TaxTMI 
TaxTMI 
2023 (4) TMI 1079
X X X X Extracts X X X X
X X X X Extracts X X X X
....(in short 'IBC') assailing the order dated 06.07.2022 (in short 'Impugned Order') passed by the Adjudicating Authority [National Company Law Tribunal, Mumbai] in I.A. No. 1635 of 2022 in C.P. (IB) No. 190(MB)/2018, by which Respondent No. 1 has been directed to put lock and seal on the Plot No. A7, MIDC, Andheri (E), Mumbai - 400093. 2. Briefly, the facts of the case as stated and argued by the Appellant are that the Appellant entered into a Leave and Licence Agreement (in short 'Agreement') for taking the premises located at Plot No. A-7, MIDC, Andheri (E), Mumbai - 400093 admeasuring approximately 6000 sq. ft. (built up area) at 1st and 2nd Floor for house for a period of three years commencing from 03.08.2016 to 02.08.2019 (both days inclusive). The Appellant has further stated that Corporate Insolvency Resolution Process (in short 'CIRP') was initiated against the Corporate Debtor Shrenuj & Co. by an order of the Adjudicating Authority on 12.03.2019 and during the subsistence of the moratorium the Resolution Professional ('RP') extended the Leave and Licence Agreement from 03.08.2019 to 02.07.2020 on requirement of the Corporate Debtor. 3. It is further stated by the appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the same since the year 2016, it filed R.A.D Suit No. 259 of 2022 in the Small Causes Court at Mumbai, since the jurisdiction to give directions for vacation or eviction lay with the Small Causes Court. This suit was taken up by the Small Causes Court, Mumbai on 28.06.2022, whereupon an order was passed by the Court directing both the parties to maintain 'status-quo' till the next date which was fixed as 06.07.2022. The Appellant has stated that despite this order dated 28.06.2022 passed by the Small Causes Court, the Learned Adjudicating Authority went ahead and passed the Impugned Order dated 06.07.2022 without taking into account the 'status quo' order passed by the Small Causes Court, Mumbai and it is Appellant's contention that the Learned Adjudicating Authority (National Company Law Tribunal, Mumbai) did not possess the necessary jurisdiction to pass the Impugned Order but the vacation/ eviction from the said premises could have been done by the Small Causes Court, Mumbai which possessed jurisdiction under the Maharashtra Rent Control Act, 1999. 8. We heard the arguments of both the parties and perused the record. The Learned Senior Counsel for the Appellant has initiated ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e NCLAT 426] wherein this tribunal has held that the Adjudicating Authority is not empowered to pass an order for eviction and it is for the aggrieved party to move the appropriate forum for redressal of its grievances in accordance with law. 11. The Learned Senior Counsel for Appellant has also cited the Judgment of Hon'ble Supreme Court in the matter of Vishal N. Kalsaria vs. Bank of India and Ors. [(2016) 3 SCC 762] to claim that Hon'ble Supreme Court has gone into the issue of primacy between the SARFAESI Act and Rent Control Laws and held that the provision of SARFAESI Act cannot override the provisions of Rent Control Law in the matter of taking possession of an asset. 12. The Learned Senior Counsel for Appellant has referred to the e-mail dated 14.02.2022 of the Liquidator wherein he has confirmed payment of 'Rent' for the period of June 2021 to January 2022. He has further referred to the e-auction notice issued by the Liquidator dated 16.03.2022 to point out that the subject property was to be auctioned on "As Is Where Is", "As Is What Is" and "Whatever There Is Basis" and therefore the bidders were advised to satisfy themselves about the title and occupation and phy....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... case since in the Jhanvi Rajpal case a settlement proposal given by the tenant which was accepted and also because the property in Jhanvi Rajpal case was the only property and therefore it was relevant for insolvency resolution of the corporate debtor. He has further contended that in the Jhanvi Rajpal case, the CIRP proceedings were going on and moratorium under Section 14 of the IBC was in operation, whereas in the present case liquidation has been initiated since no successful resolution could be achieved and moreover the renewed Leave and Licence Agreement in the present case came to an end on 02.07.2020, and therefore tenancy of the Appellant commenced on 03.07.2020 which has continued till the time of e-auction. 15. The Learned Senior Counsel for Appellant has also claimed that since the Appellant has admittedly paid "rent" and the Liquidator had received and accepted the said rent when there was no Leave and Licence Agreement subsisting between the parties, the Appellant is a tenant fully covered under the Maharashtra Rent Control Act, 1999. He has further claimed that the Respondent No. 2, the Successful Bidder, was aware of the rights and claims of the Appellant by vir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llant on 20.08.2019 and thus the Appellant continued to be in use, possession and occupation of the said premises for further period of 11 months starting from 03.08.2019 to 02.07.2020 on the terms & conditions that were set out in the Agreement and thereafter from July 2020 till date Appellant has continued to be in illegal possession of the said premises. 18. The Learned Senior Counsel for Respondent No. 1 has referred to the notice dated 04.01.2020 sent by the Legal Counsel of Respondent No. 1 to the Appellant, whereby the Appellant was asked to handover the peaceful possession of the said premises to the Respondent No. 1 within 7 days of the receipt of the notice and also make outstanding payment of the 'Licence Fees' that was overdue and to be paid by the Appellant. 19. The Learned Senior Counsel for Respondent No. 1 has further submitted that the Appellant paid the outstanding dues as it was required to do through a cheque of an amount of Rs. 18,83,520/- only along with the covering letter dated 04.02.2022 and very fairly the R-1/ Liquidator sent an e-mail on 24.03.2022 to the Appellant informing that the Leave and Licence Agreement was extended for a period of 11 month....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iquidator to take into custody and control the assets of the Corporate Debtor. 22. The Learned Senior Counsel for Liquidator/ R-1 has shown the notice dated 04.01.2022 sent by Legal Counsel of the Liquidator addressed to the Appellant, wherein it was clearly stated that an initial agreement was executed for three years commencing from 03.08.2016 to 02.08.2019 and the consideration for use and occupation of the premises i.e. the licence fee was Rs. 2 Lakhs per month. He has also shown that an interest fee deposited of Rs. 6 Lakhs was to be paid as per the Agreement and the limit was further renewed by executing a new Leave and Licence Agreement dated 20.08.2019 for a period of 11 months commencing from 03.08.2019 to 02.07.2020. He has further submitted that through this notice, the Liquidator called upon the Appellant to provide proof of payment of interest fee deposit of Rs. 6 Lakhs and pay the outstanding licence fees and vacate the licensed premises within 7 days from the receipt of the notice whereupon the Appellant sent a cheque for an amount of Rs. 18,83,520/- as per the outstanding amount communicated by the Liquidator through its notice dated 04.01.2022. He has further re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he light of the fact that the Appellant was not ready to vacate the said premises for handing over to the Successful Bidder, the Liquidator, in accordance with the requirement of Section 33(5) of the IBC, filed I.A. No. 1635 of 2022 seeking direction to the Appellant by the Adjudicating Authority for vacation of the said premises so that the property could be handed over to the Successful Bidder and the liquidation proceedings could be concluded in a timely manner. 25. The Learned Senior Counsel for Liquidator/ R-1 has further argued that after the Appellant appeared before the Adjudicating Authority in I.A. No. 1635 of 2022 on 26.06.2022, the Appellant sought time to file Reply which was subsequently filed by the Appellant on 22.06.2022, and while the Adjudicating Authority was considering I.A. No. 1635 of 2022, the Appellant went ahead to file R.A.D Suit No. 259 of 2022 in the Small Causes Court at Mumbai, wherein the fact of the existence of I.A. No. 1635 of 2022 filed by the Liquidator before the Adjudicating Authority for vacation of the said premises was concealed and in such a circumstance, the Appellant obtained a 'status-quo' order from the Small Causes Court on 28.06.2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f NCLAT has attained finality. The Learned Senior Counsel for Liquidator has also referred to the Judgment in the matter of Hemal Ishwarbhai Patel vs. Veer Narmad South Gujarat University [(2016) SCC OnLine Guj 10037] wherein the powers and duties of the Liquidator have been clarified and it is held that the Liquidator is bound by Section 35(1)(d) of the IBC. The Learned Senior Counsel for Liquidator has also referred to the Judgment in the matter of Parineeta Chaudhary vs. Mohammed Hussain A. Furniturewalla [(2008) SCC OnLine Bom 858] in support of his contentions. The Learned Senior Counsel for Liquidator has referred to the Judgment in the matter of Vijisan Jewels Pvt. Ltd. vs. Cimme Jewels Ltd. [Company Appeal (AT) (Insolvency) No. 204 of 2021] which is given on similar facts as this case where the corporate debtor was in liquidation and the Adjudicating Authority has allowed the Liquidator to proceed with e-auction and the occupier was asked to vacate the said premises. The matter went on Appeal before the Hon'ble Supreme Court and the Civil Appeal was dismissed and therefore the order of the Adjudicating Authority was upheld. Further, he has referred to Section 35(1)(b) where....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is Judgment of Hon'ble High Court of Gujarat considers the Judgement in Gujarat Urja Vikas Nigam Limited (Supra) and Tata Consultancy Services Ltd. (Supra) and takes the view that the residuary jurisdiction of NCLT is correctly invoked by the Respondent Gujarat Industrial Development Corporation in that case. He has also referred to the Judgment of Hon'ble Supreme Court in the matter of Ranjan Kumar & Ors. vs. State of Bihar & Ors. [(2014) 16 SCC 187], wherein it is held that, if necessary, parties are not impleaded, the writ petition would be defective and no relief could be granted in such writ petition. He has sought support from this Judgement in his contention that the successful bidder was a necessary party since it had been given a Letter of Intent in its favour by the Liquidator and the possession of the said premises was to be handed over to the successful bidder and the Appellant was well aware that the Letter of Intent had been issued to the successful bidder. He has vehemently argued that in such a situation the plaint before the Small Causes Court was defective and relief of 'status-quo' in this matter could not have been granted. 30. In Rejoinder, the Learned Senio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ceeding shall be instituted by or against the corporate debtor: Provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the Adjudicating Authority. xxx xxx xxx 60. Adjudicating Authority for corporate persons. - xxx xxx xxx (5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of - (a) any application or proceeding by or against the corporate debtor or corporate person; (b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and (c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code. xxx xxx xxx 238. Provisions of this Code to override other laws. - The provisions of this Code shall have effect, notwithstanding anything incons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Notwithstanding anything contained in, any law for the time being in force, but subject to the provisions of Chapter VIII, and notwithstanding that by reason of the amount of the claim or for any other reason, the suit or proceeding would not, but for this provision, be within its jurisdictions,- (a) in Brihan Mumbai, the Court of Small Causes, Mumbai," xxx xxx xxx 34. We further note that 'tenant' has been defined in Section 7 (15) of the Maharashtra Rent Control Act, 1999 as "any person by whom or on whose account rent is payable for any premises" and 'licensee' has been defined separately in Section 7(5) of this Act as a person who is in occupation of the premises or such part, as the case may be, under a subsisting agreement for licence given for a licence fee or charge. Further, the various references to 'rent' in the Maharashtra Rent Control Act, 1999 are between the 'landlord' and 'tenant' but when it is in respect of any premises given to licensee, the term 'licence fee' or 'charge' is used. Thus it is clear that while the term 'rent' is used for payment or of use of premises by a tenant, the term 'licence fee' is used in respect of use of any premises ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2, 13.04.2022, 30.04.2022, 18.05.2022 and in its I.A. No. 1635 of 2022 used the word 'Leave and Licence Agreement' extensively while referring to the arrangement for use of the sub premises by the Appellant. It is, therefore, not clear as to how after admitting that the said premises were used on 'Leave and Licence' basis by the Appellant in accordance with the Leave and Licence Agreement, the Appellant does a complete turnaround and mentions that the subject premises were being used and occupied by him as lawful tenant in its letter dated 27.05.2022 and again in its letter dated 10.06.2022 and 11.06.2022. 37. While noting the above, we are conscious of the fact that the Appellant vide its letter dated 26.04.2022, (which has been mentioned by the Appellant in passing in the Appeal, but the copy is not attached with the Appeal Memo) states that the subject premises located at Plot No. A-7, MIDC, Andheri (E), Mumbai - 400093 belonging to Shrenuj and Co. is being occupied by them on 'Leave and Licence' basis and acknowledged that since the said premises had been sold through auction and they have to vacate it before 22.05.2022, they are looking for an alternate place to shift in or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mises and was consciously aware that it had to vacate the said premises, as is evident from the Appellant's letter dated 26.04.2022 addressed to the Liquidator. 40. Thus, in the light of the Leave and Licence Agreement entered between the Appellant and Resolution Professional and a series of communications sent by the Liquidator and in particular the letter dated 26.04.2022 (attached in Reply of R-1, Page-22) sent by the Appellant to the Liquidator admitting that the said premises have to be vacated after having been sold through e-auction. We are of the clear view that the relationship that existed between the Appellant and the corporate debtor is that of a 'licensee' and 'licensor' and not that of 'tenant' and 'landlord'. 41. We now peruse section 18(1)(f) of the IBC which imposes a duty on the Resolution Professional to take control and custody of any asset over which the corporate debtor has ownership rights. Therefore, the Resolution Professional had to take ownership of the sub-property and he decided to extend the Leave and Licence Agreement till 02.07.2020 in accordance with the requirements of the corporate debtor. On the same lines, the powers and duties of the Liqu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dation proceeding of the Corporate Debtor under IBC. The Learned Senior Counsel for the Appellant has relied upon the judgment Hon'ble Supreme Court of India in the matter of Jhanvi Rajpal Automotive Pvt. Ltd. vs. R.P. of Rajpal Abhikaran Pvt. Ltd. & Anr. which is as follows:- "Heard Learned counsel for the appellant. We do not find any ground to interfere in the order impugned dated 05.01.2023 passed by the National Company Law Appellate Tribunal. The appeal is accordingly dismissed keeping the question of law open." This judgment has been cited in support of the contention that the Jhanvi Rajpal (Supra) case cant be a definitive support for the case of the Liquidator as the question of law was kept open therein. This judgment is distinguishable as in the matter of Jhanvi Rajpal, there was tenancy in question and also a settlement between the parties whereas the present case of Leave and Licence and the Appellant was in occupation after the expiry of licence period. 45. In addition the Learned Counsel for Liquidator has also cited the judgment in the matter of Hemal Ishwarbhai Patel vs. Veer Narmad South Gujarat University [(2016) SCC OnLine Guj 10037], whi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....emises to the Liquidator but the Appellant vide letter dated 21.12.2019 had sought two months time from the Liquidator to vacate the said premise which they have still not done. 6. xx xxx xx b. The Appellant was supposed to vacate the premises in April 2019 and inspite of agreeing to vacate in two months' time in December, 2019 has not yet vacated the same either one pretext or another. c. Liquidation process is governed by Chapter III Part - II of the Code. The Regulation governing Liquidation process providing elaborate provisions on "Realizations of Assets" vide Chapter - VI of IBBI (Liquidation Process) Regulations, 2016. The Appellant is forcing the Liquidator to sale the property to them only which is not permissible under the provisions of the Code and Regulations. d. It is undisputed fact that Appellant has no locus standi and accordingly he cannot seek the sale of the property to the Appellant only. The Appellant is reagitating the same matter in different rounds before the Adjudicating Authority. The Code provides for time bound resolution and if such frivolous actions are allowed, it will be never ending process to complete the liquida....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eliance on the judgement of Supreme Court in the matter of Gujarat Urja Vikas Nigam Limited vs. Amit Gupta [(2021) 7 SCC 209] which is as follows :- "69. The institutional framework under IBC contemplated the establishment of a single forum to deal with matters of insolvency, which were distributed earlier across multiple fora. In the absence of a court exercising exclusive jurisdiction over matters relating to insolvency, the corporate debtor would have to file and/or defend multiple proceedings in different fora. These proceedings may cause undue delay in the insolvency resolution process due to multiple proceedings in trial courts and courts of appeal. A delay in completion of the insolvency proceedings would diminish the value of the debtor's assets and hamper the prospects of a successful reorganisation or liquidation. For the success of an insolvency regime, it is necessary that insolvency proceedings are dealt with in a timely, effective and efficient manner. Pursuing this theme in Innoventive34 this Court observed that: (SCC p. 422, para 13). "13. One of the important objectives of the Code is to bring the insolvency law in India under a single unified....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding (vi) assets subject to the determination of ownership by a court or authority; xxx xx xxx Explanation.-For the purposes of this 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 consultation with any financial sector regulator. 40. If NCLT has been conferred with jurisdiction to decide all types of claims to property, of the corporate debtor, Section 18(1)(f)(vi) would not have made the task 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 Secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted by this Court has no bearing, we would like to issue a note of caution to the NCLT and NCLAT regarding interference with a party's contractual right to terminate a contract. Even if the contractual dispute arises in relation to the insolvency, a party can be restrained from terminating the contract only if it is central to the success of the CIRP. Crucially, the termination of the contract should result in the corporate death of the Corporate Debtor. In Gujarat Urja (supra), this Court held thus: "176. Given that the terms used in Section 60(5)(c) are of wide import, as recognised in a consistent line of authority, we hold that NCLT was empowered to restrain the appellant from terminating PPA. However, our decision is premised upon a recognition of the centrality of PPA in the present to the success of CIRP, in the factual matrix of this case, since it is the sole contract for the sale of electricity which was entered into by the corporate debtor. In doing so, we reiterate that NCLT would have been empowered to set aside the termination of PPA in this case because the termination took place solely on the ground of insolvency. The jurisdiction of NCLT under Section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....resent subject matter in Gujarat Urja (supra) after the pronouncements of the NCLT and NCLAT. Going forward, the exercise of the NCLT's residuary powers should be governed by the above decision." 52. We note that in the matter of Embassy Properties Developments (Supra), the Hon'ble Supreme Court has held that "if asset owned by a third party in possession of the Corporate Debtor held under contractual arrangements, is specifically kept out of the definition of the term "assets" Further, in a situation where a contractual arrangement is ongoing, the Resolution Professional cannot short-circuit the same and bring a claim before NCLT taking advantage of Section 60(5). These judgements are distinguished on the basis of the fact that no contractual arrangement existed between the Appellant and the Corporate Debtor after 02.07.2020, when the extended Leaves and Licence Agreement expired and therefore the ratio in these judgements cannot provide support to the case of the Appellant. 53. The Learned Senior Counsel for Appellant has also referred to the judgment in the matter of K.L. Jute Products Pvt. Ltd. vs. Tirupti Jute Industries Ltd. [(2020 SCC Online NCLAT 426] which is as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y law enacted by the Central and State 38, Interpreting the non obstante clause in Section 35 of the SARFAESI Act, a three Legislatures. It can only extend to the laws operating in the same field. 39. If the interpretation of the provisions of the SARFAESI Act as submitted by the learned Senior Counsel appearing on behalf of the Banks is accepted, it would not only tantamount to violation of the rule of law, but would also render a valid rent control statute enacted by the State Legislature in exercise of its legislative power under Article 246(2 ) of the Constitution of India useless and nugatory. The Constitution of India envisages a federal feature, which has been held to be a basic feature of the Constitution, as has been held by the seven-Judge Bench of this Court in S.R. Bommai v. Union of India12, wherein K. Ramaswamy, 3. in his concurring opinion elaborated as under: (SCCp. 205, paras 247-48) 247. Federalism envisaged in the Constitution of India is a basic feature in which the Union of India is permanent within the territorial limits set in Article 1 of the Constitution and is indestructible. The State is the creature of the Constitution and the law made ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave been evicted only after following the due process of law as prescribed under the Rent Control Act. In the present case there is no existence of tenancy in favour of the Appellant and the Applicant it was only a licensee till 02.07.2020, whereafter he was in illegal occupation and possession of the said premises. Therefore, the Judgement in Vishal N. Kalsaria (Supra) case cannot also provide support to the case of the Appellant. 57. The Learned Counsel for the Respondent No. 1/ Liquidator relied upon the following few judgment in the matter of Parineeta Chaudhary vs. Mohammed Hussain A. Furniturewalla [(2008) SCC OnLine Bom 858] . We note that this judgment supports the contention of the Liquidator that mere payment of some amount, which the Appellant incorrectly calls 'rent' cannot create the right of tenant in favour of the Appellant :- "11. In the present case, however, the licence period expired in January 2005. Indeed, respondent did not file application under section 24 with immediate despatch but waited till December 2005. It is also true that the respondent accepted the monthly compensation offered by the petitioners from time to time. That alone cannot be th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de in that application. 8. For all the aforesaid reasons therefore, the petition is dismissed. Rule is discharged." 59. We are of the view that the residuary jurisdiction is relevant during the CIRP when the insolvency resolution of the corporate debtor is taking place, whereas in the present case the liquidation of the corporate debtor is being considered and the liquidator has taken recourse to its powers under section 33(5) to get control and custody of the asset of the corporate debtor. 60. We now note the order of NCLT in I.A. 1635 of 2022 passed on 06.07.2022 which is as follows :- " ORDER The Court is taken up through Virtual Hearing (VC). IA-1635/2022 - This IA is filed by Brijendra Kumar Mishra Liquidator of Shrenuj & Company Co. Ltd. seeking permission to affix a lock and seal at the premises situated at Plot No. A7, MIDC, Andheri (E), Mumbai-400 093. The Liquidator further sought order from this Bench to provide the assistance of police in case of any resistance while putting the lock and seal by the Liquidator on the said property. The Counsel appearing for the Liquidator further brought to the notice of this Bench that....