TaxTMI 
TaxTMI 
2025 (4) TMI 1411
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....s have been filed. 2. Brief facts of the case necessary to be noticed for deciding the appeals are : i. Corporate debtor owns the piece and parcel of land building survey number 60/1/1, admeasuring 1000 sq. mt. along with factory shed/building consisting of ground floor and first floor situated at village Amli of Union Territory of Dadra and Nagar Haveli. ii. An application for initiation of Corporate Insolvency Resolution Process (CIRP) against the corporate debtor M/s. Desimran Cartons Private Ltd. was filed by Jalgaon Janta Sahakari Bank Ltd. under Section 7 of the Insolvency and Bankruptcy Code (for shot the 'Code' or the 'IBC') on 08.05.2019. iii. On 07.06.2019, corporate debtor entered into Leave and License Agreement dated 07.06.2019 with the appellant at the rent of Rs.5,000 for a term of 12 years up to 31.05.2031. The bank had existing mortgage on the assets, consent of which bank was required for transferring the assets. iv. CIRP against the corporate debtor commenced on 28.03.2022. No resolution plan having been received, on order dated 28.03.2022 was passed by the adjudicating authority directing liquidation of the corporate debtor....
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....agreement to sell with the corporate debtor on 16.04.2019 and has paid an amount of Rs.40 lakhs. It is submitted that appellant has also given refundable security deposits of Rs.60 lakhs between 06.05.2019 to 07.06.2019. It is submitted that two separate orders were passed by Ld. Technical Member and Judicial Member. Ld. Member Technical has found the Leave and License Agreement to be onerous contract, whereas Ld. Judicial Member has not found the Leave and License Agreement as an onerous contract rather Ld. Judicial Member has only held that contract is unprofitable. It is submitted that thee being divergent opinion between the decision of both the Members, application filed by liquidator being I.A. No. 2012/2022 could not have been allowed. It is submitted that reference of illustration 10 as by Member Judicial is not part of Regulation 10 of the Liquidation Regulation, 2016. Ld. Member Judicial has not provided any reason as to why the Leave and License Agreement allegedly is unprofitable contract. Appellant having paid an amount of Rs.60 lakhs + Rs.50 lakhs i.e., Rs.1,15,00,000/- in furtherance of agreement of sale dated 06.04.2019 and Leave and License Agreement dated 07.06.20....
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.... no divergence of opinion between the Technical Member and the Judicial Member. Both the Members were in agreement, that the transaction is fully covered by Regulation 10 of the Liquidation Regulation, 2016, hence deserves to be disclaimed by the liquidator. 6. We have considered the submissions of counsel for the parties and perused the records. 7. In the present case, the application was filed by the liquidator being I.A. No.2012/2022 both under Section 45 of the IBC as well as Regulation 10 of the Liquidation Regulations, 2016. The prayers made in the I.A. No.2012/2022 has been extracted by the adjudicating authority in paragraph 1 of the order, which is as follows: "a) To disclaim the Leave and License Agreement dated 07 June 2019 which was registered at the Serial No 2930 of 2019 at the office of Sub-registrar of Dadar & Nagar Haveli, Silvassa as being in the nature of an onerous contract in terms of Regulation 10 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation, 2016; b) To classify the transactions undertaken under the said Agreement as being undervalued in terms of Section 45(1) of the IBC, 2016; c) To direct ....
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.... 'unprofitable' and 'burdensome' and attracts the provisions under Regulation 10 of the Liquidation Regulations, 2016. xxviii. Thus, for the reasons recorded above, prayer 'a' in IA/2012/2022 is allowed and the Liquidator is allowed to disclaim, from the date of disclaimer notice issued to Sarla, the leave and license agreement as 'onerous property' (unprofitable contract) under Regulation 10 of the Liquidation Regulations. Further, the licensee, i.e. Sarla Performance Fibers Limited is directed to vacate the said premises within a period of 30 days from the date of this order." 11. Ld. Judicial Member also has proceeded to consider the application of the liquidator seeking declaration of the transaction as onerous. Judicial Member has also come to the conclusion that transaction is unprofitable transaction and is covered by Regulation 10 of the Liquidation Regulations, 2016. 12. As noted above, two principal submissions have been advanced by the appellant challenging the impugned order; firstly, there is no divergence of the opinion between the parties holding the transaction as onerous under Regulation 10 of the Liquidation Regulations, 2016, hence the order allowing the I.....
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....d (AS) 29. 8. AS 29 is relating to Provisions, Contingent Liabilities and Contingent Assets and provides as follows: "Scope This Standard should be applied in accounting for provisions and contingent liabilities and in dealing with contingent assets, except: (a) those resulting from financial instruments2 that are carried at fair value; (b) those resulting from executory contracts, except where the contract is onerous; Explanation: (i) An 'onerous contract' is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Thus, for a contract to qualify as an onerous contract, the unavoidable costs of meeting the obligation under the contract should exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. (ii) If an enterprise has a contract that is onerous, the present obligation under the contract is recognised and measured a....
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...., Judicial Member has also come to the conclusion that transaction is covered by one of the illustrations given under onerous property in Regulation 10. In paragraph 10 Ld. Judicial Member has obviously referred to Regulation 10(1)(d), which mentioned unprofitable contracts which can be basis for disclaimer of onerous property. We, thus do not accept the submission of the appellant that there is divergence of opinion between Technical Member and Judicial Member. Ld. Judicial Member has given detailed reason, including the conduct of the corporate debtor and come to the conclusion that the transaction 07.06.2019 was not bona fide and good faith transaction. In paragraph 19 of the judgement following has been observed by the Ld. Judicial Member: "19. Thus, considering facts and circumstances in its entirety and also in view of the fact that Sarla also wanted to take over the management of the Corporate Debtor by submitting EoI and also persuaded the Liquidator to sell the said Premises to Sarla, it is apparent that the Corporate Debtor did not act in good faith while executing the said L&L Agreement of the premises which is the substantial asset of the Corporate Debtor." ....
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.... is to protect the creditors of the company in liquidation and not mulct them by reason of onerous covenants. The power under Section 535 is not to be lightly exercised. Due care and circumspection have to be bestowed. It must be remembered that an order permitting disclaimer, while it frees the company in liquidation of the obligation to comply with covenants, puts the party in whose favour the covenants are, to serious disadvantage. The Court must therefore, be fully satisfied that there are onerous covenants, covenants which impose a heavy burden upon the company in liquidation, before giving leave to disclaim them." 19. Now the question need to be considered as to whether power vested in the liquidator by Regulation 10 of the Liquidation Regulations, 2016, is beyond the IBC. We need to notice Section 34(2), which provides that all powers of board of directors key managerial personnel and partners of the corporate debtor shall vest in the liquidator. Section 34(2) is as follows: "34. Appointment of liquidator and fee to be paid (2) On the appointment of a liquidator under this section, all powers of the board of directors, key managerial personnel and the partners of....