TMI Blog2023 (12) TMI 1147X X X X Extracts X X X X X X X X Extracts X X X X ..... pment of the premises was given to Respondent No.1. Respondent No.1 having failed to carry out the development as per the terms and conditions, Kolkata Municipal Corporation has every jurisdiction to cancel the agreement. The cancellation of the agreement being outside the insolvency process, Respondent No.3 could not have brought issue of cancellation of the agreement before the Adjudicating Authority by filing the application IA No.138 of 2022. Respondent No.1 whose Development Agreement was cancelled was free to take such legal proceeding against the Appellant as may be permissible. It is relevant to notice that no proceedings were initiated by Respondent No.1 questioning the termination of agreement dated 17.01.2022. The Kolkata Municipal Corporation who is owner of the premises by Development Agreement gave right of development of the premises to the Respondent No.1 and Respondent No.1 has unauthorisedly without prior approval of the Appellant as alleged Assignment Agreement dated 06.03.2008 has given to the Corporate Debtor. The possession of the premises has to be of Respondent No.1 who was given possession by the Appellant. In event, the Respondent No.1 illegally transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 219/KB/2018. By the order impugned, Adjudicating Authority has set aside order dated 17.01.2022 issued by Kolkata Municipal Corporation terminating the Development Agreement and Supplemental Agreement and Power of Attorney executed between Kolkata Municipal Corporation and Bengal Shelter Housing Development Limited - Respondent No.1. 2. Brief facts necessary to be noticed for deciding this Appeal are: 2.1. Kolkata Municipal Corporation is a statutory body governed under Kolkata Municipal Corporation Act, 1981. There were premises known as College Street Market consisting of land about 13 bighas with a two storied brick built building and structures thereon which had municipal market consisting of different shops. Kolkata Municipal Corporation decided to improve the College Street Market premises for which purpose a Development Agreement was executed on 24.02.2006 between the Kolkata Municipal Corporation and Bengal Shelter Housing Development Limited - Respondent No.1 herein. Agreement contains various terms and conditions for carrying out development. A Supplemental Agreement was also executed on 12.06.2006 between the Kolkata Municipal Corporation and Bengal Shelte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the delay in completion of work. In the said letter, Respondent No.1 for the first time brought to the knowledge of the Appellant that a CIRP is ongoing with respect to the Corporate Debtor in which Resolution Plan has been submitted. By an order dated 17.01.2022, Appellant cancelled the Development Agreement by an order of the same date. Appellant issued notice to the Respondent No.1 to take over the College Street Market Premises in consequence of the Development Agreement being terminated and resumed the property. The Resolution Applicant- Respondent No.3 filed an IA No.138 of 2022 before the Adjudicating Authority in which application Respondent No.3 prayed for following reliefs:- a. Declaration that the said two letters bearing Nos. CM (M)/L/057/2021-22 and CM (M)/L/059/2021- 22 both dated 17th January 2022 terminating the said Development Agreement and Supplemental Agreement and Power of Attorney and calling upon the Respondent No. 2 to hand over possession of the said property are illegal, null and void; b. Declaration that the forceful physical possession of the said Property by the Kolkata Municipal Corporation is illegal, null and void: c. Order quash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following orders: a. The said two letters bearing Nos. CM (M)/L/057/2021-22 and CM (M)/L/059/2021-22 both dated 17th January 2022, intended to terminate the said Development Agreement and Supplemental Agreement and Power of Attorney and intended to call upon the Respondent No. 2 to hand over possession of the said property, are declared a nullity; b. The possession of the said property shall rest with the RP till the approval/rejection of the Resolution Plan by this Adjudicating Authority; c. Respondent No. 3 is restrained from taking any further coercive action with regard to the sale, encumbrance, transfer, development or alienation of the said Property in any manner whatsoever, till the approval/rejection of the Resolution Plan by this Adjudicating Authority, or without the leave of the Adjudicating Authority. 2.4. Aggrieved by the impugned order, this Appeal has been filed by the Kolkata Municipal Corporation. 3. We have heard Learned Counsel for the Appellant, Counsel appearing for Respondent Nos. 1 to 3 and Counsel appearing for Resolution Professional. 4. Learned Counsel for the Appellant challenging the impugned order submits that the Adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside in this Appeal. Development Agreement executed in favour of the Respondent No.1 was terminated lawfully by the Kolkata Municipal Corporation which could not have been interfered with by the Adjudicating Authority. Termination was in accordance with the Development Agreement dated 24.02.2006 and could not have been quashed. Termination was also not affected by Section 14 of the IBC. The Corporate Debtor had no interest in the premises and premises were owned by Appellant. When the premises were owned by the Appellant, the Moratorium was not applicable. Corporate Debtor entered into unlawful possession of the premises on the basis of illegal and unauthorised assignment by the Respondent No.1 without consent of the Appellant. 5. Learned Counsel appearing for the Respondent Nos.1 to 3 supporting the order impugned submits that under the Development Agreement and Supplemental Agreement, the Respondent No.1 was fully entitled to part with its development rights and assignment in favour by Respondent No.1 was not illegal. Respondent No.2 having assigned the development rights, Respondent No.2 was proceeded to carry out the process. It is submitted that under the Agreement be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f buildings in accordance with the Scheme and plan approved by KMC. xxx xxx xxx (d) Bengal Shelter shall be entitled to do all lawful works required for implementation of Comprehensive Market Complex either by itself and/or by other contractors appointed by it and/or in any other manner it considered fit and proper. None of the Contractors and/or the persons engaged in connection therewith shall have any claim of any nature whatsoever against KMC and Bengal Shelter shall be solely responsible for payment of all amounts, including compensation for injuries to such workman and/or other persons engaged by them and/or due for anything done by Bengal Shelter in pursuance hereof. 9. Agreement in clause 9 (c) of the Development Agreement further provides that on completion of the project, it is KMC who shall execute lease deed(s). Clause 9(c) is as follows: - 9. BENGAL SHELTER AND KMC BOTH HEREBY AGREE UNDERTAKE AND DECLARE AS FOLLOWS:- c) On completion of the Project and at the request of Bengal Shelter KMC shall execute lease Deed(s) in favour of the end-users of stalls, spaces and/or units to be allotted-retained, as the case may be, out of the Bengal Shel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to any third party without the prior approval in writing of the other party. Clause 13(b) is as follows:- 13. MISCELLANEOUS:- (b) Neither party shall seeing or part with any of its rights and obligations under this agreement to any third party without the prior approval in writing of the other party. 13. Supplemental Agreement contains certain modifications of the Development Agreement. Clause 3(ii) of the Supplemental Agreement is as follows:- 3. In further modification of Bengal Shelter's Rights under the Principal Development Agreement:- xxx xxx xxx (ii) Bengal Shelter shall be entitled to Aise necessary finance for construction of Comprehensive Market Complex including finance from the authorised financial institutions, Banke, Corporate houses or such other bodies for development of the land by construction of the Comprehensive Market Complex as per the terms of the Development Agreement and for that purpose, to create mortgage or any other lien over College Street Market Complex or any part thereof, gave and except the area to be allotted to KMC or its nominee or nominees, in favour of the Banks, financial institutions or other bodie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice is as follows:- 2. That the delay in completion of the Project is injurious to your interest only since the allocation of KMC has been completed. As has already been elaborated above, the allocation of KMC is yet to be completed. Moreover, owner of the space under your allocation i.e. 70% of the built up space is also KMC. In fact, KMC is supposed to lease out the said space and to receive lease rent against the same. Delay in completion of the Project has meant that KMC is losing out on revenue from such lease rent. 3. That the KMC has accepted the enormity of delays in pertinent issues on its part. However, the KMC has only stated that even if certain delays are taken to be reasonable, these could have caused a delay of around three years or so and cannot in any way explain the tremendous delay of eleven years. 4. That several issues were notified to the KMC through numerous letters but the KMC either miserably failed or preferred to be deaf and blind even against encroachment of principal pathways etc. However, such claims made by you are vague and trivial. Encroachment of passages is not in any way linked to the delay in construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow-cause notice in accordance with the relevant clauses of Development Agreement. The Development Agreement executed by the Appellant in favour of the Respondent No.1 also contained a provision as noticed above that no party shall assign any of its rights or obligations to the third party without obtaining prior consent of other party. Here the case of the Respondent No.2 is that the Respondent No.2 has received an assignment from the Respondent No.1 dated 06.03.2008 and it was the Corporate Debtor came into possession of the premises by virtue of assignment dated 06.03.2008. Assignment in favour of Respondent No.2 i.e. Corporate Debtor by the Appellant was clearly contrary to the Development Agreement where there was clear prohibition without approval of the other party. No consent or permission was obtained from Kolkata Municipal Corporation by Respondent No.1 for assignment the development right in favour of the Respondent No.2. We are of the view that on the basis of assignment dated 06.03.2008 as claimed by Respondent No.3, no right could flow in the Respondent No.2 regarding the premises neither any developmental rights nor any ownership rights. It was Respondent No.1 who has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Security Interest Act, 2002 (54 of 2002); (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. [Explanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period;] 18. From the facts as noticed above, it is clear that the Kolkata Municipal Corporation who is owner of the premises by Development Agreement gave right of development of the premises to the Respondent No.1 and Respondent No.1 has unauthorisedly without prior approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try that records the ownership of assets including (i) assets over which the corporate debtor has ownership rights which may be located in a foreign country; (ii) assets that may or may not be in possession of the corporate debtor; (iii) tangible assets, whether movable or immovable; (iv) intangible assets including intellectual property; (v) securities including shares held in any subsidiary of the corporate debtor, financial instruments, insurance policies; (vi) assets subject to the determination of ownership by a court or authority; 20. In the present case, assets i.e. premises are owned by the Appellant and there was no contractual arrangement between the Appellant and the Corporate Debtor with regard to premises in question. The assets clearly were not the assets of the Corporate Debtor on which IRP can take possession. It is only the assets on which IRP can take possession on which the Moratorium under Section 14(1)(d) shall be applicable. Moratorium cannot be applicable with regard to assets which are not the assets of the Corporate Debtor. 21. The Adjudicating Authority in its impugned order had held the assignment agreement d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment Agreement dated 24.02.2006. Agreement was terminated on 17.01.2022 which order we have already extracted above. 25. From the facts of the present case, it is clear that the Respondent No.1 has brought its 100% subsidiary, Respondent No.2 without there being any consent or permission of the Appellant and in the CIRP of the Respondent No.2, the assets are sought to be included whereas the assets premises are not the assets of the Corporate Debtor. Even the development rights do not belong to the Corporate Debtor which was given by the Kolkata Municipal Corporation in favour of the Respondent No.1 which could not have been assigned to any entity without prior approval of the Kolkata Municipal Corporation. No right and interest with regard to premises have been created in favour of the Respondent No.2. The premises, in question, cannot be subject matter of the CIRP of the Corporate Debtor. Adjudicating Authority committed error in directing the Appellant to handover the possession of the premises to the Resolution Professional. The order passed by the Adjudicating Authority setting aside the order dated 17.01.2022 terminating Development Agreement, Supplemental Agreement a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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