AI Drafter 
TaxTMI 
TaxTMI 
2025 (6) TMI 606
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....tion No. 5065(MB) of 2023 in Company Petition (IB) No. 543/MB/2022. 2. Ms Palak Desai, who is the Liquidator of Rajmal Jewelers Private Limited, is the Respondent herein. ASREC India Limited, who is an ARC and assignee of the debts of the Corporate Debtor, is the Respondent No.2 herein. 3. The Appellant submitted that it has been operating a restaurant under the trade name 'Wakai'. Pursuant to a Leave and License Agreement (LLA) dated 14.07.2022, the Appellant was granted a license by the Corporate Debtor, Rajmal Lakhichand Jewelers Private Limited, in respect of commercial premises situated at Ground Floor, B Wing, along with the adjacent covered garage in 'Mangal Sandesh Building', admeasuring approximately 2853.62 sq.ft. ("licensed premises"), five years, commencing from 12.07.2022 with a monthly license fee of Rs. 7,50,000/- subject to a yearly escalation of 5%, and a security deposit of Rs. 30,00,000/- paid by the Appellant. The agreement also stipulated a lock-in period of three years for the Appellant and five years for the Corporate Debtor from the date of commencement of the license. 4. The Appellant submitted that in compliance with the LLA, he commenced renov....
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.... letter dated 12.07.2023 (communicated via email on 18.07.2023) from the Respondent No.1, informing the Appellant for the first time about the commencement of the corporate insolvency resolution process (CIRP) against the Corporate Debtor pursuant to an order dated 09.02.2023 passed by Adjudicating Authority as well as the public announcement dated 13.03.2023. In the said correspondence, the Respondent No.1 also sought payment of rentals under the LLA from the Appellant and requested further details in relation thereto. 9. The Appellant submitted that, in response, he addressed a letter dated 19.07.2023 to the Respondent No.1, wherein he clarified that, as per the arrangement under the LLA and the correspondence exchanged between the parties-read in conjunction with the fit-out clause-the obligation to pay license fees would arise only after 01.07.2023. The Appellant reiterated that the expenses incurred towards obtaining the necessary licenses and permissions were to be deducted from the future license fees, and only the balance, if any, would be payable thereafter. The Appellant submitted that on 02.08.2023, he addressed an email to the Respondent No.1, wherein it set out its ....
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....ulated under the LLA. The Appellant submitted that the Impugned Order disregards the settled legal position that the Adjudicating Authority lacks jurisdiction to adjudicate issues pertaining to the interpretation of agreements or contracts that arose prior to the initiation of the CIRP. 13. The Appellant submitted that, by way of the Impugned Order, the Adjudicating Authority directed the Appellant to vacate the premises and pay arrears of rent amounting to Rs. 1.14 Crores to the erstwhile Resolution Professional in respect of the premises owned by the Corporate Debtor. The Appellant submitted that upon filing an appeal, this Appellate Tribunal, vide order dated 15.03.2024, granted a stay on the operation of the Impugned Order, subject to the condition that the Appellant deposit 50% of the amount directed by the Adjudicating Authority and continue to pay the license fee on a monthly basis with effect from 01.04.2022. The Appellant has duly complied with the said order dated 15.03.2024 by depositing 50% of the dues as per the Order of this Appellate Tribunal and has continued to pay the license fee. 14. Concluding his arguments, the Appellant requested this Appellate Tribunal ....
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....mises and pay the outstanding license fees, the Respondent No.1 filed I.A. No. 5065/2023 under Section 18(f) of the code read with Rule 11 of the NCLT Rules, 2016, seeking appropriate reliefs. The Respondent No. 1 submitted that the Adjudicating Authority, passed the Impugned Order allowing the Interim Application, and the Adjudicating Authority correctly found that the unauthenticated communications between the Appellant and Corporate Debtor, lacking the company seal and board authorization, are contrary to the terms of the LLA and therefore have no detrimental bearing on the LLA. 20. The Respondent No. 1 submitted that, at the outset, this is not a case where the Resolution Plan proposes automatic termination of the contract upon its approval, nor is it a case where the Resolution Professional has failed to follow the due process as prescribed in the LLA. The Respondent No.1 stated that there is no express bar under Section 14 of the Code preventing the Resolution Professional from terminating contracts during the moratorium period. What is specifically prohibited under the Code is the action by third parties to (a) recover any property occupied by or in possession of the Corp....
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....otection under Section 14 is intended to benefit the Corporate Debtor, ensuring its continued viability, maximizing asset value, and enhancing the prospects of successful insolvency resolution, which is not the case in present appeal. 23. The Respondent No. 1 submitted that both the Adjudicating Authority and this Appellate Tribunal possess the necessary jurisdiction to adjudicate all matters impacting the insolvency process, particularly those relating to core value maximization and the facilitation of resolution. The Respondent No.1 further submitted that the arrangement between the parties is the LLA and not a tenancy and this Appellate Tribunal, in the matter of Adinath Jewellery Exports v. Mr. Brijendra Kumar Mishra & Anr., Company Appeal (AT) (Insolvency) No. 748 of 2022, has held that the Adjudicating Authority and this Appellate Tribunal have residuary jurisdiction to decide upon the termination of contracts that affect the survival of the Corporate Debtor. 24. The Respondent No. 1 submitted that, in a similar case, this Appellate Tribunal in Company Appeal (AT) (Insolvency) No. 508 of 2020, by its judgment dated 08.04.2021, held that the Adjudicating Authority and th....
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....tered as an Asset Reconstruction Company with the Reserve Bank of India. 30. The Respondent No. 2 submitted that, in the year 2014, the Corporate Debtor, M/s Rajmal Lakhichand Jewellers Pvt. Ltd., availed credit facilities from Jalgaon People's Co-op Bank Ltd. These credit facilities are secured by the several assets including Mortgage of piece and parcel of land or ground, together with the building known as "Mangal Sandesh," comprising Wing "A" (constructed up to the 10th floor) and Wing "B," situated at Khar Danda, Bombay side of the 17th Road. The Respondent No. 2 submitted that he subsequently acquired the account of M/s Rajmal Lakhichand Jewellers Pvt. Ltd. from Jalgaon People's Co-op Bank Ltd. pursuant to an Assignment Agreement dated 26.03.2020. 31. The Respondent No. 2 submitted that, thereafter, State Bank of India filed an application bearing CP No. 543/MB/2022 under Section 7 of the Code before the Adjudicating Authority against the Corporate Debtor for initiation of CIRP, which was duly admitted by order dated 09.02.2023. In compliance with the CIRP process, Respondent No. 2 filed its claim on 28.02.2023. 32. The Respondent No. 2 submitted that the App....
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....ons of LLA, it was responsibility of Corporate Debtor to complete the formalities before the fit out period of 60 days came into effect. 39. It is the case of the Appellant that due to non compliance of the Corporate Debtor of various regulations, the Appellant had to incur huge cost in order to obtain necessary licenses from MCGM, excise department, health department etc and thereafter it was agreed between the Appellant and the Corporate Debtor that the tenure of LLA would be suitable enhanced and the cost incurred by the Appellant would be adjusted against the licensed fee payable, keeping upper limit of Rs. 1 Crore. On the other hand, the Respondent No. 1, who is liquidator of the Corporate Debtor brought out to our notice that the Appellant never paid any license fee since inception. The Respondent No. 1 also brought out that when it came to the notice of liquidator that for the said property no, payment has been made by the Appellant, he wrote to the Appellant but the Respondent No.1 did not receive any suitable response including money. Thereafter, the Respondent No. 1 was compelled to file an application before the Adjudicating Authority seeking the Adjudicating Authorit....
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....ould not obtain the requisites licenses from MCGM, excise department, health department etc., and therefore he could not commencement the business. The Appellant's pleading is that since he incurred more than Rs.1 Crore to obtain such license, therefore he was not supposed to pay to the Corporate Debtor as per their mutual understanding. We find that this pleading is not legally tenable in view of clause 5 of LLA. We observe that the Appellant was duty bound to pay the license fee after the fit out period of 60 days was over. (iv) As regard issue that it was mutually agreed between the Appellant and the Corporate Debtor that the expenses incurred by the Appellant would be reimbursed to the Appellant subject to limit of Rs. 1 Crore and also that the tenure of LLA would be enhanced suitable by the correspondence period, we would like to look into the correspondence exhanged between the Appellant and the Corporate Debtor which was brought to our notice by the Appellant. The letters are reproduces as under :- Dated 11.10.2022 Date: 11th October 2022 To, Rajmal Lakhichand Jewellers Pvt. Ltd. Johari Bazar, Jalgaon-425001 K....
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....from the date of obtaining the OC and the Excise Licence. Kindly confirm the same so we can continue to pursue the required permissions and make expenses for the same. After receiving the OC and Excise License for the property, we will begin to adjust these expenses against our L&L fees payable. Meanwhile, please also pay the dues and taxations of the BMC. Yours Faithfully, WAKAI HOSPITALITY PRIVATE LIMITED (Authorised Signatory) WAKAI MANAGEMENT BANDRA LLP C-3/5 Rakshalekha co-op Society, Lane no.6, Koregaon Park, Pune - 411 001 LETTER DATED 01.11.2022 LETTER DATED 23.06.2023 Date: 23^rd June 2023 To, Rajmal Lakhichand Jewellers Pvt. Ltd. Johari Bazar, Jalgaon-425001 Dear Manish Ji, Re: Leave & Licence Agreement dated 14th July 2022 in respect of premises admeasuring about 2853.62 sq ft situated at MANGAL SANDESH BUILDING, 'B'wing, Plot No.490, Bearing CTS No. E-72, Village Khar, 17th Road, Khar, Mumbai. And Our Letter dated 11.10.2022 And Your letters dated 1.11.2022 and 11.09.2022 This is to inform you that we have obtained the BMC OC on 28.3.2023, the BMC....
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.... that it is not within jurisdiction of the Adjudicating Authority to adjudicate inter-se disputes between the parties and for any remedy, the Respondent No. 1 was required to approach appropriate suitable judicial forum like the small cause court. (i) In this connection, we note that in the judgment delivered by this Appellate Tribunal in Encore Asset Reconstruction Company Pvt. Ltd. vs. Ms. Charu Sandeep Desai (RP of Calyx Chemicals & Pharmaceuticals Ltd.) & Ors., Company Appeal (AT) (Insolvency) No. 719 of 2018, it was held that that an asset owned by the corporate debtor but is in the possession of a third party or creditor, such party is obligated to hand over possession to the Resolution Professional under Section 18 of the Code, so long as the title remains with the corporate debtor. The aforementioned judgment was challenged before the Hon'ble Supreme Court of India and was duly upheld. The facts are similar to present case and thus we find the same to be applicable. (ii) The Appellant has also pleaded that the Respondent No. 1 should have initiated case under small cause court. We note that the CIRP was ordered 09.02.2023 more than two years ago and since ....
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....rotection of moratorium to third party like the Appellant herein and therefore the contention of the Appellant that during moratorium the Respondent No. 1 could not have initiated any action against the Appellant is not convincing. We must understand that the protection to the Corporate Debtor under Section 14 of the Code is given so that the Resolution Professional can try to resolve the Corporate Debtor under guidance of the CoC. (iv) It is an obligation as well as the right of the Resolution Professional to protect the interest of the Corporate Debtor and take necessary action including realising recoverable dues from third party like the Appellant on behalf of the Corporate Debtor as well as take legal action in accordance with law to take possession of property in given circumstances. In the present case the Appellant has not paid the license fee on certain assumptions which we have already discussed in earlier paragraphs. (v) As such we do not find any merit in the contentions of the Appellant that during moratorium period the Respondent No. 1 could not have terminated the LLA. (vi) We note that the Corporate Debtor is the owner of the subject prope....
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....pondent No.1 that the Appellant even breached of these conditions and has been in default for more than two months in payment of license fee. We have also taken into consideration the submission made by the Respondent No. 2 that the Appellant has since then vacated the license property and has also filed his claim before the liquidator i.e., the Respondent No. 1 herein. 44. We also note that this Appellate Tribunal, in Company Appeal (AT) (Ins) No. 63/2024, in the matter of Deepak Sakharam Kulkarni & Anr. vs. Manoj Kumar Agarwal, Resolution Professional of DS Kulkarni, has recognized the power of the Resolution Professional to terminate agreements, and observe that, while it is impermissible to deprive third parties of their rights solely on the basis of the initiation of insolvency proceedings, there is no prohibition on terminating agreements in accordance with the contractual terms during the CIRP or even thereafter. 45. Thus, we hold that during moratorium the respondent could terminate the LLA and also was entitled to take legal action against the Appellant. We reject arguments of the Appellant on this ground. 46. Based on above detailed observations, we do not find a....