TMI Blog2021 (3) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... binding on all the stakeholders of the Corporate Debtor. R3 is also a stakeholder being the lessor of the Corporate Debtor and had also filed claim in the CIRP as an Operation Creditor. It is also not in doubt that required approvals have to be given by the concerned authorities under the relevant laws and rules framed thereunder. However, no authority can deny the renewal of licence or lease, on the ground that past dues are not paid, even without making a claim (water charges) during CIRP. In respect of Transfer and Renewal fees, we have adduced reasons how the belated claim made is not in consonance with the provisions of the Code. Prayer for issue of no objection certificate and no dues certificate for creation of mortgage by the Applicant - HELD THAT:- Snce R3 is the owner of the property, it is purely within its prerogative to decide on the issue. We are conscious that jurisdiction under 60(5) of the Code is not so elastic to grant this relief sought for by the Applicant. Application allowed in part. - IA No. 2114/MB/2020 in CP (IB) No. 241/MB/2018 - - - Dated:- 9-3-2021 - Janab Mohammed Ajmal, Hon ble Member (Judicial) And Shri V. Nallasenapathy, Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had to have completed at least 20% of the construction of the total plot area, upon which BCC was to be processed without applying for further extension. 5. The plot holder failed to complete the construction within the prescribed time (15/06/2009) and on 07/11/2014, R3 issued show cause notice to the Corporate Debtor asking as to why action for termination of lease and repossession of plot would not be initiated against it. When the plot holder failed to repay the bank loan, the possession of the plot was taken over by the Creditor Bank. Thereafter the Insolvency and Bankruptcy petition was admitted by this Tribunal. 6. It is submitted by the Applicant that R3 filed claim before R1 for sum of ₹ 2.92 Crores pertaining to certain arrears payable by the Corporate Debtor. The Resolution Plan provided for the payment of ₹ 50 Lakhs towards debt due to Operational Creditors. It is submitted that the R3 s claim of ₹ 2,92,42,128/- claimed as an Operational Debt was paid and settled for ₹ 2,67,226/- in the Resolution Plan which has been approved by this Adjudicating Authority and it is submitted that the payment of ₹ 2,67,226/- was made to R3 on 29/09/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and according to the Corporation s Policy, its debts ought to be first paid off from amounts recovered. As such the amounts due to the Maharashtra Industrial Development Corporation for the subject Plot No. T-17 and T-17 Part, admeasuring 3,22,109 square meters are as follows:- 1. Renewal Fees ₹ 12,33,85,400/- 2. Transfer Fees ₹ 07,05,41,900/- 3. Water Bill and Service Tax ₹ 3,49,59,777/- Pursuant to the above, the total amount due is ₹ 22,88,87,077/- and the same should be paid to the Maharashtra Industrial Development Corporation. This letter has been sent with the approval of the Joint Chief Executive Officer. Yours Faithfully, Farogh Mukadam, Deputy CEO (2), MIDC, Mumbai CC: Smt. Sujata Chattopadhyay, Insolvency Resolution Professional for information and necessary action. 10. Aggrieved by the action of R3, the Applicant is before us with the following reliefs: a. Declare that no amount is due and payable to the Respondent No. 3 over and above the amount of ₹ 2,67,226/-as set out in the Resolution Plan sanctioned by this Hon ble Tribunal by way of its order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, R3 has not filed any claim in respect of this claim. G. R3 s claim of transfer charges of ₹ 7,05,41,900/- arising out of implementation of the approved Resolution Plan is completely misplaced as there is no transfer of leasehold rights in the land and factory premises of the Corporate Debtor. H. The Corporate Debtor which was the lessee of the land and factory building, continues to be the lessee. It is only the shareholding of the Corporate Debtor which has undergone a change. I. In response to the MIDC Circular No. 2633 dated 12/05/1998 the Applicant submits that for a formal transfer which include all voluntary transfers including amalgamation, demergers, etc., under the direction of the competent authority/tribunal or government body, a standard minimum transfer fee or no fee could be payable for the transfer of plot. But this transfer is not due to voluntary transfer and is on account of operation of law that has the binding effect under the Code. This change in shareholding has taken place due to such operation of law. J. Hence the charging of exorbitant transfer fee of more than ₹ 7 Crores is contrary to the provisions of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31(b) of the CIRP Regulations. E) Without prejudice to the above and strictly in the alternative, it is submitted that the dues prior to the Insolvency Commencement Date i.e. 08/05/2019 may stand satisfied as per the approved plan, but for the period from 08/05/2019 till the approval of the Resolution Plan i.e. 02/07/2020, the demand of ₹ 2,92,42,128/- towards water and service tax, ₹ 9,50,39.800/- towards non-refundable additional premium for granting extension for obtaining BCC and ₹ 7,05,41,900/- towards transfer charges, which are remaining unpaid, have to be either incurred by the Resolution Professional as Resolution Process Costs or are to be paid in full from the funds of the Corporate Debtor. F) R3 is entitled to charge transfer fees in the event of change of shareholding of the lessee entity, in view of the MID Act, 1961 and various circulars issued there under. G) The levy of such fee has been upheld by the Hon ble Supreme Court in the Case of UP Street Industrial Development Corporation...V/s...Monsanta Manufacturers Private Limited: ((2015) 12 SCC 501) which was followed by the Hon ble Bombay High Court in the case of Aurangabad Carbon Produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution Plan and no more. Section 31(1) of the Code cannot be used to suggest either that the statutory authority cannot levy or recover dues that arises after the insolvency commencement date much less those that arise upon the implementation of the Resolution Plan or the statutory authorities are bound to grant approvals, sanctions, etc., that are required for such implementation. Such a suggestion would amount to misuse of Section 31(1) and also militates against Section 31(4) of the Code. M) In levying the transfer fee, there is no conflict or inconsistency between the MID Act and the Code, and in any event, Code cannot override any law which is under exclusive purview of the State under List 2 of Schedule VII of the Constitution of India. N) Due to non-payment of transfer fee, which is completely outside the realm of the Code, entitles R3 to terminate the lease deed and resume possession of the leased plots. O) Leased plots are owned by R3 and creation of encumbrances over the leasehold interest by the Applicant is subject to its approval in its sole discretion. Any encumbrance created without the approval of R3 will entitle R3 to terminate the lease deed and resume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lessor of the Corporate Debtor and had also filed claim in the CIRP as an Operation Creditor. 19. In this circumstance, as provided under Section 60(5)(c) of the Code, any question of priorities or any question of law or facts, arising out of in relation to the insolvency resolution or liquidation proceedings of the Corporate Debtor, this Authority shall have the jurisdiction to decide the issues such as claims made, belated claims and CIRP cost. 20. Clause 2(d) of the lease deed stipulates that on or before 15.06.2009, the Corporate Debtor has to complete at least 20% of the construction in the leased land. The Corporate Debtor has not complied with the stipulation and R3 issued show cause notice on 17.11.2014 to the Corporate Debtor for termination of the lease. But no further action was taken by it, till the notice dated 02.11.2020 as above. 21. R3 cannot say that the Resolution Plan is void since it does not provide for proper payment of CIRP costs and the Corporate Debtor is to be liquidated. The Resolution Plan was approved on 02/07/2020. R3 by its letter dated 02/11/2020 demanded this payment from the Applicant, hence there is no question of treating this amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Applicant has to bear these fees. It has to be noted that the right in the leasehold property has not been transferred to any other third party. Only the shareholding is changed and the Corporate Debtor Company remains as it is. The company is a separate legal entity distinct from the shareholders. The shareholders may come and go but the company as a separate legal entity remains the same even after the approval of the plan. The leasehold right is held by the very same Corporate Debtor company. Before Corporate Insolvency Resolution Process and after Corporate Insolvency Resolution Process the status of the lessee does not change. The Lessee is the same person. The change in shareholders of the Corporate Debtor on approval of plan by virtue of the provisions of the Code cannot be termed as transfer of leasehold right. In view of this legal position we hold that there is no transfer of leasehold rights to anybody and fees claimed is wholly untenable. Since we are holding that there is no transfer at all, the judgements relied by R3 are of no avail. Another contention that charging of these fees has arisen only upon implementation of the Plan also fails. The contention of the R3 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a resolution plan is approved by the Committee of Creditors it shall be binding on all stakeholders, including guarantors. This is for the reason that this provision ensures that the successful resolution Applicant starts running the business of the corporate debtor on a fresh slate as it were. In State Bank of India v. Ramakrishnan, MANU/SC/0849/2018: 2018 (9) SCALE 597, this Court relying upon Section 31 of the Code has held: 22. Section 31 of the Act was also strongly relied upon by the Respondents. This Section only states that once a Resolution Plan, as approved by the Committee of Creditors, takes effect, it shall be binding on the corporate debtor as well as the guarantor. This is for the reason that otherwise, Under Section 133 of the Indian Contract Act, 1872, any change made to the debt owed by the corporate debtor, without the surety's consent, would relieve the guarantor from payment. Section 31(1), in fact, makes it clear that the guarantor cannot escape payment as the Resolution Plan, which has been approved, may well include provisions as to payments to be made by such guarantor. This is perhaps the reason that Annexure VI(e) to Form 6 contained in the Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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