TMI Blog2021 (4) TMI 1317X X X X Extracts X X X X X X X X Extracts X X X X ..... y Section 14(1)(d) of the Code. As far as other prayers, R1 shall not take any coercive steps till the Application for approval of the Resolution Plan (MA No. 3960 of 2019) is heard by this Bench - application allowed. - M.A. No. 3691 of 2019 in C.P. (IB) No. 2298/MB/2018 - - - Dated:- 12-4-2021 - Janab Mohammed Ajmal, Member (J) and V. Nallasenapathy, Member (T) For the Appellant: Rohit Gupta and Rubina Khan, Advocates i/b Fortis India Law For the Respondent: Chetan Kapadia, Rahul Sarda, Khushbu Marwadi, Advocates i/b Jay Co and Nikhil Rajani, Advocate i/b V. Deshpande Co. ORDER V. Nallasenapathy, Member (T) 1. This is an Application under section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 (the Code) by the Resolution Professional seeking the following reliefs: a. To quash and set aside the notice dated 8.11.2019 issued by the Respondent as null and void and to restrain the Respondent from taking any steps in further of the said notice dated 8.11.2019; b. To direct the Respondent to restrain from terminating the lease agreement dated 21.1.2015 till the completion of the corporate insolvency resolution process or to take an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), vide registered Assignment Agreement dated 20.01.2018. The said agreement is annexed as Annexure XI. i. On 29.01.2019, R1 issued a show cause notice to R2 as to why action should not be initiated and allotment of the plot be not cancelled, since the conditions of lease requiring building to be constructed by 19.01.2017 had been violated. j. R2 filed Writ Petition No. 2470 of 2019 on the file of Hon'ble Bombay High Court against R1 challenging the show cause notice. The Writ Petition was dismissed by order dated 04.11.2019 with the observation that R1 had the right to issue a show cause notice to ARCIL and the same could not be faulted. k. In the meantime, the CIRP intervened on 11.03.2019. On 08.11.2019, the R1 issued a notice to the Applicant stating that the lease agreement was terminated and an officer of the R1 would come on 14.11.2019 to take possession of demised land. l. The Counsel for the Applicant submits that while the CIRP is going on, the moratorium provided under Section 14 would be effective. The R1 is prohibited under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h R2. Despite the possession with R2, the Corporate Debtor continued to hold leasehold rights, ownership and title of the land and they never got vested with R2. 6. The Counsel for the R1 submitted as below: a. R1 is a Government of Maharashtra Undertaking, established with the object of ensuring planned and accelerated industrial development in the State under the provisions of MIDC Act. b. The land was allotted to the Corporate Debtor by the Land Allotment Committee as per Maharashtra Industrial Development Corporation Disposal of Land Regulations, 1975 which regulates the procedures for disposal of plots in the industrial areas and estates. c. Clause 2(d) of the Lease Deed dated 12.05.2015 provided that the Corporate Debtor had to complete construction of at least 8,224 sq. mtrs of building and other structures on or before 19.01.2017. d. Since the Corporate Debtor violated the clause 2(d) referred above, R1 issued show cause notice to the Corporate Debtor on 01.11.2018, calling upon as to why action of termination of lease deed and repossessing the subject plot should not be taken. On 29.01.2019, R1 issued notice to DHFCL and R2 on the same subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, inserted by the Amendment Act 10 of 2015 provides for deemed grant and deemed extension of different kinds. Primarily Section 8A applies only to minerals other than those specified in Parts A and B of the First Schedule. In so far as minor minerals are concerned, the State government is empowered to make Rules for regulating the grant of mining leases. ... 27. ... The liberties and privileges granted to the Corporate Debtor by the Government of Karnataka under the mining lease, are delineated in Part IV of the mining lease. The mining lease was issued in accordance with the statutory Rules namely Mineral Concession Rules, 1960. Therefore the relationship between the Corporate Debtor and the Government of Karnataka under the mining lease is not just contractual but also statutorily governed. ... 28. Therefore as rightly contended by the learned Attorney General, the decision of the Government of Karnataka to refuse the benefit of deemed extension of lease, is in the public law domain and hence the correctness of the said decision can be called into question only in a superior court which is vested with the power of judicial review over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ownership by a court or other authority. In fact an asset owned by a third party, but which is in the possession of the corporate debtor under contractual arrangements, is specifically kept out of the definition of the term assets under the Explanation to Section 18. ... This shows that wherever the corporate debtor has to exercise rights in judicial, quasi-judicial proceedings, the resolution professional cannot short-circuit the same and bring a claim before NCLT taking advantage of Section 60(5). 41. Therefore 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 resolution professional, take a bypass and go before NCLT for the enforcement of such a right. h. The correctness or otherwise of R1's action in terminating the lease agreement and/or repossessing Plot No. B-11 from R2 is not questionable. i. The Corporate Debtor have been granted license only to enter upon the plot for the purpose of buildin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ines Development and Production Agreement'. ... 8. The conditions for vesting has been shown in Clause 3 which is subject to compliance of all the eligibility conditions, payment of upfront amount in installments and furnishing of performance security etc. Completion of vesting condition and notice has been shown therein. ... 13. In the present case, as we find that the vesting of the Coal Mines is not complete in absence of any agreement with the State Government in respect to the mines in question, we hold that the 'Resolution Professional' on behalf of the 'Corporate Debtor' cannot claim that pursuant to lease the mines are under occupation or in possession of the 'Corporate Debtor'. 14. The Government of India by its letter dated 13th April, 2017 issued show cause notice to the 'Corporate Debtor' before issuance of the termination letter dated 30th December, 2017 i.e. much prior to initiation of the 'Corporate Insolvency Resolution Process' (18th July, 2017). The 'Corporate Debtor' having failed to act in terms with the said show cause. If the order of cancellation have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MCGM's appeal was rejected by NCLAT. The proposal could be approved only to the extent it did not result in encumbering the land belonging to MCGM. 36. ... Seven Hills did not complete construction of the 1600 bed hospital. Apparently, it did not even fulfill its commitment, or pay annual lease rentals. In these circumstances, MCGM was constrained to issue a show cause notice before the insolvency resolution process began, and before the moratorium was declared by NCLT on 13th March, 2018. According to MCGM, in terms of Clause 26 (of the contract), even the agreement stood terminated due to default by Seven Hills. This Court does not propose to comment on that issue, as that is contentious and no finding has been recorded by either the adjudicating authority or the NCLAT. ... 47. In the opinion of this Court, Section 238 cannot be read as overriding the MCGM's right - indeed its public duty-to control and regulate how its properties are to be dealt with. That exists in Sections 92 and 92A of the MMC Act. This Court is of opinion that Section 238 could be of importance when the properties and assets are of a debtor and not when a third party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taken, the Applicant by reply dated 11/11/2019 wrongly contended that the plot was in his possession. s. In fact, in the meetings of the CoC held on 17/06/2019 and 26/07/2019, the Applicant admitted that the custody of the leased premises had not been taken by him. t. The Applicant has not brought any material on record to show that the possession of the land was with the Corporate Debtor on the date of initiation of CIRP i.e., on 11/03/2019. u. Even as per Regulation 17 of MIDC Disposal of Land Regulations, 1975, R1 is entitled to resume possession of the plot due to the contravention by the Corporate Debtor of the terms and conditions of the lease. Panchnama dated 14th November 2019 was prepared by R1 at the time of taking possession of Plot B-11. v. Since on the date of initiation of CIRP, Plot B-11 was not in possession of the Corporate Debtor, the protection under Section 14 is not available. The protection is available only in respect of property which is occupied by or in the possession of the corporate debtor . The provisions of section 14(1)(d) do not have any impact on taking over possession from a third party. Furthermore, as stated above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, been affected by the resolution plan. Equally in the opinion of this Court, the adjudicating authority could not have approved the plan which implicates the assets of MCGM especially when Seven Hills had not fulfilled its obligations under the contract. 18. The matter had come to this Court after the Adjudicating Authority had approved of a certain resolution plan, unlike in the facts of the present case, and what was clear, on the facts of that case, was that a show cause notice of the Municipal Corporation, which preceded admission of the insolvency resolution process, made it clear that assets of MCGM could not possibly be subsumed within a resolution plan without its approval/permission. It was in this context that this Court, in para 47 of the said judgment, stated that Section 238 of the Code cannot be read as overriding the MCGM's right-indeed its public duty-to control and regulate how its properties are to be dealt with. Properties was referred to in this judgment as referring to assets of the corporate debtor. We have seen how, in the facts of this case, we are not concerned with the assets of the corporate debtor, least of all the assets of MHADA. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018 and 29.01.2019 were issued during pre-CIRP period i.e. before 11.03.2019. The termination/possession notice dated 08.11.2019 was issued during CIRP and the same is hit by Section 14 of the Code. c. The Hon'ble Supreme Court have time and again and specifically in a recent judgment of Alchemist Asset Reconstruction Company Limited v. Hotel Gaudavan Private Limited and Others (2018) 16 SCC 94, held that once a moratorium under Section 14 of the Code comes into effect, Section 14(1)(a) expressly stops institution or continuation of pending proceedings against corporate debtors. The Supreme Court held that: the mandate of the new Insolvency Code is that the moment an insolvency petition is admitted, the moratorium that comes into effect under Section 14(1)(a) expressly interdicts institution or continuation of pending suits or proceedings against corporate debtors. d. Reliance is also placed on the judgment of Hon'ble NCLAT in the case of Bohar Singh Dhillon v. Rohit Sehgal (Company Appeal (AT) Insolvency No. 665 of 2018 (paragraph 7), wherein it is held that till the period of moratorium continues, agencies such as the SEBI cannot recover any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has given a notice in writing, to the Lessee, stating his intention to reenter the demised land; and only if the breach is not cured within three months of such a notice. Further, Clause 4(b)(ii) states that the Lessor may permit the Lessee to continue occupying the demised premises on payment of additional premium as may be decided upon by the Lessor. j. Clause 2(d) of the Tripartite Agreement states that in the event there is a default/breach by the lessee and the lessor decides to re-enter the said plot area, the lessor has to give the financial institution, i.e. DHFCL, a notice in writing, of 6 months, specifying the breach committed by the lessee and the lessor shall not re-enter the said property, unless the lessee or the financial institution has failed to remedy the breach within 6 months of receipt of the said notice. k. In spite of having issued two show cause notices and a Termination/Possession Notice, MIDC has not adjudicated upon any of the notices. No cure period is available to the financial institution under the Tripartite Agreement to remedy the alleged breach. The possession of the said property can be taken only by due process of law after adheri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting 5% of the total premium amount and such other dues and outstanding, if any. 7. However, if the License Holder fails to hand over possession of the said plot to the Area Manager on the given date and time and if the said License Holder failed to hand over Possession Receipt and Original Lease Agreement dated 20.01.2015 and if the Corporation compel to take possession of the said plot on the given date and time after conducting panchnama then in such case, while refunding back the Premium amount, the Corporation shall refund back the balance premium amount after deducting 10% of the total premium amount and such other dues and outstanding which please note. b. The above notice given by R1 unequivocally shows that the Corporate Debtor/Applicant is in the possession of leased land. In view of this, the contention of R1 that possession under SARFAESI Act was taken by DHFCL and subsequently by R2, falls to the ground. We hold that the Applicant is in possession of the property. c. The Applicant is right in saying that termination notice dated 08.11.2019 is hit by Section 14(1)(d) of the Code. He rightly relied on the judgment of Hon'ble Supreme Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is application was partially granted, excluding 38 out of 55 days. An appeal to the NCLAT proved successful, whereby the NCLAT, by order dated 09.05.2018, allowed the appeal and allowed the entire 55 days so taken before the NCLT to be excluded. xi. On 03.07.2018, the Appellant filed an approved Resolution Plan before the NCLT, Mumbai by way of I.A. No. 21433 of 2018. We are informed that this was within the extended period of 55 days so granted by the NCLAT. It may only be mentioned that the Resolution Plan was approved by 86.16% of the Committee of Creditors. Ultimately, the NCLAT, by the impugned order dated 14.12.2018, (after omitting to refer to the order dated 09.05.2018), stated that 270 days are over, as a result of which the entire discussion of Section 14(1)(d) would now become academic. However, it also decided: 14. On perusal of record, we find that pursuant to the 'Joint Development Agreement' the land of the 'Maharashtra Housing and Area Development Authority' was handed over to the 'Corporate Debtor' and 'except for development work' the 'Corporate Debtor' has not accrued any right over the land in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment dated 10.04.2008 and Deed of Confirmation and Modification dated 03.11.2011 and Letter dated 18.01.2014 stands terminated and you will not be allowed to enter the property and your authority/license to enter the property or remain there upon is terminated. 16. There is no doubt whatsoever that important functions relating to repairs and reconstruction of dilapidated buildings are given to MHADA. Equally, there is no doubt that in a given set of circumstances, the Board may, on such terms and conditions as may be agreed upon, and with the previous approval of the Authority, handover execution of any housing scheme under its own supervision. However, when it comes to any clash between the MHADA Act and the Insolvency Code, on the plain terms 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 otherw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ike in the facts of the present case, and what was clear, on the facts of that case, was that a show cause notice of the Municipal Corporation, which preceded admission of the insolvency resolution process, made it clear that assets of MCGM could not possibly be subsumed within a resolution plan without its approval/permission. It was in this context that this Court, in para 47 of the said judgment, stated that Section 238 of the Code cannot be read as overriding the MCGM's right-indeed its public duty-to control and regulate how its properties are to be dealt with. Properties was referred to in this judgment as referring to assets of the corporate debtor. We have seen how, in the facts of this case, we are not concerned with the assets of the corporate debtor, least of all the assets of MHADA. The limited question before us is as to whether Section 14(1)(d) of the Code will apply to statutorily freeze 'occupation' that may have been handed over under a Joint Development Agreement. 19. ......... As we have pointed out herein above, it is clear that Section 14(1)(d) of the Insolvency Bankruptcy Code, when it speaks about recovery of property occupied , d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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