AI Drafter 
TaxTMI 
TaxTMI 
2023 (3) TMI 699
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....ainst an Order of the National Company Law Tribunal For short, "NCLT", thereby confirming an order of the Adjudicating Authority, in two applications, in the course of the Corporate Insolvency Resolution Process For short, "CIRP" . 2. We have heard the learned counsel for the parties. Parties to the Litigation 3. The subject matter of controversy in these appeals is the land of an extent of about 10.19 acres at Ramrajatala Station Road, Howrah, West Bengal. M/s Energy Properties Private Limited For short, "Energy Properties" which is the appellant in CA No.1782 of 2021 is the ostensible owner of the said property, in whose name the title stands. Avani Towers Private Limited, which is the Corporate Debtor in respect of whom CIRP has been initiated, not only provided finance to Energy Properties, for the purchase of the said property, but also holds 40% of the share capital in Energy Properties, apart from holding a Joint Development Agreement with Energy Properties in respect of the property in question. 4. M/s Victory Iron Works Ltd. For short, "Victory" which is the appellant in CA No.1743 of 2021, claims to be in possession of the property in entirety, partly by virtu....
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.... activities of the Resolution Professional and also holding at the same time that the order will not prevent Victory from carrying on their activities in the portion of the land given to them under the Leave and License Agreement. The operative portion of the order of the Adjudicating Authority reads as follows:- "The respondents (or any other person acting through them in CA(IB) No. 1807/KB/2019) shall not obstruct RP's possession and his activities relating to CIRP of the corporate debtor, until further orders, failing which the local police are directed to give every assistance to the RP for completion of CIRP of the corporate debtor effectively. ii) Our order dated 09.01.2020 shall not affect the activities of Victory Iron Works Ltd. in piece of land in their possession on the basis of leave and licence agreement dated 11.08.2011 untill the original owner of the property decides further course of action as far as leave and licence agreement is concerned. Hence, this application, i.e. CA(IB) 146/KB/2020 stands disposed off." 10. Aggrieved by the said order of the Adjudicating Authority, two independent appeals were filed, one by Victory and one by Energy Pro....
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....greed to be provided by the Corporate Debtor to Energy Properties, for enabling them to tide over a crisis. The consideration for the Corporate Debtor providing financial assistance to Energy Properties, both for the purchase of the aforesaid property and for overcoming a crisis, was actually two-fold, namely, (i) that 40% of shareholding in Energy Properties should be transferred to the Corporate Debtor; and (ii) the Corporate Debtor was to be given the exclusive right of development of the property. (ii) Simultaneously with the execution of the aforesaid MoU, 40% of the total shares of Energy Properties was transferred to the Corporate Debtor. (iii) With the funds so provided by the Corporate Debtor, Energy Properties purchased the land in question from UCO Bank, under a Sale Certificate dated 29.01.2008. The total sale consideration indicated in the Sale Certificate was Rs.2,97,03,484/- (Rupees Two Crore Ninety-seven Lakhs Three Thousand Four Hundred and Eighty-four only). (iv) On 16.06.2008, Energy Properties entered into an agreement with the Corporate Debtor, whereby the Corporate Debtor was conferred exclusive rights of developmen....
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....eals, both the Adjudicating Authority (NCLT) and the Appellate Authority (NCLAT) have protected the interest of Victory to the extent of land of 10000 sq.ft. covered by the Leave and License Agreement. But at the same time both NCLT and NCLAT refused to acknowledge that Victory is in possession of the entire extent of land of 10.19 acres. Therefore, NCLT and NCLAT thought that the development rights that the Corporate Debtor has over the remaining extent of land is to be preserved and included in the Information Bulletin. This is what both Energy Properties and Victory are opposing in these two appeals. Rival Contentions 13. It is contended on behalf of Victory, (i) that the asset in question, namely, the land of the extent of 10.19 acres is owned by Energy Properties and not by the Corporate Debtor; (ii) that under Section 25(2)(a) of IBC, the Resolution Professional is entitled to take custody and control only of the assets of the Corporate Debtor and not the assets of a third party; (iii) that under Regulation 30 of the Regulations, the Resolution Professional is entitled to seek the assistance of the local district administration only for discharging his duties under the ....
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....e Corporate Debtor; (v) that it is settled by the decision of this Court in Sushil Kumar Agarwal vs. Meenakshi Sadhu & Others (2019) 2 SCC 241 that the right of development of a property is an intangible asset of the developer and it is especially so when this development project was shown in the balance sheets of the Corporate Debtor year after year; and (vi) that, therefore, the impugned orders do not warrant any interference. Discussion and Analysis 16. From the rival contentions, it appears that two issues arise for our consideration. They are, (i) what is the nature of the right or interest that the Corporate Debtor has over the property in question, for the purpose of deciding the inclusion of the same in the Information Memorandum prepared by the Resolution Professional under Regulation 36 of the Regulations?; and (ii) whether NCLT and NCLAT have exercised a jurisdiction not vested in them in law by seeking to recover/protect the possession of the Corporate Debtor? Issue No.1 17. The IBC is divided into five parts, with Part-I containing the preliminaries, Part-II containing provisions dealing with Insolvency Resolution and Liquidation for Corporate Persons, Part....
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....of interim resolution professional. - The interim resolution professional shall perform the following duties, namely: - (a) collect all information relating to the assets, finances and operations of the corporate debtor for determining the financial position of the corporate debtor, including information relating to- (i) business operations for the previous two years; (ii) financial and operational payments for the previous two years; (iii) list of assets and liabilities as on the initiation date; and (iv) such other matters as may be specified; (b) receive and collate all the claims submitted by creditors to him, pursuant to the public announcement made under sections 13 and 15; (c) constitute a committee of creditors; (d) monitor the assets of the corporate debtor and manage its operations until a resolution professional is appointed by the committee of creditors; (e) file information collected with the information utility, if necessary; and (f) take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor,....
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....n accordance with section 29; (h) invite prospective resolution applicants, who fulfils such criterion as may be laid down by him with the approval of the committee of creditors, having regard to the complexity and scale of operations of the business of the corporate debtor and such other conditions as may be specified by the Board, to submit a resolution plan or plans. (i) present all resolution plans at the meetings of the committee of creditors; (j) file application for avoidance of transactions in accordance with Chapter III, if any; and (k) such other actions as may be specified by the Board." 22. It may be noticed from Sections 18 and 25 that the word "asset" and not the word "property" is what is used in these provisions, though the word "property" is defined in Section 3(27). But the said word "asset" used in Sections 18 and 25 is not defined in the IBC. We have seen from Section 3(37) that it makes a reference to seven different enactments, to which one can take recourse, for finding the definition of words and expressions used but not defined in the Code. Therefore, let us find out whether those seven enactments will be of any assist....
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....t is now appropriate for us to return to the facts of this case and to find out the nature of the rights that the Corporate Debtor admittedly has in the immovable property namely land of the extent of acres 10.19. This can be done by making a reference to certain documents and the chain of events borne out by these documents. 28. The documents to which useful reference can be made are: (i) MoU dated 24.01.2008; (ii) Shareholders Agreement dated 24.01.2008; (iii) Sale Certificate dated 29.01.2008; (iv) Development Agreement dated 16.06.2008; (v) Memorandum Recording Possession dated 02.03.2010 executed by the shareholders of Energy Properties; (vi) Memorandum Recording Possession dated 24.06.2010 executed by Energy Properties; and (vii) Leave and License Agreement dated 19.08.2011. Let us now see the story as revealed by each of these documents. 29. The first of these documents is the Memorandum of Understanding dated 24.01.2008, entered into between three parties namely, (i) Energy Properties; (ii) the Corporate Debtor; and (iii) the shareholders of Energy Properties. By this MoU, the Corporate Debtor agreed to provide financial accommodation to the total extent of Rs.12 cror....
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....n the said sale certificate was Rs.2,97,03,484/- out of which, a sum of Rs. 2.70 crores was admittedly paid by the Corporate Debtor. 32. The fourth document to be considered is the Development Agreement dated 16.06.2008 entered between Energy Properties and the Corporate Debtor. This Development Agreement contains a reference to both the MoU and the Shareholders Agreement dated 24.01.2008. It also affirms the fact that the Development Agreement was what was contemplated under the MoU, to be a definitive agreement. The Development Agreement contemplated the handing over of khas and vacant possession of the entire property to the Corporate Debtor. The Corporate Debtor was imposed with the obligation to develop a housing complex in the said property as per the specifications provided in the Fifth Schedule to the Agreement, at their own cost. One of the covenants contained in the Development Agreement is that Energy Properties will not let-out, lease, mortgage and/or charge the said property without the consent in writing of the Corporate Debtor. 33. After the execution of the Development Agreement, two memorandums (titled as Memorandums Recording Possession) were also executed r....
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....tes "property of any kind", the bundle of rights that the Corporate Debtor has over the property in question would constitute "asset" within the meaning of Section 18(f) and Section 25(2)(a) of IBC. 36. In Sushil Kumar Agarwal (supra), this Court brought out the distinction between different types of Development Agreements, with particular reference to Section 14(3)(c) of the Specific Relief Act, 1963. After summarizing the different types of Development Agreements in paragraph 17 of the decision, this Court held in paragraph 19 as follows:- "19. ...An essential incident of ownership of land is the right to exploit the development potential to construct and to deal with the constructed area. In some situations, under a development agreement, an owner may part with such rights to a developer. This in essence is a parting of some of the incidents of ownership of the immovable property..." 37. Therefore, it is not very difficult to conclude, that a bundle of rights and interests were created in favour of the Corporate Debtor, by a series of documents such as (i) the MoU dated 24.01.2008; (ii) the shareholders agreement dated 24.01.2008; (iii) the flow of the considerati....
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....or was coupled with flow of consideration. 41. Having dealt with the objections raised on the strength of statutory provisions, let us now see the decisions on which heavy reliance is placed by the appellants. 42. Embassy Property Developments Private Limited (supra) arose out of a case where, under the guise of preserving and protecting the interests of the Corporate Debtor, NCLT issued a direction to the Government of Karnataka to grant renewal of a mining lease, in terms of the deeming provision in Section 8A(6) of the Mines and Minerals (Development and Regulation) Act, 1957. Raising the question of jurisdiction of the NCLT to issue such a direction, the Government of Karnataka approached the High Court by way of a writ petition, instead of filing a statutory appeal to NCLAT. The jurisdiction of the High Court to entertain the said writ petition and also grant interim stay, was what was questioned before this Court in the said decision. The right to have a mining lease granted by the Government, was neither a statutory right nor a contractual right. A person applying for a mining lease may at the most be entitled to have his application considered along with the applicati....
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.... development agreement. NCLAT refused to treat the property as the asset of the corporate debtor. But this Court reversed the said decision, by holding that Section 14(1)(d) stood attracted in the facts and circumstances of the said case and that even a reference to Sections 18 and 25 may not be necessary. Though the said case arose out of a fact situation where the termination of the joint development agreement was hit by Section 14, the said decision clinches the issue on what constitute a property and the distinction between occupation and possession of a property. 47. Having seen the legal position, let us now come back to the facts of the case to see whether NCLT and NCLAT addressed the issue correctly or not. 48. As we have seen earlier, two applications were filed before NCLT. One was by the Resolution Professional and the other was by Victory. A careful look at the application filed by Victory in C.A. (IB) No.146 of 2020 would show that there was no whisper about Victory occupying any land in excess of what they were permitted to occupy under the Leave and License Agreement. Under the Leave and License Agreement, Victory was allowed to occupy only 10000 sq. ft. of lan....