TMI Blog2023 (4) TMI 1079X X X X Extracts X X X X X X X X Extracts X X X X ..... ion where a contractual arrangement is ongoing, the Resolution Professional cannot short-circuit the same and bring a claim before NCLT taking advantage of Section 60(5). These judgements are distinguished on the basis of the fact that no contractual arrangement existed between the Appellant and the Corporate Debtor after 02.07.2020, when the extended Leaves and Licence Agreement expired and therefore the ratio in these judgements cannot provide support to the case of the Appellant. The residuary jurisdiction is relevant during the CIRP when the insolvency resolution of the corporate debtor is taking place, whereas in the present case the liquidation of the corporate debtor is being considered and the liquidator has taken recourse to its powers under section 33(5) to get control and custody of the asset of the corporate debtor. The NCLT order notes the contention of the Liquidator that Respondent No. 1 had obtained status-quo order from the Small Causes Court, Mumbai by suppressing facts and without making the Liquidator as a necessary party. We therefore, are of the opinion that the status- quo order was obtained from the Small Causes Court by the Appellant without placing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easuring approximately 6000 sq. ft. (built up area) at 1st and 2nd Floor for house for a period of three years commencing from 03.08.2016 to 02.08.2019 (both days inclusive). The Appellant has further stated that Corporate Insolvency Resolution Process (in short CIRP ) was initiated against the Corporate Debtor Shrenuj Co. by an order of the Adjudicating Authority on 12.03.2019 and during the subsistence of the moratorium the Resolution Professional ( RP ) extended the Leave and Licence Agreement from 03.08.2019 to 02.07.2020 on requirement of the Corporate Debtor. 3. It is further stated by the appellant that an order for liquidation of the Corporate Debtor was passed on 12.07.2021, whereafter the Liquidator-Respondent No. 1 (in short R-1) started proceedings for liquidation of the Corporate Debtor. 4. During the on-going liquidation proceedings, the Liquidator started the e-auction of the said premises and sent letter dated 04.01.2022 through his legal counsel to the Appellant asking for vacation of the licensed premises and payment of outstanding licence fee within 7 days of the vacation of the said premises, whereafter, the Appellant paid an amount of Rs. 18,83,520/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Order dated 06.07.2022 without taking into account the status quo order passed by the Small Causes Court, Mumbai and it is Appellant s contention that the Learned Adjudicating Authority (National Company Law Tribunal, Mumbai) did not possess the necessary jurisdiction to pass the Impugned Order but the vacation/ eviction from the said premises could have been done by the Small Causes Court, Mumbai which possessed jurisdiction under the Maharashtra Rent Control Act, 1999. 8. We heard the arguments of both the parties and perused the record. The Learned Senior Counsel for the Appellant has initiated his arguments by submitting that the National Company Law Tribunal, Mumbai does not possess jurisdiction in relation to matters relating to landlord and tenant viz. tenant by eviction and payment of rent which are matters to be delt under the Maharashtra Rent Control Act, 1999 for which jurisdiction vests only with the Court of Small Causes. He has further referred to Section 33 of the Maharashtra Rent Control Act, 1999 to clarify the aspect of jurisdiction of the Small Causes Court, Mumbai and has also referred to Section 47 of this Act to clarify that no other authority can gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot override the provisions of Rent Control Law in the matter of taking possession of an asset. 12. The Learned Senior Counsel for Appellant has referred to the e-mail dated 14.02.2022 of the Liquidator wherein he has confirmed payment of Rent for the period of June 2021 to January 2022. He has further referred to the e-auction notice issued by the Liquidator dated 16.03.2022 to point out that the subject property was to be auctioned on As Is Where Is , As Is What Is and Whatever There Is Basis and therefore the bidders were advised to satisfy themselves about the title and occupation and physically verify the site and subject property prior to bidding, which means that the Liquidator was well aware that the Appellant was a tenant under whose lawful and peaceful possession the subject property continued to be in. He has also referred to the e-mail dated 24.03.2022 of the Liquidator to the successful bidder to say that after noticing the conditions of the e-auction document and the fact that the subject property was in the possession of the Appellant as a tenant, the successful bidder decided to bid and deposited the EMD with the Liquidator. He had said that in such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to an end on 02.07.2020, and therefore tenancy of the Appellant commenced on 03.07.2020 which has continued till the time of e-auction. 15. The Learned Senior Counsel for Appellant has also claimed that since the Appellant has admittedly paid rent and the Liquidator had received and accepted the said rent when there was no Leave and Licence Agreement subsisting between the parties, the Appellant is a tenant fully covered under the Maharashtra Rent Control Act, 1999. He has further claimed that the Respondent No. 2, the Successful Bidder, was aware of the rights and claims of the Appellant by virtue of the conditions set out in the e-auction document, and the subject property was put to auction on as is where is , as is what is and whatever there is basis and therefore under the provisions of the letter of intent and Transfer of Property Act the Successful Bidder was aware of the Appellant is a tenant in possession of the subject property. 16. The Learned Senior Counsel for Appellant has also cited the judgment of Hon ble Supreme Court in the matter of Tata Consultancy Services Ltd. vs. Vishal Ghisulal Jain, Resolution Professional, SK Wheels Private Limited (Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the said premises to the Respondent No. 1 within 7 days of the receipt of the notice and also make outstanding payment of the Licence Fees that was overdue and to be paid by the Appellant. 19. The Learned Senior Counsel for Respondent No. 1 has further submitted that the Appellant paid the outstanding dues as it was required to do through a cheque of an amount of Rs. 18,83,520/- only along with the covering letter dated 04.02.2022 and very fairly the R-1/ Liquidator sent an e-mail on 24.03.2022 to the Appellant informing that the Leave and Licence Agreement was extended for a period of 11 months i.e. from 03.08.2019 to 02.07.2020 and it was also stated that the Appellant had paid the licence fee upto May 2021 and no payments were paid by him from June 2021 onwards. He has further submitted that he had only repeated the words rent used in a loose manner by the Appellant in its letter dated 14.02.2022 by which the Appellant had sent the cheque regarding outstanding dues and it was quite clear from his e-mail dated 24.03.2022 that the Appellant was occupying the premises by virtue of Leave and Licence Agreement and the payments to be made by him were also related to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was further renewed by executing a new Leave and Licence Agreement dated 20.08.2019 for a period of 11 months commencing from 03.08.2019 to 02.07.2020. He has further submitted that through this notice, the Liquidator called upon the Appellant to provide proof of payment of interest fee deposit of Rs. 6 Lakhs and pay the outstanding licence fees and vacate the licensed premises within 7 days from the receipt of the notice whereupon the Appellant sent a cheque for an amount of Rs. 18,83,520/- as per the outstanding amount communicated by the Liquidator through its notice dated 04.01.2022. He has further referred to an e-mail dated 24.03.2022 wherein the Liquidator reiterated the fact of the existence of Leave and Licence Agreement and that the said property is going to be put to e-auction on 31.03.2022 and that after successful completion of the e-auction, the Appellant shall have to vacate the premises within a period of 45 days after receipt of vacation notice by the Appellant. He has further referred to notice dated 13.04.2022, wherein the fact of successful completion of e-auction on 06.04.2022 was mentioned and the Appellant was called upon to vacate the said premises within 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority in I.A. No. 1635 of 2022 on 26.06.2022, the Appellant sought time to file Reply which was subsequently filed by the Appellant on 22.06.2022, and while the Adjudicating Authority was considering I.A. No. 1635 of 2022, the Appellant went ahead to file R.A.D Suit No. 259 of 2022 in the Small Causes Court at Mumbai, wherein the fact of the existence of I.A. No. 1635 of 2022 filed by the Liquidator before the Adjudicating Authority for vacation of the said premises was concealed and in such a circumstance, the Appellant obtained a status-quo order from the Small Causes Court on 28.06.2022. He has contended that once proceedings under the IBC for vacation of the said premises after successful conclusion of e-auction was underway, there was no reason for the Appellant to approach the Small Causes Court because it had obtained possession of the said premises on Leave and Licence basis and was not a tenant. He has further submitted that in the proceeding in I.A. No. 1635 of 2022 the Adjudicating Authority was made aware of the fact that the Appellant had obtained status-quo order from Small Causes Court by concealing certain facts and without making the Liquidato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nior Counsel for Liquidator has referred to the Judgment in the matter of Vijisan Jewels Pvt. Ltd. vs. Cimme Jewels Ltd. [Company Appeal (AT) (Insolvency) No. 204 of 2021] which is given on similar facts as this case where the corporate debtor was in liquidation and the Adjudicating Authority has allowed the Liquidator to proceed with e-auction and the occupier was asked to vacate the said premises. The matter went on Appeal before the Hon ble Supreme Court and the Civil Appeal was dismissed and therefore the order of the Adjudicating Authority was upheld. Further, he has referred to Section 35(1)(b) where the duties of the Liquidator have been listed to point out that it is the duty of the Liquidator to take in custody the assets of the corporate debtor and by Section 35(1)(d), the Liquidator has to adopt measures to protect and preserve the assets of the Corporate Debtor. He has also claimed that the suit before the Small Causes Court was filed on 27.06.2022 which was almost one year after passing of the liquidation order and such a delay cannot give any right to the Appellant to take recourse to the issue of his tenancy before the Small Causes Court. 28. The Learned Senior Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in such writ petition. He has sought support from this Judgement in his contention that the successful bidder was a necessary party since it had been given a Letter of Intent in its favour by the Liquidator and the possession of the said premises was to be handed over to the successful bidder and the Appellant was well aware that the Letter of Intent had been issued to the successful bidder. He has vehemently argued that in such a situation the plaint before the Small Causes Court was defective and relief of status-quo in this matter could not have been granted. 30. In Rejoinder, the Learned Senior Counsel for the Appellant has clarified that he had earlier submitted that the NCLT did not possess jurisdiction to consider any dispute relating to insolvency during liquidation of the Corporate Debtor and the Judgment in Jhanvi Rajpal Automotive (Supra) related to proceedings during CIRP. He has also referred to various sections of the Maharashtra Rent Control Act, 1999 to claim that the Appellant had rights to approach the Small Causes Court as licensee is a party as defined in Section 7(5) of this Act who has the right to approach to Small Causes Court. He has also referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e person; (b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and (c) 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. xxx xxx xxx 238. Provisions of this Code to override other laws. 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. 33. We also note the provisions in the Maharashtra Rent Control Act, 1999, that have been cited by the Learned Senior Counsel for the Appellant which are as hereunder :- 7. Definitions. xxx xxx xxx (5) Licensee , in respect of any premises or any part thereof, means the person who is in occupation of the premises or such part, as the case may be, under a subsisting agreement for licence given for a licence fee or charge; and includes any person in such occupation of any premises or part thereof in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he premises or such part, as the case may be, under a subsisting agreement for licence given for a licence fee or charge. Further, the various references to rent in the Maharashtra Rent Control Act, 1999 are between the landlord and tenant but when it is in respect of any premises given to licensee, the term licence fee or charge is used. Thus it is clear that while the term rent is used for payment or of use of premises by a tenant, the term licence fee is used in respect of use of any premises given under licence agreement by a licensee. 35. Admittedly, the Leave and Licence Agreement for the said premises was entered into for a period of 3 years from 03.08.2016 to 02.08.2019, and thereafter CIRP was initiated vide order of the Adjudicating Authority on 12.03.2019 against the corporate debtor. During the subsistence of the CIRP, the Resolution Professional renewed the Leave and Licence Agreement from 03.08.2019 to 02.07.2020 and no further extension or renewal of the Leave and Licence Agreement took place after expiry of the agreement of 02.07.2020. It is noted by us that the Appellant remained in position of the subject premises and continued to pay licence fees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant vide its letter dated 26.04.2022, (which has been mentioned by the Appellant in passing in the Appeal, but the copy is not attached with the Appeal Memo) states that the subject premises located at Plot No. A-7, MIDC, Andheri (E), Mumbai 400093 belonging to Shrenuj and Co. is being occupied by them on Leave and Licence basis and acknowledged that since the said premises had been sold through auction and they have to vacate it before 22.05.2022, they are looking for an alternate place to shift in order to vacate the property, further seeking time till 31.07.2022 to the vacate property. 38. Admittedly, the original Leave and Licence Agreement between the Appellant and Corporate Debtor was for 3 years from 03.08.2016 to 02.08.2019 and this Agreement was extended by the Resolution Professional during the currency of the Moratorium from 03.08.2019 to 02.07.2020. Thereafter, as per the Agreement terms as included in Clause 28, no alteration, amendment or modification of the Agreement could have been done in writing and signed by both the parties. Quite clearly the Agreement was not extended beyond 03.0.7.2020 and this fact was brought to the notice of the Appellant by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not that of tenant and landlord . 41. We now peruse section 18(1)(f) of the IBC which imposes a duty on the Resolution Professional to take control and custody of any asset over which the corporate debtor has ownership rights. Therefore, the Resolution Professional had to take ownership of the sub-property and he decided to extend the Leave and Licence Agreement till 02.07.2020 in accordance with the requirements of the corporate debtor. On the same lines, the powers and duties of the Liquidator are enumerated in Section 35 of the IBC, and the relevant clause (f) of sub-section (1) is as follows:- 35. Powers and duties of liquidator. - (1) Subject to the directions of the Adjudicating Authority, the liquidator shall have the following powers and duties, namely: - xx xxx xx (f) subject to section 52, to sell the immovable and movable property and actionable claims of the corporate debtor in liquidation by public auction or private contract, with power to transfer such property to any person or body corporate, or to sell the same in parcels in such manner as may be specified: [Provided that the liquidator shall not sell the immovable and movable property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was kept open therein. This judgment is distinguishable as in the matter of Jhanvi Rajpal, there was tenancy in question and also a settlement between the parties whereas the present case of Leave and Licence and the Appellant was in occupation after the expiry of licence period. 45. In addition the Learned Counsel for Liquidator has also cited the judgment in the matter of Hemal Ishwarbhai Patel vs. Veer Narmad South Gujarat University [(2016) SCC OnLine Guj 10037], which is as follows :- 18. The bone of contention turned out was that when the Supreme Court did not interfere, but kept the question of law open, whether it was permissible for this Court to take a different view. It was attempted to contend by learned advocate for the University in a naive way that the Supreme Court had not dismissed the SLP, but used the words 'not inclined to interfere'. One fails to fathom, what differentiation learned advocate wanted to establish thereby. It was harped that because of clarification by the Supreme Court about keeping the question of law open, this Court can take different view and may take a departure in light of facts of the present case. xx xxx xx 26. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the provisions of the Code and Regulations. d. It is undisputed fact that Appellant has no locus standi and accordingly he cannot seek the sale of the property to the Appellant only. The Appellant is reagitating the same matter in different rounds before the Adjudicating Authority. The Code provides for time bound resolution and if such frivolous actions are allowed, it will be never ending process to complete the liquidation. This judgment provides clear support to the case of Liquidator in that the jurisdiction of NCLT under IBC has been held to be the correct jurisdiction for dealing with issues during liquidation of a Corporate Debtor. 47. The Liquidator approached the Adjudicating Authority in the light of Section- 33(5) and Section- 60(5)(c) of the IBC for vacation of the premises which in our view was the correct thing to do. We note that I.A. 1635 of 2022 was preferred by the Liquidator before NCLT, Mumbai on 15.06.2022, and the Appellant filed his Affidavit in Reply on 22.06.2022. The Affidavit in Reply of the Appellant in I.A. 1635 of 2022 is attached at Page- 99 to 108 of the Appeal Paper Book, wherein the Appellant raised the question of it being a tenant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets and hamper the prospects of a successful reorganisation or liquidation. For the success of an insolvency regime, it is necessary that insolvency proceedings are dealt with in a timely, effective and efficient manner. Pursuing this theme in Innoventive34 this Court observed that: (SCC p. 422, para 13). 13. One of the important objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up of the insolvency process. The principle was reiterated in ArcelorMittal35 where this Court held that: (SCC p. 88, para 84). 84 The non obstante clause in Section 60(5) is designed for a different purpose : to ensure that NCLT alone has jurisdiction when it comes to applications and proceedings by or against a corporate debtor covered by the Code, making it clear that no other forum has jurisdiction lo entertain or dispose of such applications or proceedings. Therefore, considering the text of Section 60(5)(c) and the interpretation of Provisions in other insolvency related statutes, NCLT has jurisdiction to entertain or dispose of such applications or proceedings. Therefore, considering the text of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... custody of an asset over which the corporate debtor has ownership rights, subject to the determination 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 assumes significance in view of the language used in Sections 18 and 25 in contrast to the language employed in Section 20. Section 18 speaks about the duties of the interim resolution professional and Section 25 speaks about the duties of resolution professional. These two provisions use the word assets , while Section 20(1) uses the word property together with the word value . Sections 18 and 25 do not use the expression property . Another important aspect is that under Section 25(2)(b) of the IBC, 2016, the resolution professional is obliged to represent and act on behalf of the corporate debtor with third parties and exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings. Sections 25(1) and 25(2)(b) reads as follows: 25. Duties of resolu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, since it is the sole contract for the sale of electricity which was entered into by the corporate debtor. In doing so, we reiterate that NCLT would have been empowered to set aside the termination of PPA in this case because the termination took place solely on the ground of insolvency. The jurisdiction of NCLT under Section 60(5)(c) of IBC cannot be invoked in matters where a termination may take place on grounds unrelated to the insolvency of the corporate debtor. Even more crucially, it cannot even be invoked in the event of a legitimate termination of a contract based on an ipso facto clause like Article 9.2.1(e) herein, if such termination will not have the effect of making certain the death of the corporate debtor. As such, in all future cases, NCLT would have to be wary of setting aside valid contractual terminations which would merely dilute the value of the corporate debtor, and not push it to its corporate death by virtue of it being the corporate debtor's sole contract (as was the case in this matter's unique factual matrix). 177. The terms of our intervention in the present case are limited. Judicial intervention should not create a fertile ground fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Agreement expired and therefore the ratio in these judgements cannot provide support to the case of the Appellant. 53. The Learned Senior Counsel for Appellant has also referred to the judgment in the matter of K.L. Jute Products Pvt. Ltd. vs. Tirupti Jute Industries Ltd. [(2020 SCC Online NCLAT 426] which is as follows, to claim that the Adjudicating Authority did not possess jurisdiction to pass order regarding eviction:- 66. Insofar as, the eviction of 2nd Respondent is concerned, the Adjudicating Authority is not empowered to pass an order of eviction and it is for an Aggrieved party to move the appropriate forum for redressal of its grievances in accordance with Law. In short, the Committee of Creditors had approved the Resolution Plan in utter regard to the ingredient of Section 30(2)(e) of the I B Code and as hence the same was rejected by the Adjudicating Authority. Moreover, the Adjudicating Authority had appointed a Liquidator other than the Existing Resolution Professional . 54. The above judgment is in a case where a lease agreement was signed by the corporate debtor after the section 13(2) notice had been issued and further the resolution plan was su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r: (SCCp. 205, paras 247-48) 247. Federalism envisaged in the Constitution of India is a basic feature in which the Union of India is permanent within the territorial limits set in Article 1 of the Constitution and is indestructible. The State is the creature of the Constitution and the law made by Articles 2 to 4 with no territorial integrity, but a permanent entity with its boundaries alterable by a law made by Parliament. Neither the relative importance of the legislative entries in Schedule VII Lists I and II of the Constitution, nor the fiscal control by the Union per se are decisive to conclude that the Constitution is unitary. The respective legislative powers are traceable to Articles 245 to 254 of the Constitution. The State qua the Constitution is federal in structure and independent in its exercise of legislative and executive power. However, being the creature of the Constitution the State has no right to secede or claim sovereignty. Qua the Union, State is quasi-federal. Both are coordinating institutions and ought to exercise their respective powers with adjustment, understanding and accommodation to render socio-economic and political justice to the people, to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod expired in January 2005. Indeed, respondent did not file application under section 24 with immediate despatch but waited till December 2005. It is also true that the respondent accepted the monthly compensation offered by the petitioners from time to time. That alone cannot be the basis to inter that the Respondent agreed for change of relationship between the parties from one of licensor and licensee to that of landlord and tenant in relation to the suit premises. In the present case, the Courts below have Considered the defence of the petitioners in this behalf and rejected the same. That is the finding of fact which would bind this Court. Merely because another view is possible or that there is some error here or there in the judgement under challenge, cannot be the basis to exercise writ jurisdiction under Article 227 of the Constitution of India. In so far as the finding recorded by the two courts below on the material issue as to whether the petitioners are liable to be evicted from the suit premises, I have no hesitation in upholding the same as just and proper and in accordance with the legal requirement. 58. The Learned counsel for Respondent No. 2 has placed re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther sought order from this Bench to provide the assistance of police in case of any resistance while putting the lock and seal by the Liquidator on the said property. The Counsel appearing for the Liquidator further brought to the notice of this Bench that it is quite necessary to secure the property which is (under Liquidation). It is contended by the Liquidator that the Respondent No. 1 had obtained status quo order from the Learned Small Causes Court, by suppressing facts and without making Liquidator as necessary party in the proceeding pending at Small Causes Court. Having considered the submissions and on perusal of the averments made by the Liquidator in the Application, this Bench directs the Liquidator to put the lock and seal on the Plot No. A7, MIDC, Andheri (E), Mumbai-400 093. The Senior Inspector of the concerned Police Station is directed to render all kinds of police assistance in securing the possession and to put the lock on the above stated property. The Liquidator is further directed to place on record the compliance of the Order within 2 days. Registrar of this Tribunal is directed to send copy of this order to concern Police Station for its complian ..... X X X X Extracts X X X X X X X X Extracts X X X X
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