substantially all the risks and rewards incidental to ownership must be transferred under the lease. While we do agree with the appellants that an element of flexibility is allowed by the presence of the concept 'substantially', at the same time, it cannot be a case where predominantly all the risks and rewards incidental to ownership are not transferred. In other words, on a conspectus of all the terms of the lease and the reference to the situations and examples which have alre....
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....Information Memorandum. 16. Section 18(f) of the Code discusses both Tangible and Intangible Assets which can be taken control and custody of by the RP. Since, the term 'Intangible Assets' has not been expressly defined under the Code, we rely on Explanation 32(1) of the Income Tax Act, 1961, which defines Tangible and Intangible Assets as follows: 17. Explanation 3 to 32(1) of Income Tax Act, 1961: For the purposes of this sub-Section, the expression, 'Assets' and 'block of Assets mean - (a) Tangible Assets, being building, machinery, plants and furniture (b) Intangible Assets, being know-how - patents, copyrights, trademarks, licenses, franchisees or any other business or commercial rights of similar nature. The reading of the words 'any other business or commercial rights of similar nature' in Clause B of Explanation 3 indicates that Leasehold Rights which have commercial nature would fall within this definition. The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b). We also place reliance on the definition of 'Intangible Assets' as defined by the Indian Accounting Standard ('IAS') ....
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.... from goodwill. Goodwill arising on an amalgamation in the nature of purchase represents a payment made by the acquirer in anticipation of future economic benefits. The future economic benefits may result from synergy between the identifiable assets acquired or from assets which, individually, do not qualify for recognition in the financial statements but for which the acquirer is prepared to make a payment in the amalgamation. 12. An intangible asset can be clearly distinguished from goodwill if the asset is separable. An asset is separable if the enterprise could rent, sell, exchange or distribute the specific future economic benefits attributable to the asset without also disposing of future economic benefits that flow from other assets used in the same revenue earning activity. 13. Separability is not a necessary condition for identifiability since an enterprise may be able to identify an asset in some other way. For example, if an intangible asset is acquired with a group of assets, the transaction may involve the transfer of legal rights that enable an enterprise to identify the intangible asset. Similarly, if an internal project aims to create legal rights ....