TaxTMI 
TaxTMI 
2026 (7) TMI 925
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....cial)] The aforesaid three appeals are connected with the same matter and for the sake of convenience are being disposed of by passing this common judgment. 2. The factual matrix as is reflected from the material available on record is in terms that the appellant in CA (AT) (Ins) No. 1581 of 2023 i.e. Uttar Pradesh Housing and Development Board (UP Awas Evam Vikas Parishad) herein after referred to as UPAVP allotted a commercial plot no. 16 measuring 6860.959 sq. metre situated at C-1, Sector 16, Vasundhara Ghaziabad UP through auction to Respondent No. 2 - Mr. Ramesh Kumar Prasad on 23.12.2006 and an allotment letter was accordingly issued on 11.04.2008 and in view of the allotment letter the total amount of land was Rs. 256,267,693/- out of which 50% of the amount i.e. Rs. 128,133,800/-was payable by 30.03.2009 and the remaining 50% was payable through 72 monthly instalments along with interest of 18% p.a. 3. It is further reflected that vide letter dated 24.03.2010 the CD-Respondent No. 1 K.S.N Buildwell Pvt. Ltd. was added along with the name of Respondent No. 2 on his request and it was designated as joint allottee of the commercial property on the condition that the ....
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.... the aforesaid amount to be collected through the District Magistrate and in pursuance of the same a proclamation of sale of the land and other immovable properties was also made by the District Magistrate. 10. It is further reflected that in the meantime, on an application moved by the Omkara Assets Reconstruction Company Ltd. under Section 7 of the Code the Ld. Adjudicating Authority vide order dated 11.10.2022 initiated insolvency process against the CD and Mr. Mohit Goyal was appointed as the IRP. 11. It is also reflected that an application being IA No. 5536 of 2022 was filed by the Resolution Professional of the CD seeking directions for the deceiving of the aforesaid property and vide order dated 17.10.2023 the Ld. Adjudicating Authority allowed the application and direction was given to de seal the property and this order of date 17.10.2023 is impugned in the CA (AT) (Ins) No. 1581 of 2023 filed by the UPAVP. 12. It is further reflected that on 13.01.2023 appellant-UPAVP filed claim of about 139 crores by filing Form B and during the insolvency proceeding a resolution plan was submitted by Bhati Associates which was approved by the CoC with 100% voting share and an....
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..... Sr. Counsel has relied on the law laid down by the Hon'ble Supreme Court in Municipal Corporation of Greater Mumbai (MCGM) vs. Abhilash Lal and Ors. (2020) 13 SCC 234 and State Bank of India vs. Union of India, (2026) SCC Online 202, wherein according to Ld. Sr. Counsel, the Hon'ble Supreme Court has taken a view that matters involving public interest and natural resources would fall outside the domain of insolvency adjudicatory framework and exception to Section 238 of the Code on statutory authorities has also been highlighted in Victory Iron Works Ltd. vs. Jitendra Lohia and Anr. (2023) 7 SCC 227. 18. It is further submitted that the law restrains the IRP from dealing with the properties which do not qualify as assets of the CD in terms of explanation (a) to Section 18 and Section 25 and 36 of the Code and it has been observed by the Hon'ble Supreme Court that asset owned by a third party specially a statutory authority like appellant even if it is in the possession of the CD under contractual agreements would remain out of the definition of term 'assets' in view of explanation of Section 18 of the IBC. In this regard reliance is placed on Greater Noida Industrial Developme....
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....allowed and while the appeal preferred by the CD and homebuyers be dismissed. 24. Ld. Counsel for the Appellant in CA (AT) (Ins) No. 1581 of 2023 i.e. RP of the CD submits that in view of Section 61(1) of the Code any person aggrieved by an order of the Adjudicating Authority may prefer an appeal to the Appellate Tribunal and the Resolution Professional being an aggrieved person in this case is empowered to file the appeal and in this regard the CoC of the CD vide Resolution dated 08/09 May 2025 has specifically authorised the RP to challenge the impugned order. Thus the RP was also authorised by the CoC to challenge the impugned order by filing the appeal. 25. It is further submitted that the hire purchase agreement confers assets on the CD and neither the hire purchase agreement nor the lease agreements were ever terminated by the UPAVP. It is highlighted that Section 18 of the Code empowers the RP to take into custody and control all assets and property and even actionable claims of the CD and explanation appended with Section 18 clarifies that assets include all types of assets whether tangible or intangible, movable or immovable. In this regard Regulation 37 of the CIRP ....
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....t. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. & Ors., (2021) 9 SCC 657 it is submitted that once the resolution plan is approved all claims including those of statutory authorities would stand extinguished except as provided in the resolution plan. 31. It is vehemently submitted that recovery/attachment proceedings are not equivalent to termination or eviction under the Uttar Pradesh (Eviction of unauthorised persons from public premises) Act, 1972. 32. It is further submitted that the judgment of Greater Noida Industrial Development Authority (GNIDA) vs. Prabhjit Singh Soni and Anr. (2024) 6 SCC 767 is not having any applicability in the facts and circumstances of the instant case. As in that case a pre cancellation/ termination notice was issued by the GNIDA before the commencement of CIRP and it was highlighted in this case that the resolution plan must take into consideration the rights of the statutory authorities for feasibility of the plan particularly where the requisite approval of the statutory authority are absent. 33. It is further submitted that the plan submitted by the SRA was approved with 100% voting by the CoC and the UPAVP was also treated as c....
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.... with regard to the non-applicability of Prabhjit Singh Soni (supra) and MCGM vs. Abhilash Lal and it is submitted that the dispute between the parties is only for payment of money and the resolution plan provides about Rs. 20 Crore to the UPAVP. 42. It is further submitted that in none of the meetings of the CoC the UPAVP has ever objected to the resolution plan. 43. Section 238 of the IBC has also been highlighted in order to show that the provisions contained under SEZ Act, 2005 would not be having any effect in view of Section 238 of the Code and in this regard reliance is laid on Noida SEZ Authority vs. Manish Agarwal and Ors. (2025) 1 SCC 415. 44. Having heard Ld. Counsel for the parties, we proceed at first to take the issue of de sealing of the property by passing the order impugned in CA (AT) (Ins) No. 1581 of 2023. This order has been passed by Ld. Adjudicating Authority on IA No. 5536 of 2022 moved by the RP of the CD for de sealing of the premises and to further direct the UPAVP to file its claim, if any. 45. Having gone through the impugned order we notice that Ld. Adjudicating authority has given directions to de seal the property on the following grounds;....
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....19. A communication dated 19.03.2025 written by executive engineer to the property manager of the UPAVP has also placed on record by UPAVP, wherein it is stated that the property was sealed on 27.08.2019 and was given in the custody of police. 50. It appears to be an admitted situation that the CIRP was initiated against the CD on 13.05.2022. True copy of the letter dated 10.11.2017 written by competent officer of the UPAVP to the allottees has also been placed at page no. 69 of the appeal paper book, which shows that direction has been given to demolish the legal structure, constructed contrary to the approved map within 7 days. 51. It is also stated therein that structure erected for five additional floors different from the approved plan has been constructed, which is illegal/ unauthorised and a tin shed of temporary nature has also been erected. 52. We also notice that true copy of communication dated 20.07.2021 has also been placed by the UPAVP at page no. 79 of the appeal paper book and a perusal of this would reveal that the property has been confiscated. 53. Therefore, it is reflected that sealing and confiscation of the said property was ordered much before the....
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....us the RP has acted under the instructions of the CoC and has not filed the appeal independently. 57. Coming to the factual matrix of this case, perusal of the hire purchase agreement would show that it has been executed between UPAVP (first party/owner) and Ramesh Kumar Prasad and authorised signatory of K.S.N Buildwell Pvt. Ltd. on 30.03.2010. Relevant clauses of this agreement are placed herein below: Since, under the Vasundhara Scheme of U.P. Housing and Development Parishad, the rent-installment buyer has separately applied to the owner for allotment of a commercial plot under the rent-installment purchase scheme and the owner has subsequently paid the rent on the prescribed terms and conditions. Consent has been given to allot commercial plot to the installment buyer. And since the total value of Commercial Plot No.16/Com-1 is Rs. 25,62,67,693.00 (Rs. Twenty-Five Crore Sixty-Two Lakh Sixty-Seven Thousand Six Hundred and Ninety-Three only). The rent-installment buyer has paid 30 percent of the total amount which is Rs. 7,68,80,308.00 (Rs. seven crore sixty eight lakh eighty thousand three hundred eight only) as advance amount and first installment. ....
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.... (b) The amount of all municipal or other taxes, fees and other levies, of whatever nature, collected by the local body or the State or Central Government, as determined in the scheme of allotment of rent-installment buyer, or by any other authorized agency in respect thereof on the said property hereby given on rent to the landlord or tenant will make payment directly to the concerned authorities. The hire-purchaser shall pay to the owner property tax, water charges and sewerage system charges as may be levied by the owner from time to time. Provided that in case of non-payment by the rent-installment purchaser, the owner shall have the power to recover such due amount as arrears of land revenue or in such other manner as may be lawful to recover and treat the same as arrears of installment. (h) the rent-installment purchaser shall not sell, transfer, assign or withdraw from possession of the whole or any part of the said property without the prior written consent of the owner, which the owner shall be entitled to reject as per its discretion; (o) That the Hire-purchaser shall be liable to clear all its dues in full which are mentioned in the pr....
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....such increase as shall be fixed by the Parishad and shall be the final and binding for the Tenant. (t) The installment buyer hereby agrees to construct a building on the plot and complete the construction work within 3 years from the date of allotment, failing which the land may be repossessed by the Parishad. The rent-installment buyer will get the building plan approved by the competent authority before starting the construction work. 4. The owner hereby agrees to transfer the said property to the hire installment purchaser after the expiry of the hire-installment purchase period by executing a conveyance deed in the prescribed form with him provided that before such execution he shall inform the owner and the public bodies, if any, that all dues have been paid. The rent installment purchaser will thereafter cease to be a tenant and will be the owner of the property as a lessee subject to the provisions of the conveyance deed to be executed as provided in para 5. 5. That the conveyance deed would be executed by the lessee only after the completion of the installments, and incase the Hire-purchaser tenant requests to complete tenancy before that and beco....
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....instalment buyer/CD had paid 30% of the total amount i.e. Rs. 76,880,308/- as advance amount and first instalment. 60. Clause II of this agreement would suggest the CD/buyer was to take the said plot as a tenant for the purchase period which will be 6 years and the instalment was to start on the first date of January Quarter of the year 2010 and will end on the end of March 2015. The buyer/CD was required to pay Rs. 16,871,406/- to the UPAVP on the first day of every quarter. 61. Proviso appended with Clause III (b) of the agreement would suggest that in case of non-payment by the purchaser/CD the owner/ UPAVP shall have power to recover such amount as arrears of land revenue or in such other manner. 62. Clause III (o) of the agreement suggest that the purchaser shall be liable to clear all its dues within one month of their due and in addition to the regular interest it shall be liable to pay additional 80% interest p.a. and in case of continues three defaults of instalments the tenancy shall be treated as cancelled and the tenants can be evicted. All the dues of lessee shall be recoverable as land arrears and water and electricity connection may also be disconnected 6....
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.....2010 the total payable amount along with 18% interest was equated in 21 trimonthly instalments and was payable from 01.01.2010. There was additional interest of 24% p.a. on delayed payment. 68. Significantly it is also reflected by office order dated 29.11.2019 whereby representation of CD was disposed of, that architectural planner unit-V vide its letter dated 19.04.2011 had approved the map with 1:2 FAR for construction of group housing on commercial and subsequent 8 floors, however the chief architect vide letter dated 27.08.2013 was informed about the decision of the UPAVP taken in its 225th meeting whereby it was decided that the process of land use change by the allottee can be started only after the entire land price has been paid by the allottee and the allottee has taken the registration in his favour. 69. It is also evident from the office order dated 29.11.2019 that on the request of buyer/CD through architectural planner letter dated 02.06.2015 information was given about the change in the use of land from commercial to group housing and information was sought from the executive engineer about the construction and infrastructure. Executive engineer vide letter da....
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....demonstrated through title documents and land records that the ownership of the plot rests solely with the Applicant. Despite this, the Resolution Professional has proceeded to include the said property in the resolution plan without providing any definitive evidence of ownership or leasehold rights by the corporate debtor. 11. The change in land use and increase in FAR in the Plan without statutory permissions raises concerns of statutory and regulatory non-compliance, which undermines the sanctity of the resolution process. Section 30(2) of the IBC mandates that a resolution plan must be in compliance with the provisions of applicable laws. By incorporating changes that are not legally: permissible, the plan violates statutory requirements. 12. The role and discretion of the CoC, though commercial in nature, must operate within the boundaries of the law. We are aware of the fact that the present Resolution Plan in question has been approved by CoC with 100% votes. However, we are of the view that, while the CoC has the prerogative to decide on the commercial feasibility and viability of a resolution plan, its decision must comply with the statutory framework. In....
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....ebt/claim is delineated in sub-regulation (2) of Regulations 7 and 8 of the CIRP Regulations, 2016. 21. Once a claim is submitted with proof under any of the regulations (i.e. Regulations 7, 8, 8-A, 9 and 9-A), the IRP or the RP, as the case may be, as per Regulation 13, has to verify the claim, as on the insolvency commencement date, and thereupon maintain a list of creditors containing names of creditors along with the amount claimed by them, the amount of their claims admitted and the security interest, if any, in respect of such claims, and update it in terms of Regulation 12-A". 75. Instant Appeals raises an important question in terms as to whether rights arising under a Hire Purchase Agreement executed by a statutory development authority in favour of a Corporate Debtor constitute assets capable of being dealt with under a Resolution Plan notwithstanding that legal title in the land continues to vest in the statutory authority. The controversy, therefore, in these Appeals is not merely whether the Corporate Debtor owned the land, the fundamental question is whether the Corporate Debtor possessed any subsisting contractual, possessory or developmental rights on th....
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....nership of assets from one person to another. Its primary object is to preserve the Corporate Debtor as a going concern, maximise the value of its assets and balance the interests of all stakeholders. The Hon'ble Supreme Court in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2020) 8 SCC 531 has held that value maximisation and balancing of stakeholders' interests constitute the fundamental objectives of the Code. It is also a well settled principle that the Code does not create proprietary rights where none existed prior to commencement of CIRP. The Resolution Professional merely steps into the shoes of the Corporate Debtor and can neither acquire nor transfer a better title than what the Corporate Debtor has possessed. It is, therefore, imperative to ascertain the exact nature of the rights which were vested in the Corporate Debtor on the Insolvency Commencement date. 78. Section 18 and 25 of the Code are as under: "Section 18: Duties 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 ....
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....rporate debtor, including the continued business operations of the corporate debtor. (2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions, namely:- (a) take immediate custody and control of all the assets of the corporate debtor, including the business records of the corporate debtor; (b) represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration proceedings; (c) raise interim finances subject to the approval of the committee of creditors under section 28; (d) appoint accountants, legal or other professionals in the manner as specified by Board; (e) maintain an updated list of claims; (f) convene and attend all meetings of the committee of creditors; (g) prepare the information memorandum in accordance with section 29; [(h) invite prospective resolution applicants, who fulfil such criteria as may be laid down by him with the approval of committee of creditors, having regard to the complexity and scale of operations of the business of the c....
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....ul termination of any contract preceding CIRP. However, where contractual rights continue to subsist on the Insolvency Commencement date, unilateral interference therewith after commencement of CIRP may come within the four corners of Section 14. Thus, the applicability of Section 14 in instant case would depend upon the fact whether the Hire Purchase Agreement had been validly terminated prior to the commencement of CIRP against CD. 82. Section 30 of the Code empowers the Committee of Creditors to approve the Resolution Plan. Section 31 authorises the Adjudicating Authority to approve such Plan if it satisfies the statutory requirements. The jurisdiction of the Adjudicating Authority while considering approval of the Resolution Plan is undoubtedly circumscribed. However, where implementation of the Resolution Plan necessarily depends upon rights in immovable property belonging to third parties, the Adjudicating Authority cannot shut its eyes to such issues. 83. Perusal of the impugned judgment dated 27.03.2025 would reveal that the Adjudicating Authority has proceeded on the premise that since ownership of the land never vested in the Corporate Debtor, the land could not for....
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....e 3(o) of the hire Purchase agreement upon default in payment of three consecutive instalments. The controversy, therefore, requires an examination pertaining to the nature of "tenancy" under the Hire Purchase Agreement and whether such tenancy is synonymous with a lease contemplated under the Transfer of Property Act, 1882. 85. Section 105 of the Transfer of Property Act defines a lease as a transfer of a right to enjoy immovable property made for a certain time or in perpetuity in consideration of a price paid or promised to be paid. The essential ingredients of a lease are: (i) transfer of an interest in immovable property; (ii) right to exclusive possession; (iii) certain duration; (iv) consideration. 86. A lease thus creates an interest in the immovable property itself, however the Ownership does not pass and it remains with the owner. Nevertheless, the lessee acquires a proprietary interest recognised by law. Such interest is transferable unless restricted by contract or law and is also heritable and enforceable even against the lessor subject to contractual stipulations. 87. Hon'ble Supreme Court in 2026 INSC 199, CIVIL APPEAL NO. OF 2026, Special Leave Petition....
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....f a premises, it would conclusively establish that he was a lessee. But there was a change and the recent trend of judicial opinion is reflected in Errington v. Errington [(1952) I All ER 149, wherein Lord Denning reviewing the case-law on the subject summarizes the result of his discussion thus at p. 155: xxx xxx xxx The following propositions may, therefore, be taken as well established : (1) To ascertain whether a document creates a licence or lease, the substance of the document must be preferred to the form; (2) the real test is the intention of the parties - whether they intended to create a lease or a licence; (3) if the document creates an interest in the property, it is a lease; but, if it only permits another to make use of the property, of which the legal possession continues with the owner, it is a licence; and (4) if under the document a party gets exclusive possession of the property, prima facie, he is considered to be a tenant; but circumstances may be established which negative the intention to create a lease." (Emphasis Supplied) 16. Relying on the above reasoning, this Court in Mrs M.N Clubwala and another v. Fida Hussain Saheb and others,....
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....uted. The law in this regard is well settled that nomenclature of the agreement is never conclusive and therefore calling a person "tenant" does not automatically create a tenancy or lease in his favour under Section 105 of the Transfer of Property Act and nature of his rights would have to be assessed in view of the terms and stipulations of the contract. 88. Having carefully examined the Hire Purchase Agreement executed between the parties, we find that the Agreement repeatedly declares that ownership shall continue to vest in the UPAVP till it is divested by conveyance and Conveyance is expressly postponed until payment of the entire consideration by the CD. The Corporate Debtor could neither demand execution of a sale deed before completion of payments nor assert its ownership against the terms of the Agreement. On the other hand, the Agreement conferred substantial rights upon the Corporate Debtor. The CD was put in possession; authorised to undertake construction; permitted to develop the project; entitled to exploit the property commercially; permitted to induct purchasers subject to contractual conditions and these rights, in our understanding were neither illusory nor i....
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....of the agreement and these rights undoubtedly possess economic value. 91. The next question is whether the aforesaid rights existed in favour of the CD, may come under the term "assets" used under the IBC. 92. In Victory Iron Works Ltd. Vs. Jitendra Lohia and Ors., MANU/SC/0229/2023 Hon'ble Supreme Court while considering the nature of leasehold rights opined as under: - "19. Section 3(27) of the IBC defines the word "property" as follows: 3. Definitions. - - In this Code, unless the context otherwise requires, - xxx xxx xxx (27) "property" includes money, goods, actionable claims, land and every description of property situated in India or outside India and every description of interest including present or future or vested or contingent interest arising out of, or incidental to, property. But the word "asset" is not defined either in Section 3 or in Section 5 or in Section 79 of the Code, though Section 79(14) defines the expression "excluded assets". 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....
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....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 consideration from the Corporate Debtor to the UCO Bank and to Energy Properties; (iv) the Development Agreement dated 16.06.2008; (v) the Memorandum Recor....
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....ansfer of a right to enjoy such property, made for a certain express or implied, or in perpetuity, in consideration of a price paid or promised. The present is a case where on payment of monthly rent as reserved in the lease deed, Corporate Debtor has given possession and right to erect building of the land. Thus, by lease, Appellant has acquired a right to enjoy the property. Leasehold rights which has been granted to the Corporate Debtor is property within the meaning of Section 3(27) and has to be treated as an asset for the purposes of Section 18(1)(f). Much reliance has been placed by the Appellant on explanation (a) and what is sought to be contended is that the land under the lease is owned by the Appellant, hence, the possession of the said land ought not to have been taken by the Resolution Professional. The expression 'assets' occurring in explanation (a) has wide meaning which meaning encompasses itself the immoveable land as well as leasehold rights. 20. The leasehold rights which are owned by the Corporate Debtor consists of right to enjoy the immoveable property by virtue of Registered Lease Deed dated 31.03.2007. Explanation (a) does not come into way of the....
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....strued as a whole. No clause of a commercial contract can be read and interpreted in isolation so as to render the remaining clauses/provisions redundant. It is also settled principle that where two constructions are reasonably possible, the construction which gives effect to all provisions of the contract must ordinarily be adopted over one which renders any provision as useless. An approach which is harmonises to all clauses of the agreement rendering the commercial agreement as workable must be adopted. 99. Here we recall that as per the admitted case of UPAVP, they have proceeded under Section 69 of Uttar Pradesh Awas Vikas Adhiniyam 1965 (Act No.1 of 1966). While the documents provided by them at Appellate stage would reveal that the property has not been sealed due to non-payment of instalments and for this purpose (non-payment of instalment) 'Recovery Certificate' was issued against the CD. It is evident that the property has been sealed for raising illegal and unauthorised constructions made by the CD, in violation of approved plan under relevant provisions of the Uttar Pradesh Urban Planning and development Act,1973. It is also reflected that no proceedings unde....
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....ent of contractual rights arising under Clause 3(o). Participation in CIRP is a statutory remedy available to every creditor. Exercise of such remedy cannot automatically operate as waiver but the contents of the claim filed by the UPAVP are relevant. A claim demanding the balance consideration and compounding charges constitutes significant evidence regarding how the UPAVP itself understood the continuing legal relationship between the parties. In our considered understanding once the UPAVP elected to participate in the insolvency process as a creditor, its claim required consideration in accordance with the provisions of the Code. Thus the Resolution Professional was justified in considering the U.P. Housing Board as a creditor of the CD for the purposes of formulation of the Resolution Plan and we do not find any illegality in the same. 102. The crucial question, therefore, is not whether Clause 3(o) has authorised UPAVP to cancel the agreement, the question is whether cancellation had attained legal finality before the Insolvency commencement date. It appears to be an admitted situation in the present case that no formal order either for cancellation of agreement or determin....
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....owed money by mortgaging said lands, however was not able to pay leading to the commencement of CIRP and a resolution plan was ultimately submitted by Shetty's New medical centre (SNMC) and after revision was approved by COC. The Hon'ble Supreme Court held as under: "32. A cumulative reading of the stipulations reveals that the contract/agreement contemplates that the lease deed was to be executed after the completion of the project. The contract reveals that: (a) the project period was for 60 months starting from the date excluding the monsoon period; (b) by Clauses 5 and 17, Seven Hills could mortgage the property for securing advances from financial institutions for the construction of the project and thereafter towards its working. Such mortgage/charge or interest was subject to approval by MCGM. In the event the contract was to be terminated, it was agreed that MCGM would not in any manner be liable towards the mortgaged amount and all its rights and ownership would continue to vest in it free from encumbrances (Clause 17). 33. The show-cause notice in this case preceded admission of the insolvency resolution process. In view of....
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....they also acknowledge the liabilities of the corporate debtor; equally, however, there are proposals which envision the creation of charge or securities in respect of MCGM's properties. Nevertheless, the authorities under the Code could not have precluded the control that MCGM undoubtedly has, under law, to deal with its properties and the land in question, which undeniably are public properties. The resolution plan, therefore, would be a serious impediment to MCGM's independent plans to ensure that public health amenities are developed in the manner it chooses, and for which fresh approval under the MMC Act may be forthcoming for a separate scheme formulated by that corporation (MCGM)". 105. The Hon'ble Supreme Court held that neither the Resolution Professional nor the Adjudicating Authority could compel the Municipal Corporation to renew a lease contrary to law. It was further held that the Insolvency and Bankruptcy Code does not create proprietary rights in favour of the Corporate Debtor. The Resolution Professional merely represents the Corporate Debtor and he cannot claim a better title than what the Corporate Debtor itself possessed. The Court further observed tha....
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....spose of any claim made by or against the corporate debtor or corporate person and also 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. Section 238 of the Code creates an overriding effect which provides that the provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. We are of the firm view that Embassy Property Developments (P) Ltd. and Gujrat Urja Vikas Nigam (Supra) are the sheet anchor so far as the determination of the jurisdiction of NCLT is concerned. It has been held in Gujrat Urja Vikas Nigam (Supra) that the non-obstante clause in Section 60(5) is designed for a different purpose to ensure that the NCLT alone has the jurisdiction when it comes to the applications and proceedings by or against a corporate debtor covered by the Code, making it clear that no other forum has jurisdiction to entertain or dispose of such applications or proceedings. It is held that the NCLT ....
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.... deemed to be valid up to 31.03.2020 which was allowed by the NCLT and ultimately the Adjudicating Authority directed the Government of Karnataka to execute the supplement lease deed. In the background of these facts, the Hon'ble Supreme Court held that in the light of the statutory scheme as culled out from various provisions of the IBC, 2016 it is clear that wherever the corporate debtor has to exercise a right that falls outside the purview of the IBC, 2016 especially in the realm of the public law, they cannot through the RP, take a bypass and approach NCLT for the enforcement of such a right. Similarly, in the case of Tata Consultancy Service Limited (Supra) the Hon'ble Supreme Court has reiterated that the RP can approach the NCLT for adjudication of disputes which relate to the insolvency resolution process, but when the dispute arises dehors the insolvency of the corporate debtor, the RP must approach the relevant competent authority, even at an interim stage. 74. Having considered the aforesaid legal position with regard to the jurisdiction of the NCLT as provided under Section 60 (5) of the Code and keeping in view Section 238 of the Code wherein a specific provi....
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....g from proprietary rights, highlighting that the NCLT is a statutory body whose powers are conferred by law, specifically the IBC and Section 60(5)(c) of the IBC must be interpreted in light of the legislative intent to consolidate insolvency law and avoid multiplicity of fora, as reflected in the Statement of Objects and Reasons and judicial precedents. While discussing judicial precedents (e.g., Innoventive Industries Ltd. v. ICICI Bank, Arcelormittal India Pvt. Ltd. v. Satish Kumar Gupta) it is opined that they confirm that Section 60(5) vests exclusive jurisdiction in the NCLT for applications and proceedings by or against a corporate debtor under the IBC and that the NCLT has jurisdiction to adjudicate disputes arising solely from or relating to the insolvency of the corporate debtor, however, it must not usurp the jurisdiction of other fora for disputes not so related and a nexus with insolvency is required. The NCLT's jurisdiction is supervisory and process-driven, not unlimited and since the PPA was terminated solely on the ground of insolvency, the dispute arises out of and relates to the insolvency process, and the NCLT has jurisdiction under Section 60(5)(c). Section 238....
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....as in a different form. As already discussed above, in our view the form in which a claim is to be submitted is directory. What is necessary is that the claim must have support from proof. Here, the resolution plan fails not only in acknowledging the claim made but also in mentioning the correct figure of the amount due and payable. According to the resolution plan, the amount outstanding was Rs 13,47,40,819 whereas, according to the appellant, the amount due and for which claim was made was Rs 43,40,31,951. This omission or error, as the case may be, in our view, materially affected the resolution plan as it was a vital information on which there ought to have been application of mind. Withholding the information adversely affected the interest of the appellant because, firstly, it affected its right of being served notice of the meeting of the CoC, available under Section 24(3)(c) IBC to an operational creditor with aggregate dues of not less than ten per cent of the debt and, secondly, in the proposed plan, outlay for the appellant got reduced, being a percentage of the dues payable. In our view, for the reasons above, the resolution plan stood vitiated. However, neither NCLT no....
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....pleted housing project continues to possess "assets" within Sections 18 and 25 of the Code. Hon'ble Supreme Court also did not examine a case where construction had already been almost completed, hundreds of third-party purchasers had acquired rights and the statutory authority itself had lodged a comprehensive financial claim in CIRP, where in the compounding charges were also claimed and the agreement and allotment was not cancelled. Therefore, while Prabhjit Singh Soni (supra) undoubtedly governs proprietary rights, it does not completely cover the present controversy. 115. One of the main submissions advanced by Ld. Counsel for the Resolution Professional is that the Resolution Plan does not seek transfer of ownership. We have already carefully examined this submission. As stated earlier ownership of land and contractual rights arising from development of that land are not identical legal concepts. A developer may possess valuable commercial rights although title remains vested elsewhere. Such distinction is recognised throughout commercial jurisprudence. Hon'ble Supreme Court in Prabhjit Singh Soni (supra) did not hold that every contractual right connected with public land....
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....ntractual clauses must also bear in mind this objective. 118. We at this stage again recall that the UPAVP filed its claim before the Resolution Professional comprising of balance consideration of the land, instalments, interest and compounding charges. We have already held that the filing of the claim by itself does not amount to waiver, however filing of claim for compounding charges presupposes that the existing construction was capable of consideration under the applicable statutory framework for compounding. Similarly, a claim for balance consideration indicates that obligations flowing from the original contractual arrangement continued to be asserted. These circumstances become relevant while deciding whether every contractual relationship had finally disappeared before CIRP. Having harmoniously considered Abhilash Lal, Embassy Property, Gujarat Urja and Prabhjit Singh Soni (Supra) it emerges that (i) Ownership of the land always remained vested in the UPAVP (ii) No Resolution Plan can compel transfer of ownership contrary to the Hire Purchase Agreement. (iii) The Resolution Professional cannot acquire a superior title. (iv) However, contractual and development rights, if....
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....ding ratio of Prabhjit Singh Soni. (b) Contractual and development rights, if subsisting on the Insolvency Commencement Date, may nevertheless constitute assets capable of examination under Sections 18 and 25 of the IBC. (c) The Resolution Professional can never claim a higher right than what the Corporate Debtor itself possessed (d) Whether such contractual rights survived depends upon the terms of the agreement and the facts of each case. (e) The RP could not bypass the statutory provisions governed by the public law and the compounding of illegal constructions is in the exclusive domain of the Housing Board, in view of the binding precedent of Embassy properties (supra). 123. A copy of the Resolution Plan which has not been approved by Ld. Adjudicating authority has been placed on record by the RP and we notice that RP has admitted claim of one Financial Creditor namely Omkara Assets Reconstruction Private Ltd. for Rs 32,15,72,653 and 153 claims of Financial Creditors in Class amounting to Rs 78,26,16,253 totalling all the admitted claims as of Rs 1,10,41,88,906/-.It is also reflected that the structural part of the construction is stated to be complete and only finishing wor....
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....se that insolvency jurisprudence cannot become an instrument for validating illegal constructions or defeating statutory town planning laws, unless the same could be legally compounded by the appropriate authority. If the project suffers from violations incapable of regularisation / Compounding under the governing statute, no Resolution Plan can compel the UPAVP to compound such violations. Conversely, where the governing statute itself contemplates compounding or regularisation upon satisfaction of prescribed conditions, the mere existence of CIRP cannot deprive the Resolution Applicant of seeking such statutory remedies. It is to be clarified that once the UPAVP elected to participate in the insolvency process as a creditor, by submitting its claim, the claim require consideration in accordance with the provisions of the Code, which appears to have been considered, however this does not mean that its ownership would stand transferred to the CD. 126. From the foregoing discussion we conclude that the Hire Purchase Agreement did not create ownership in favour of the Corporate Debtor. The Corporate Debtor acquired contractual possession coupled with development rights and such co....