TaxTMI 
TaxTMI 
2026 (5) TMI 1241
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....ort as the "GIDC") to challenge the judgment and order dated 01.12.2025 passed by the learned Single Judge in allowing the writ petition, setting aside the orders dated 13.12.2021 terminating the lease deed dated 21.02.2008 as well as the order dated 10.03.2022 directing for eviction of the petitioner under Section 5 of the Gujarat Public Premises (Eviction of Unauthorized Occupants) Act, 1972 (in short as the "Public Premises Act' 1972" or PP Act' 1972). 2. Both the orders were subjected to challenge in the writ petition filed by the respondent no. 1 herein viz. Gujarat Hydrocarbon Power SEZ Ltd. primarily on the ground that they were passed during the subsistence of the moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 (in short as "IBC' 2016"). It was argued before the writ court that in view of Section 14(1)(d) of the IBC' 2016, any recovery of any property by the lessor which in the possession of the Corporate debtor would be prohibited and hence, the order terminating of lease and eviction under the PP Act' 1972, cannot be sustained. 3. The learned Single Judge while adverting to the facts of the case, has framed the point of determination that :- ....
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....porate debtor, so that upon approval of the resolution plan, the same may be seamlessly handed over to the successful resolution applicant in an orderly manner. With the approval of the resolution plan by the adjudicating authority, the same shall be binding on the Corporate debtor, its employees, members, creditors including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under the law for the time being in force as also the guarantors and other stakeholders involved in the resolution plan, the creditors include a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree holder. It was, thus, observed that once the resolution plan has been approved, the same will be binding upon all those stakeholders involved in the resolution plan. (iv) Referring to Section 238 of the IBC' 2016, it was noted that the said provision gives overriding effect over the Public Premises Act' 1972 and during the period of moratorium and/or if resolution plan is approved, the order passed under the Public Premises Act' 1972 is contrary to the aim and object of IBC' 2016, and as ....
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....an was allowed by the Adjudicating Authority after overruling the objections raised by the respondent No. 1. Therefore, as per Section 31 read with Section 2(10) of the IBC, approved Resolution Plan shall be binding upon all the stakeholders involved in the Resolution Plan. Thus, respondent No. 1 being an operational creditor is also bound by the approved Resolution Plan. The respondent No. 1 being an operational creditor under the scheme of the IBC, cannot have higher rights than the financial creditors and cannot have priority over the dues of the financial creditors. Dues of an operational creditor are always subject to the provisions of such dues made in the Resolution Plan as per Section 30 of the IBC. 12.3 Looking to the scheme, object and purpose of the IBC, the impugned orders are not sustainable in the eye of law. I say so because the underlined object behind the aforesaid enactment is to provide effective legal framework for timely resolution of insolvency and bankruptcy to support development of credit markets and encourage entrepreneurship. So as to achieve the goal and object of the enactment, the Resolution Professional clothed with ample powers to ensure tha....
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.... is the statutory duty of the Resolution Professional to hand over peaceful and vacant possession of the property to the successful Resolution Applicant. Therefore, the contention of respondent No. 1 is devoid of any merits and is hereby rejected. 13.2 With regard to the contention raised by making reliance on the explanation appended to Sections 14(1)(a) to (d) to state that the termination is barred only when it is occasioned by reason of insolvency and not otherwise where the lease deed was terminated on account of repeated and continuing breaches of terms and conditions of the lease deed is concerned, the said contention, in my considered opinion, cannot be accepted. A plain reading of clauses (a) to (d) of Section 14(1) clearly manifest the legislative intent that once the moratorium is declared upon commencement of CIRP, there shall be a prohibition against recovery of any property by the owner of lessor where such property is in possession or occupation of the Corporate debtor. The explanation appended to Section 14(1) cannot be construed to defeat the clauses (a) to (d) of Section 14(1). The explanation inserted by the legislature to clarify that a license, permit,....
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....on Professional. However, having realized that in the scheme of IBC, position of it being an operational creditor would not allow to meet the expectation and thereby to defeat the CIRP, passed an order under the provisions of the Act, 1972. GIDC being statutory authority was even otherwise expected to act fairly and in accordance with law and certainly not in a manner contrary to the statutory framework of the IBC. 13.4 With regard to the contention that since the Corporate debtor was not an ongoing concern at the time of initiation of CIRP, the termination of lease deed would not be hit by the moratorium, this Court is unable to concur. It is not a condition precedent under the Code that CIRP can be initiated only in respect of a functioning or ongoing concern. The moratorium envisaged under Sections 14(1) (a)-(d) applies upon initiation of CIRP against any Corporate debtor, irrespective of its operational status. The Explanation appended to Section 14(1) further fortifies this position by clarifying that even where the Corporate debtor is an ongoing concern, and its business depends upon statutory licences or permissions, such rights shall not be terminated mere....
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....y the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan; 102.2 The 2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect; 102.3 Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued." 15. So far as the decisions relied on by learned Senior Advocate Mr. Soparkar for the respondent No. 1 in case of Tata Consultancy Services Ltd. (supra) is concerned, the facts of the case is wholly converse to the case on hands. In the said case, the Corporate debtor was the lessor and was receiving services from the lessee. Whereas, in the present case, the Corporate....
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....ce, the said decision is also of no help to the respondent No. 1. 15.3 So far as decision of the coordinate Bench of this Court in case of Biotor Industries Limited (in liquidation) (supra) is concerned, the scope and the context in the said case was under Section 33(5) of the IBC. In the said case, liquidation proceedings against the Corporate debtor was going on and at that time termination was made on the ground that leased property would not be part of the liquidation estate as per Section 36(6)(iv). However, in the present case, leased 'property' is clearly included within Section 14(1)(d) wherein it takes its meaning from Section 3(27) and includes an interest in the property. Hence, the said case is also not of any help to the respondent No. 1. I answer the question accordingly." 8. Considering the above, we may extract the opinion of the learned Single Judge as under:- (i) The dues of the GIDC, being an operational creditor, have been made subject to the provisions of such dues in the resolution plan as per Section 30 of the IBC' 2016. (ii) Upon approval of the resolution plan, the successful resolution application made payment to GIDC....
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....hat since the Corporate debtor was not ongoing, it would not be hit by moratorium, it was concluded that the moratorium envisaged under Section 14(1)(a) to (d) applies upon initiation of CIRP against any Corporate debtor, irrespective of its operational status. 9. The conclusion drawn by the learned Single Judge in allowing the writ petition filed by the Corporate debtor challenging the action of GIDC in terminating the lease deed and passing eviction order under the Public Premises Act' 1972 during the subsistence of moratorium, has been challenged herein by the GIDC essentially on the same grounds agitating the same submission as were raised before the learned Single Judge, whose decision we do not find to suffer from any error of law. However, for the sake of completeness of this judgement, we deal with the submission of Mr. Saurabh Soparkar, learned Senior counsel for the appellant GIDC before us, as under:- I. The lease deed contained the power to terminate and the termination order has been passed invoking the 'Breach of Covenant' clause under the lease agreement. Section 14(1)(d) can be invoked only in case the explanation attached thereto is not attracted. Meani....
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....use 3.3 (Utilisation) of the lease deed. Third notice dated 04.02.2019 has been issued inter alia for non-payment of rent, which is violation of terms and conditions of the lease deed. The order dated 13.12.2021 for termination of lease deed has been passed in view of persistent defaults of the conditions of the lease agreement inspite of repeated opportunities being awarded to the respondents/lessee to remedy, by issuance of a show-cause notice calling upon the lessee to defend the actions that were to be taken under the provisions of the Public Premises Act' 1972 for eviction. VIII. The attention of the Court is invited to the communication dated 23.07.2007 at page '586' of the paper book to submit that the land in question was offered with a clear stipulation therein that lessee shall submit a time bound programme/development schedule for utilisation of the land of SEZ within 6 months of allotment and seek approval of GIDC. The eviction notice dated 04.02.2019 was issued to the petitioner as per the terms of the allotment and policy of the Corporation. Clause 15.2 of the lease deed has been pressed into service to submit that in case of breach in terms of non-payment of....
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....ference of a request made by the petitioner for change of usage of leased land from SEZ to industrial use, with respect to which it is stated therein that the change of use is governed by the policies and guidances of the Corporation and that the lessee had been allotted the land for SEZ purposes at a rate different than the normal rate. Moreover, the lessee had not submitted any proof of reversal of Government incentives taken by the Company, which is also a pre-condition in such case. Merely submitting a request without any compliance of procedure and non-submission of required documents are sufficient factors to reject the representation of the lessee in that regard. 12. By placing the above noted show-cause notices dated 19.03.2011, 20.12.2018 and 04.02.2019 at pages '99', '102' and '103' of the paper book, it was, thus, vehemently argued by the learned Senior counsel for the GIDC that the order of cancellation of lease deed and eviction of the lessee from the premises in question is saved by Explanation to Section 14(1), inasmuch as, the recovery of any property by the lessor which is in possession of the Corporate debtor (lessee) on the grounds of insolvency is impermissib....
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....(2020) 13 SCC 308], it was argued that while dealing with the question before the Apex Court as to whether the dispute revolves around the decisions of statutory or quasi-judicial authorities can be subjected to challenge in the insolvency proceedings before the NCLT or NCLAT or the High Court can interfere under Article 226/227 of the Constitution of India. In the facts of the said case, while moratorium in terms of Section 14 of IBC was declared by the NCLT, Chennai by admitting the application under Section 7 of the IBC' 2016, the proposal for deemed extension of the mining lease held by the Corporate debtor, which had expired during the moratorium was rejected by the Government of Karnataka on the ground that the Corporate debtor had contravened not only the terms and conditions of the lease deed but also the provisions of Rule 37 of the Minor Concession Rules, 1960 and Rule 24 of the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Rules, 2016. 16. Prior to inception of moratorium, a notice for premature termination of the lease deed had already been issued on the allegations of violation of the statutory rules and terms and conditions of the lease deed. Howev....
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....ion order under Section 4(1) of the Public Premises Act, 1972, it cannot be argued that the said proceedings could have been made subject matter of the insolvency proceedings. If a dispute cannot be covered or adjudicated by a statutory tribunal like NCLT or NCLAT exercising power under IBC' 2016, as in the instant case, it cannot be argued that the proceedings under the Public Premises Act are barred under IBC 2016, inasmuch as, they are not covered under Section 14(1)(a) of IBC' 2016. 21. Reliance is further placed on the decision of the Apex Court in Municipal Corporation of Greather Mumbai (MCGM) vs. Abhilasb Lal & Ors.[(2020) 3 SCC 234] and the decisions of this Court in the case of Biotor Industries Ltd. vs. Gujarat Industrial Development Corporation in Letters Patent Appeal No. 259 of 2023 and in the case of Biotor Industries Ltd. vs. Gujarat Industrial Development Corporation in Special Civil Application No. 3688 of 2022 to substantiate the above submissions. 22. In rebuttal, Mr. Mihir Joshi, learned Senior counsel for the Corporate debtor, respondent no. 1 herein would submit that both the orders of GIDC for termination of the lease deed and eviction under Section 5 ....
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.... The writ petition out of which the appeal has arisen was filed on 03.03.2022 challenging the termination order dated 13.12.2021, which was passed during the subsistence of the moratorium. Notice was issued to GIDC on 09.03.2022 and eviction order under the Public Premises Act' 1972 was passed on the next day, i.e. 10.03.2022. 30. It is further submitted that during the pendency of the writ petition, the resolution plan was implemented and effected vis-a-vis GIDC, particularly when the payment of Rs. 6,14,46,685/- was received by the GIDC. However, on the same day, the GIDC had issued a communication to the resolution applicant/respondent No. 2 demanding additional payment as agreed under the lease deed. 31. Simultaneously, GIDC preferred Company Appeal (AT) (Ins) No. 1648 of 2023 before the NCLAT challenging the orders dated 13.09.2023 (of withdrawal of its objection) and 19.09.2023 (approval of resolution plan). The NCLAT had set aside the order dated 13.09.2023 in IA No. 136/2022 holding that the withdrawal by the counsel of the GIDC was not under the instructions of its client and IA No. 136 /2022 was restored. Resultantly, the order dated 19.09.2023 approving the resolut....
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....s and the said proposal was placed in the meeting of Board of Approvals held on 18.01.2013 when after deliberations, it was approved. Based on the information available on the official website of the SEZ-INDIA pertaining to the SEZs which are notified and operating in the country and also pertaining to the list published for existing notified SEZ in the country, the name of the Corporate debtor is not appearing in the list. The Development Commissioner, SEZ has also not filed any claim for any of their dues pertaining to the Corporate debtor with the resolution professionals. 37. It was, thus, submitted that as declared in the resolution plan, the resolution applicant had expressed good reasons to believe that SEZ denotification is approved and all the dues between the Corporate debtor and Development Commissioner, SEZ might have been settled at the time of denotification. 38. It was also mentioned therein that with the denotification, now the only business activity that may be carried out by the Corporate debtor is development of demised premises as per the use of the notified area by sub-leasing the industrial plots developed within the demised premises. 39. With these f....
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....lanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period; (2) The supply of essential goods or services to the Corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period. (2A) Where the interim resolution professional or resolution professional, as the case may be, considers the supply of goods or services critical to protect and preserve the value of the Corporate debtor and manage the operations of such Corporate debtor as a going concern, then the suppl....
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....ll not be terminated, suspended, or interrupted during moratorium period. The provisions of Sub-section (1) of Section 14 of IBC, 2016 shall not apply to such transactions, as notified by the Central Government." 44. As noted hereinbefore, the learned Single Judge discussing the provisions of Section 14(a) to (d) had opined that a plain reading of the said provision clearly manifests the legislative intent that once the moratorium is declared upon commencement of the CIRP, there shall be a prohibition against recovery of any property by the owner or lessor where such property is in possession or occupation of the Corporate debtor. If the business of the Corporate debtor is dependent upon any license, permit, registration, etc. the same cannot be cancelled or terminated on the grounds of insolvency. The right to terminate lease allegedly in terms of the conditions of the lease deed on the plea of continuing breach thereof, was not available. From a perusal of the order of moratorium declared by the NCLT, it is evident that the language of Section 14(1)(a) to (d) has been incorporated therein to prohibit initiation of any suit or proceeding against the Corporate debtor including e....
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....ilar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period; 50. The submission of the learned Senior counsel for the appellant is that the Explanation to sub-section (1) of Section 18 added by way of amendment of 2020 is by way of exception to the main provision where prohibitions have been incorporated with the declaration of moratorium. The submission is that the learned Single Judge has committed an error in holding that the entire sub-section (1) of Section 14 providing for prohibition in different eventualities will be applicable in the facts of the present case. The submission is that only prohibition which may be attracted, in the instant case, is as incorporated in clause (d) of sub-section (1) of Section 14, which if read with the Explanatio....
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....asthan SEB v. Mohan Lal, (1967) 3 SCR 377 : AIR 1967 SC 1857], this Court had to decide whether the expression "other authorities" in Article 12 of the Constitution of India took its colour from the preceding expressions used in the said Article, making such authorities only those authorities who exercised governmental power. This was emphatically turned down by a Constitution Bench of this Court, stating : (SCR pp. 384-85 : AIR p. 1862, paras 4-5) "4. In our opinion, the High Courts fell into an error in applying the principle of ejusdem generis when interpreting the expression "other authorities" in Article 12 of the Constitution, as they overlooked the basic principle of interpretation that, to invoke the application of ejusdem generis rule, there must be a distinct genus or category running through the bodies already named. Craies on Statute Law summarises the principle as follows: 'The ejusdem generis rule is one to be applied with caution and not pushed too far. ... To invoke the application of the ejusdem generis rule there must be a distinct genus or category. The specific words must apply not to different objects of a widely differing character but to som....
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....d in Article 12 of the Constitution." 54. The question before the Apex Court was as to whether the institution or continuation of a proceeding under Section 138/141 of the Negotiable Instruments Act can be said to be covered by the moratorium provisions under Section 14 of the IBC. It was argued before the Apex Court that criminal proceedings are outside the scope of the expression "proceedings" contained in Section 14(1) (a) of the IBC' 2016. 55. Taking note of the provisions of Section 14(1) as also the exceptions contained in sub-section (2) and sub-section (3), it was noted therein that on the insolvency commencement date, the adjudicating authority shall mandatorily declare a moratorium to prohibit clauses (a) to (d). Importantly, under sub-section (4), this order of moratorium does not continue indefinitely, but has effect only from the date of the order declaring moratorium till the completion of the CIRP, which is time bound either culminating in the order of the adjudicating authority approving resolution plan or in liquidation. Exceptions in sub-section (2) are for the benefit of the Corporate debtor wherein it is provided that the supply of essential goods or servi....
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....ined in the moratorium provision qua individuals and firms in Part III of IBC. 59. It was further observed that even otherwise, the proceedings under Section 138 would be a legal proceeding in respect of a debt and given the object and context of Section 14, the expression "proceedings" cannot be cut down by any rule of construction and must be given a fair meaning consonant with the object and context. It was, however, noted that criminal proceedings which are not directly related to transactions evidencing debt or liability of the Corporate debtor, as conceded before the Court, would be outside the scope of this expression. 60. Mr. Mihir Joshi, learned Senior advocate appearing for the respondent no. 1/Corporate debtor would argue that the purpose of moratorium under section 14 is to preserve the status quo and not to create a new right. The right under Section 14(1)(d) is not to be dispossessed. Referring to the decision of the Apex Court in Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, [(2021) 7 SCC 209], it was submitted that in a challenge to the order of NCLT, staying termination of Power Purchase Agreement of the Corporate debtor, based on the application moved by the ....
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....ommended addition of the Explanation to Section 14(1) of IBC. The relevant portion of the report as noted by the Apex Court in para '14', reads as under:- "Prohibition on Termination on Grounds of Insolvency *** 8.3. It was brought to the Committee that in some cases government authorities that have granted licences, permits and quotas, concessions, registrations, or other rights (collectively referred to as "grants") to the Corporate debtor attempt to terminate or suspend them even during CIRP period. This could be attempted in two ways : one, by relying on ipso facto clauses, by virtue of which these grants may be terminated on the advent of insolvency proceedings themselves, and second, by initiating termination on account of non-payment of dues. 8.4. The Committee discussed that by and large, the grants that the Corporate debtor enjoys form the substratum of its business. Without these, the business of the Corporate debtor would lose its value and it would not be possible to keep the Corporate debtor running as a going concern during CIRP period, or to resolve the Corporate debtor as a going concern. Consequently, their termination during CIR....
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....ndant caution, the Committee recommended that the legislative intent may be made explicit by introducing an Explanation by way of an amendment to Section 14(1). (emphasis in original and supplied)" 64. It was observed therein that the court's intervention would be guided by ascertaining the legislative intent from the provisions therein. Referring to the scheme of Section 14 of the IBC' 2016, it was concluded in paragraphs '165', '166', '169' as under:- "165. Section 14 of IBC lists the conditions under which a moratorium can be imposed by NCLT in terms of clauses (a) to (d) of sub-section (1). It further clarifies that a licence, permit, quota, concession, grant or right given by a government cannot be suspended or terminated on the grounds of insolvency, subject to certain exceptions. This clarification was added by way of an Explanation to Section 14(1) with effect from 28-12-2019. The Report of the Insolvency Law Committee dated 20-2-2020, as discussed above, noted that without such government grants "the business of the Corporate debtor would lose its value and it would not be possible to keep the Corporate debtor running as a going concern during CIRP per....
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....pex Court has clarified therein that the Explanation to Section 14(1) with effect from 28.12.2019 was added by way of clarification that a licence, permit, quota, concession, clearances or right given by a Government, cannot be suspended or terminated on the grounds of insolvency, subject to certain exceptions. The report of the Insolvency Law Committee dated 20.02.2020, as discussed therein, noted that without such Government grants, "the business of the Corporate debtor would lose its value and it would not be possible to keep the Corporate debtor running as a going concern during CIRP period, or to resolve the Corporate debtor as a going concern" 66. It was noted from the report that the termination of such grants during CIRP on account of ipso facto clauses or non-payment of dues is in contravention to the purpose behind the imposition of moratorium itself. The inclusion of Explanation in light of the report of the Insolvency Law Committee was only to avoid any scope for ambiguity and in exercise of abundant caution. The Insolvency Law Committee, however, took the position that Section 14 even in its unamended form, contained an interdict on the invalidation of Government gr....
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....ice further states that on the expiry 0f 30 days from the date of receipt of the notices, the developer will not be allowed to enter the property and that its authority/license to enter the property or remain thereupon is terminated. The MHADA thereupon will not allow the developer to do anything or in relation to the property and shall take possession of all the structures standing thereon. 70. On the issue as to whether any clash between the MHADA Act and Insolvency Code, it was held that on a plain reading of Section 238 of the Insolvency Code, the Code must prevail. This is for the very good reason that when a moratorium is spoken of by Section 14 of the Code, the idea is that, to alleviate corporate sickness, a statutory status quo is pronounced under Section 14 the moment a petition is admitted under Section 7 of the Code, so that the insolvency resolution process may proceed unhindered by any of the obstacles that would otherwise be caused and that are dealt with by Section 14. The statutory freeze, thus, has been made for a limited period, expressly limited by Section 31(3) of the Code, to the date of admission of an insolvency petition upto the date of approval of resol....
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.... application under Section 7 of IBC' 2016 is required to be maintained during the moratorium period, which shall have the limited effect to the date of the said order upto the completion of the insolvency resolution process in terms of sub-section (4) of Section 14 read with Section 31(3) of the IBC' 2016. 75. The Explanation to sub-section (1) of Section 14 being clarificatory, in any case, will not envelope the whole sub-section(1) of Section 14, the intent of which is to ensure that the status of a Corporate debtor as a "Government concern", is not hampered on account of the varied situations during the CIRP. 76. The submission of the learned Senior counsel that the Explanation to sub-section (1) of Section 14 should be read as an exception to clause (d) to sub-section (1) of Section 14 only, inasmuch as, it permits termination of contract by a statutory authority on any other ground during CIRP except on the ground during of insolvency. Suffice it to say that the Explanation in sub-section (1) of Section 14 has been brought to invalidate ipso facto clauses for some of the Government contract, clarifying that a Government or statutory contracts cannot be suspended or termi....
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....rances against the demised premises during the course of the term of the lease and the Lessor is mandated to provide no objection certificate to the lessee or to a sub-lessee or any concerned party in that regard. Clause 3.9, thus, militates against the case of GIDC that it could terminate the lease deed solely on the ground of default in payment of annual rent. 83. Clause 15 is the only clause which pertains to 'Breach of covenant' and sub-clauses 15.1 and 15.2 contained therein read as under :- "15.1 In the specific event that the Annual Rent has not been paid and is, therefore, in arrears for a period of more than two months, whether the same has been legally demanded or not, the Lessor may seek re-entry in the Demised Premises and the Term of this Lease hereby granted and right to any renewal thereof shall absolutely cease. PROVIDED ALWAYS that the power of such re-entry herein before contained shall not be exercised unless and until the Lessor has given a ninety (90) days notice to the Lessee requiring it to remedy the breach in terms of payment of Annual Rent. 15.2 In the event that the said breach in terms of non-payment of the Annual Rent has not been r....