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Judgment
O R D E R
Orders pronounced. In the result, Application is allowed. The Respondent is directed to vacate and handover the premises bearing house no. 1-8-322 to 335, near American Consulate, Begumpet, Secunderabad, admeasuring 15092 sq. yards which is described in the petition, on or before 29.01.2024 and in default the petitioner is at liberty to approach this tribunal for necessary further directions. It is further ordered that arrears of the rent payable till the date of handing over of physical possession shall also be paid by the Respondent to the Applicant/Liquidator. The Liquidator upon taking delivery of the scheduled mentioned property shall proceed further in accordance with the provisions of the Code and complete liquidation process as expeditiously as possible. Accordingly, IA(IBC) 265/2023 is disposed of.
PER: BENCH
ORDER
This is an application filed under Section 60(5) read with Section 35 and Section 36 of the I&B Code, 2016 read with Regulation 9 of the IBBI Regulations, 2016 and Rule 11 of the NCLT Rules, 2016 seeking directions to the Respondent to vacate and handover the premises bearing house no.1-8-322 to 335, near American Consulate, Begumpet, Secunderabad, admeasuring 15092 sq. yards and pay the arrear rentals till the date of handover.
Averments made in the Petition:
It is averred that the liquidation order has been passed by this Tribunal on 08.07.2022 and subsequently liquidator has been appointed. Later on, due to delay in taking charge by the liquidator, sought time for exclusion of that particular period consumed between 08.07.2022 to 13.10.2022. This Tribunal vide order dated 03.11.2022 granted exclusion of the period consumed.
It is averred that on 26.11.2022, the Applicant issued two letters, one addressing to suspended Directors of Corporate Debtor apprising that this Tribunal has ordered for the Liquidation of the Corporate Debtor consequently the management of the affairs of the Corporate Debtor shall vest with the Applicant.
It is averred that the Liquidator/Applicant visited the premises thrice on different occasions and requested the officials for their cooperation. It is stated that Mr. Udaycharanrao Kokkirala Raja Venkata (one of the suspended Directors of Corporate Debtor) visited the Liquidator’s office twice when called for meeting, he not only refused to co-operate with the Liquidator but also refused to take the letter (which was for seeking co-operation) and suggested that the Liquidator send it by registered post. However, when the said letter was sent via Post the same was returned undelivered.
It is averred that in order to protect the assets of the Corporate Debtor, the Liquidator appointed a security agency namely Global Experts to provide security to the property. However, it is pertinent to mention that on 07.12.2022, the Applicant herein received an email by Global Experts apprising the Applicant that they had sent the security guard on 28.11.2022, but the security officer who was present at the premises did not allow the security the security guards to enter the premises.
It is averred that Respondent issued a letter to the Applicant on 12.12.2022 stating that the erstwhile Resolution Professional has already considered the issue of vacating the premises and it was alleged by the Respondent herein that the erstwhile Resolution Professional has extended the lease period from 01.10.2022 to 08.06.2023, and that the erstwhile Resolution Professional has also waived off the rent. Pursuant which the Applicant herein addressed the email to the erstwhile Resolution Professional seeking clarification on the same. Thereafter, on 17.12.2022, the erstwhile Resolution Professional clearly stated to the Applicant that the proposal of Respondent was never accepted and hence on 17.12.2022 a response letter to the letter received on 12.12.2022, was sent by the Applicant to Respondent stating that the lease of the property stands expired due to efflux of time and therefore the property in question needs to be handed over to the Liquidator, as appointed by this Tribunal.
It is stated that in the matter of M/s. Raptakos Brett & Co. Ltd Vs. Ganesh Property Civil Appeal No. 4657 of 1998, the Hon’ble Supreme Court opined that when a lease comes to an end by efflux of time, or by notice of termination, or if there be a breach and the lessee’s rights are forfeited, the lessee becomes a tenant at sufferance, and it becomes the duty of the lessee under Section 108(q) of the Transfer of Property Act to restore possession to the lessor forthwith.
It is stated that in the matter of Alchemist Asset Reconstruction Company Vs. Precision Fasteners Ltd. C.P.No. (IB) 1339(MB)/2017, the National Company Law Tribunal, Mumbai Bench held that:
“…In the circumstances, we at this moment allow MA 1007/2019 and direct R1, R2 and R4 to vacate the possession of the alleged flat Nos. E7, B9 and D11 and hand over the same to the liquidator, failing which Liquidator will be entitled to get the possession in accordance with law the help of police.”
It is stated that in the matter of S.C Sekaran v. Amit Gupta and Ors., Company Appeal (AT) (Insolvency) No. 495 & 496 of 2018, the Hon’ble National Company Law Appellate Tribunal, New Delhi, held that:
“8.In view of the provision of Section 230 and the decision of the Hon’ble Supreme Court in ‘Meghal Homes Pvt. Ltd.’ And ‘Swiss Ribbons Pvt. Ltd.’, we direct the ‘Liquidator’ to proceed in accordance with law. He will verify claims of all the creditors; take into custody and control of all the assets, property, effects and actionable claims of the ‘corporate debtor’, carry on the business of the ‘corporate debtor’ for its beneficial liquidation etc. as prescribed under Section 35 of the I&B Code. The Liquidator will access information under Section 33 and will consolidate the claim under Section 38 and after verification of claim in terms of Section 39 will either admit or reject the claim, as required under Section 40. Before taking steps to sell the assets of the ‘corporate debtor(s)’ (companies herein), the Liquidator will take steps in terms of Section 230 of the Companies Act, 2013. The Adjudicating Authority, if so required, will pass appropriate order. Only on failure of revival, the Adjudicating Authority and the Liquidator will first proceed with the sale of company’s assets wholly and thereafter, if not possible to sell the company in part and in accordance with law.”
It is stated that the Applicant, on 07.01.2023 received a letter from Respondent wherein Respondent is categorically admitting that he will not allow any personnel from the side of the Applicant by terming the said efforts from the side of the Liquidator as illegal. It is stated that the lease deed was valid for 5 years from the date of execution of the deed i.e., 30.09.2017. Since, the Respondent is not handing over the possession of the property and neither paying arrear of rentals to the Applicant herein who is the Liquidator of the Corporate Debtor and the Applicant is constrained to file this instant Applicant seeking appropriate directions from this Tribunal.
The Respondent filed counter, inter-alia, stating that:
It is stated that the Respondent Company is not a party to the proceedings in C.P. (IB) No. 651/7/HDB/2018 filed by the Financial Creditor / Bank of India against the Corporate Debtor M/s. Sainath Estates Pvt. Ltd. It is further stated that Applicant/Liquidator of the Corporate Debtor ought to have sought leave of this Tribunal to implead this Respondent Company as a party to the proceedings and without making the Respondent Company as a party to the proceedings, the Applicant could not have filed the present Application.
It is averred that the Respondent Company has been in the occupation of the land admeasuring 15092 Sq. Yards and the heritage building of the Corporate Debtor for the last Thirty years and the entire land, Heritage Building, and the buildings constructed on the leased land by the Respondent Company is known as Chiraan Fort Club & Hotels including Manasarover Fern. The brief history of the subject property is as under:
A. It is stated that the Corporate Debtor entered into an Agreement of Sale with its vendors in the year 1993 and it was put in possession by its vendors in the same year. The Chiraan Fort Club was started in November 1993 and the subject property was on lease with the Respondent Company is filing its Profit & Loss Statement from the years ending from 31.03.1994 onwards to demonstrate that the rents are being paid regularly to the Corporate Debtor, since November 1993.
B. It is stated that in the year 2006-07, it has been considered profitable for both the Corporate Debtor and the Respondent Company to construct various buildings in the open land which will increase the value of the subject property. The Respondent Company stated that based on such understandings, the Respondent invested huge amounts for the construction of the buildings and GHMC also approved the construction vide BPS proceedings dated 22.10.2010 vide Annexure R-7. The Respondent Company and Corporate Debtor entered into an MoU, thereafter on 26.07.2012, and the same is filed as Annexure R-8. The Respondent Company is also filing the audited balance sheets from 2009 to 2013 vide Annexure R1 to R5 during which period the construction has taken place and the investment is capitalized and the Respondent Company is also filing audited Balance sheet for the year 2018-2019 dated 06.06.2019 filed as Annexure R-6. This clearly establishes that the entire superstructure i.e., all the buildings on the leased land are constructed by the Respondent Company at its own costs to be refunded by the Corporate Debtor before handing over of the possession by the Respondent to Corporate Debtor.
C. The Respondent respectfully submits that the property tax is being demanded by the GMC for the subject property from the Respondent Company and the same is being paid by the Respondent Company regularly, since 2012, the relevant documents to show the property tax assessment and payment is filed as Annexure R-10. The Respondent is also filing electricity bills from 2006 onwards till date vide Annexure R-11. For the sake of brevity, the Respondent filed the electricity bill of one month every year.
D. It is averred that the Respondent respectfully submits that it is filing various documents relating to Provident Fund registration dated 26.08.1998 and the Commercial tax registration which is with effect from 25.01.1994 vide document dated 23.12.2004 vide Annexure R-12, R-13, R-14 respectively. The Respondent has also filed various documents namely VAT registration, ESI registration, License for sale of IMFL, Trademark certificate, Food License Certificate, Professional Tax Registration certificate, Service tax registration and all these documents are filed as Annexure R-15 to R23 from the years preceding the written agreement of lease in 2017 which clearly shows that there is a continuing unwritten lease in favour of the Respondent Company from November 1993 onwards. In fact, after the construction of the new buildings, the Mansarovar Fern division was also started and Annexures R-24 to R-26 are regarding the VAT registration, TAN registration, etc issued by various Government authorities in favor of the Mansarover Fern division. It is stated that all the buildings which are constructed after the Corporate Debtor purchased the land are by this Respondent Company alone and the Respondent Company cannot be evicted summarily and without refunding the money invested by the Respondent for the construction of the buildings.
It is stated that the letter dated 26.11.2022 marked as Annexure A-6 is not validly or legally issued to the Respondent Company. It is further respectfully submitted that, the entire new buildings which are now in existence except the old heritage building were constructed by Respondent Company out of its own funds and funds obtained from the Financial institutions/ Banks. The Respondent Company is in occupation of the land and the heritage building for the last 30 years, and admittedly an MOU was executed between the Respondent Company and the Corporate Debtor way back in the year 2012 to place on record the understanding of the Respondent Company and Corporate Debtor which is in vogue since 2006. Therefore, the contention of the Applicant that the lease deed was executed in 2017 for a period of 5 years which expired on 30.09.2022 is not factually correct and the Applicant/ Liquidator is not fully conversant with affairs of the Corporate Debtor.
It is further stated that the averments made in Para IV (8), the allegations of the Applicant that “it is imperative to note herein that the lessee of the aforementioned property is none other than the suspended Directors of Corporate Debtor”, is factually & legally baseless. The lease is in favor of the Respondent Company and it is the Respondent Company that is in occupation of land and heritage buildings since 1993. Therefore, all the allegations in Para IV (8) are false and baseless and were made to prejudice this Tribunal against the Respondent Company.
It is stated that the Applicant has again addressed a letter to one of the Directors of the Respondent Company on 17.12.2022 stating that there is no clause pertaining to Force Majeure and hence, he cannot take any plea for the same and in terms of the clause of the lease deed, any additions made by you are at your costs and therefore, this plea also cannot hold water. The Respondent Company is always ready and willing to pay the arrears of rent of the leased premises excluding the period of the Covid-19 epidemic. Since the Applicant did not give the details of the actual lease amount due, the matter could not proceed further.
It is stated that the Corporate Debtor is having land to an extend of 15,092 Sq. Yards and built-up area of approximately 6,270 Sq. Mts which is a Heritage building. Therefore it is respectfully submitted that for the purpose of valuation of the land in question there is no need for a valuer to go physically to every corner of the land to ascertain or fix the value of the land which is predominantly done on the basis of Market Value Registers of the Registration Department, Government of Telangana and the value of the heritage Building is notionally zero, since it is more than 100 years and the same cannot be demolished or altered as the same is prohibited by law.
It is stated that the former lease agreement was executed for the first time in the year 2017 for the purpose of excise license for the Chiraan Fort Club & Hotels being conducted by the Respondent Company. Though, the land and heritage building was under lease from the Corporate Debtor to the Respondent Company from 1990s. Therefore, the contention of the liquidator that this Respondent Company failed to hand over the possession of the property mentioned herein is baseless. Further, the Applicant never addressed any notice or letter to the Respondent Company in this regard. Therefore, there is no cause of action for the Applicant to approach this Tribunal. The Regulation 9 of the liquidation process referred in Para IV 19 has no relevance to the facts of this case or to the present proceedings initiated by the Applicant. This Respondent Company is ready and willing to pay any arrears of rental payable to the Corporate Debtor, to the Applicant as ascertained by this Tribunal within a reasonable time as may be fixed by this Tribunal. The Respondent Company respectfully states that the Applicant is not entitled to the reliefs prayed in the Para V of the Application except for payment of actual rental arrears as determined by this Tribunal after adjusting the amounts due and payable by the Corporate Debtor to the Respondent Company.
The Applicant filed rejoinder to the counter filed by the respondent:
The applicant submits that all averments/contentions/allegations raised in the counter filed by the respondent are vehemently denied by the applicant in entirety unless specifically admitted therein. The applicant does not admit the genuineness or correctness of any statements, allegations made therein. It is averred that the Liquidator has powers as well as duty as per Section 35 of the Code to take into his custody all the assets and properties of the corporate debtor and to carry on the business of the corporate debtor for its beneficial liquidation by protecting and preserving the assets of the corporate debtor It is further submitted that the contents of the Application preferred by the Applicant herein are reaffirmed and reiterated and are not repeated herein for the sake of brevity. Further, Section 36 of the Code imposes a duty upon the liquidator to form an estate of the assets of the Corporate Debtor which shall include any assets over which the Corporate Debtor has ownership rights where such assets may or may not be in the possession of the Corporate Debtor. It is certain to state herein that the Lease Deed dated 30.09.2017 executed between the Corporate Debtor and the Respondent herein was only for a period of 5 years, which duly expired on 30.09.2022 and there being no renewal of the same, the Applicant herein well within the provisions of the Code requested the Respondent to handover the possession of the premises and pay arrears of rentals. It is relevant to state herein that in the matter of 'M/s. Jhanvi Rajpal Automotive Pvt. Ltd. v. RP of Rajpal Abhikaran Pvt. Ltd. & Anr. [Company Appeal (AT) (Insolvency) No. 1417 of 20221, the Hon'ble National Company Law Appellate Tribunal, Principal Bench, New Delhi, held that:
“20.Accepting the contention of the Learned Counsel for the Appellant that RP is obliged to file a suit for eviction of the Appellant under MP Accommodation Control Act, 1961 even though lease in favour of the Appellant has expired shall be unduly prolonging the insolvency process which is a time bound process. When the Corporate Debtor has the ownership rights over the premises which premises can be taken in control by IRP/RP, we are of the view that for eviction of the Appellant especially in event when lease in favour of the Appellant has come to an end, filing a suit is not contemplated in the statutory scheme contained in IBC.
21.Thus, the contention of the Appellant that RP has to file a suit for eviction of the Appellant under the MP Accommodation Control Act, 1961 cannot be accepted. We thus, in view of the foregoing discussions are of the considered opinion that Adjudicating Authority has rightly allowed the Application filed by the RP directing the Appellant to vacate from the premises so that Resolution Plan which has been approved can be implemented. We thus do not find any merit in the Appeal, the Appeal is dismissed.”
[Emphasis Supplied]
Therefore, the instant Application is well maintainable under the provisions and aim of the Code.
It is submitted that the Respondent’s allegation of not making them party to the proceedings in main Company Petition is itself bad in law. It is imperative to state herein that the Company Petition filed under Section 7 of the Code is statutorily between a Financial Creditor and the Corporate Debtor and there is no requirement of any third party to be impleaded in the main Company Petition. Further, it is pertinent to state herein that the Applicant herein has filed a fresh Application in the main company petition in which the respondent is arrayed as a necessary party and therefore, the contention of the respondent pertaining to seeking leave to implead the respondent as a party to the proceeding has no bearing under the provisions of the law in so far as the instant application is concerned.
The applicant submits that the contents of Para 3 (A) to (E) of the Counter save and except what forms part of record are baseless and misleading. It is vehemently denied that the Corporate Debtor entered into Agreement of Sale with its vendors in the year 1993 and it was put in possession by its vendors in the same year. At this instance, it is imperative to state that neither any copy of such agreement of sale is attached nor clearly any date of such agreement is mentioned, thereby, the Respondent is making allegations in the air without any basis. It is further submitted that the investments said to have been made by the Respondent Company for creating assets in its own name in their books of accounts is indirectly or directly contributed by the Corporate Debtor only. It is pertinent to state herein that the Memorandum of Understanding (MOU) annexed by the Respondent as Annexure R-8, is an unregistered document, hence it has no legal binding. Nonetheless, the matter at hand pertains to Lease Deed dated 30.09.2017 which stands expired as on 30.09.2022, wherein the lessee of the property is the suspended Director of the Corporate Debtor. It is evident that, it is a devious act by the erstwhile management to illegally retain the possession of the property even after the expiry of the lease deed.
It is averred by the applicant that the contents of Paras 7 and 8 of the Counter except what forms part of record, rest are denied as false and the allegations levelled by the Respondent, that the letter dated 26.11.2022 is addressed to one of the Directors of the Respondent Company and not to the Company, as such, is erroneous and frivolous, as the letter is addressed to the representative of the Respondent Company. Further, it is also submitted that the Respondent is merely twisting the facts of the case by laying emphasis on an unregistered document i.e., MOU, which has no relevance with the case at hand, in order to hide its own misdeeds of not seeking extension of the lease deed and thereupon failure to pay the rental arrears.
It is stated that the Respondent has well acknowledged the fact that land is a leasehold land of the Corporate Debtor. Thereby, in no circumstances whatsoever, the Applicant can be denied of appointing its own security. Nonetheless, vide order dated 10.04.2023, this Tribunal in IA No.195 of 2023, duly allowed the Applicant to appoint security personnel. Hence, it is certain that the Liquidator as per Section 35 of the Code, is obligated to take into his custody all the assets and properties of the Corporate Debtor and to carry on the business of the Corporate Debtor for its beneficial liquidation by protecting and preserving the assets of the Corporate Debtor. Copy of order dated 10.04.2023 is annexed and marked herewith as ANNEXURE-1.
The applicant submits that the contents of Para 11 of the Counter except what forms part of record, rest are denied as false and it is imperative to state herein that the Respondent has never made any attempt to either seek an extension or intended towards paying the arrears, rather the Respondent has always responded vexatiously. It is only in the counter that the Respondent has showed its willingness to pay the rental arrears of the leased premises, however, the same is a conditional one. Moreover, the Respondent has been maliciously blaming the Applicant of not giving the details of actual lease amount due, even though they are much aware of the rental tariffs and terms and conditions thereof, since they were paying the dues up to 2017.
It is stated that the contents of Para 16 of the Counter are vehemently denied by the applicant. The Applicant has stringently been following the timelines and has put all his efforts to revive the Corporate Debtor. Moreover, the Respondent has no locus to question the act and duties of the Corporate Debtor. Further, the non-cooperation from the side of the Respondent has been a major reason for legal lapses, if any, in the instant liquidation process and in no manner the Applicant herein can be blamed for any legal lapses solely attributable to the Respondent.
The applicant also submits that for the loan taken by Respondent, the property of the Corporate Debtor was mortgaged while illegally stating to the Lender Bank that the property belongs to Respondent. At this juncture, it is worth drawing the attention of this Tribunal to page no. 153 of the Counter wherein, the property of the Corporate Debtor entity was mortgaged to Syndicate Bank for availing loans/borrowings for the benefit of the Respondent Company. Further, it is imperative to state herein that at Page No.78 of the Counter, the financial statement well reflects that the Corporate Debtor has invested approximately Rs.12 Crores. Thereby, it is clear that it is a mere tactic of the Respondent to create a mirage that it was the Respondent who has invested and thereby frivolously showcase that everything is owned by the Respondent instead of the Corporate Debtor. Nonetheless, the lease deed is crystal clear with its terms and conditions and since the same has expired and no further extension has been sought, then the Respondent is left with no option but to vacate the premises and handover the same to the Applicant in order to abide by the aim and intent of the Code i.e., maximization of value of assets of the Corporate Debtor. In order to achieve the same, the Applicant herein is making all the efforts to have a smooth liquidation, however, the Respondent with their ill-intentions are creating a major ruckus to push the Applicant away from its goal. It is only now the Respondent have come to up an urge to pay the rental arrears of the leasehold land belonging to the Corporate Debtor, which may appropriately be decided by this Tribunal. In order to aid this Tribunal, the Applicant herein states that in the books of accounts of the Corporate Debtor entity no lease rental have been paid by the Respondent and hence the lease rental outstanding is Rs.60,00,000 as on 30.09.2022 and another Rs.9,00,000 for the period from 01.10.2022 to 31.03.2023, hence making a total outstanding of Rs.69,00,000 as on 31.03.2023.
The applicant submits that the contents of Para 18 of the Counter are denied and that the Respondent have only shown interest to pay the rental arrears when the instant Application has been filed against them, however, the willingness to pay also has conditionalities attached to it. Without Prejudice, if at all, the Respondent is directed to pay the arrears, the conditionalities would further act as a roadblock for the Liquidator to complete the liquidation process qua the Corporate Debtor. It is also apposite to bring to the notice of this Tribunal that, payment of arrears from the side of the Respondent is one of the prayers which the Applicant has sought and apart from that the Applicant has humbly prayed the Tribunal to direct the Respondent to handover the possession of the mentioned property. Further, the Tribunal may also levy appropriate interest on the outstanding arrears as deemed fit in the interest of justice.
5. Surrejoinder filed by the Respondent Company to the Rejoinder of the Applicant:
It is stated that the property in question of Corporate Debtor was in occupation of this Respondent as tenant for almost three decades and admittedly the multistoried building was constructed by this Respondent at its cost more than a decade back and property is being assessed in its name by the Greater Hyderabad Municipal Corporation and therefore the judgment relied on by the Applicant in Rejoinder to the counter is not relevant to the facts of this case.
It is stated that an allegation made by the applicant in his rejoinder that the “lessee of the property is suspended Director of the Corporate Debtor and it is evident that it is a devious act by the erstwhile management to illegally retain the possession of the property even after the expiry of the lease period” is also absolutely false and baseless.
It is stated that the letter dated 26.11.2022 was addressed by the Applicant to the Respondent Company is incorrect and the letter shows that it is addressed to an individual but not addressed to the Company represented by its director or its authorized representatives. The Respondent Company again reiterated the letter was not addressed to the Respondent Company but only to an individual who also happens to be its director. The Hon’ble High Court and the Apex Court have held that it is the institution/corporate entity which has to be addressed and in the absence of the letter not addressed to the Respondent Company, the present Application is not maintainable.
It is stated that the Respondent was always willing to pay the agrees rent as Rs. 1 Lakh per month. The applicant was insisting for payment of rent from 2017 onwards, the dispute arose. The Respondent submitted that the details of the rent due from July, 2019 up to, end of May, 2023 is Rs. 39,00,000/- (Rupees Thirty-Nine Lakhs) excluding the period of lockdown due to Covid-19 pandemic. The Respondent is ready and willing to pay the rent due as determined by this Tribunal. Hence, it is prayed that the instant application may be dismissed by this Tribunal.
Both sides have filed written submissions and relied on the following rulings.
By Applicant
S.C Sekaran V. Amit Gupta and Ors. [C.A. (AT) (Ins.) No. 495 & 496 of 2018], wherein, the Hon’ble National Company Law Appellate Tribunal, New Delhi, held that:
“8.In view of the provision of Section 230 and the decision of the Hon’ble Supreme Court in ‘Meghal Homes Pvt. Ltd.’ And ‘Swiss Ribbons Pvt. Ltd’, we direct the ‘Liquidator’ to proceed in accordance with law. He will verify claims of all the creditors; take into custody and control of all the assets, property, effects and actionable claims of the ‘corporate debtor’, carry on the business of the ‘corporate debtor’ for its beneficial liquidation etc. as prescribed under Section 35 of the I & B Code. The liquidator will access information under Section 33 and will consolidate the claim under Section 38 and after verification of claim in terms of Section 39 will either admit or reject the claim, as required under Section 40. Before taking steps to sell the assets of the ‘corporate debtor(s)’ (Companies herein), the Liquidator will take steps in terms of Section 230 of the Companies Act, 2013. The Adjudicating Authority, if so required, will pass appropriate order. Only on failure of revival, the Adjudicating Authority and the Liquidator will first proceed with the sale of company’s assets wholly and thereafter, if not possible to sell the company in part and in accordance with law.’’
M/s. Raptakos Brett & Co. Ltd. V. Ganesh Property [C.A. No. 4657 of 1998] wherein, the Hon’ble Supreme Court has categorically opined that;
when a lease comes to an end by efflux of time, or by notice of termination, or it there be a breach and the lessee’s rights are forfeited, the lessee becomes a tenant sufferance, and it becomes the duty of the lessee under Section 108(q) of the Transfer of Property Act to restore possession to the lessor forthwith. Thereby, it is evident that the Respondent has failed to even carry out its fiduciary duty towards the lease deed and this act of the Respondent well highlights the frivolous intent of the Respondent withhold the Property illegally.
M/s. Jhanvi Rajpal Automotive Pvt. Ltd. V. R.P. of Rajpal Abhikaran Pvt. Ltd. & Anr. [CA (AT) (Ins) No. 1417 of 2022], wherein the Hon’ble National Company Law Tribunal, Principal Bench, New Delhi, held that:
“20.Accepting the contention of the Learned Counsel for the Appellant that RP is obliged to file a suit for eviction of the Appellant under MP Accommodation Control Act, 1961 even though lease in favor of the Appellant has expired shall be unduly prolonging the insolvency process which is a time bound process. When the Corporate Debtor has the ownership rights over the premises which premises can be taken in control IRP/RP, we are of the view that for eviction of the Appellant especially in event when lease in favor of the Appellant has come to an end, filing suit is not contemplated in the statutory scheme contained in the IBC. 21. Thus, the contention of the Appellant that RP has to file a suit for eviction of the Appellant under the MP Accommodation Control Act, 1961 can not be accepted. We thus, in view of the foregoing discussions are of the considered opinion that Adjudicating Authority has rightly allowed the Application filed by the RP directing the Appellant to vacate from the premises so that Resolution Plan which has been approved can be implemented. We thus do not find any merit in the Appeal, the Appeal is dismissed”.
(Emphasis Supplied)
Alchemist Asset Reconstruction Company V. Precision Fasteners Ltd. [C.P. (IB) No. 1339 (MB)/2017] wherein the Hon’ble National Company Law Tribunal, Mumbai Bench held that:
“… In the circumstances, we at this moment allow MA 1007/2019 and direct R1, R2 and R4 to vacate the possession of the alleged flat Nos. E7, B9 and D11 and handover the same to Liquidator, falling which Liquidator will be entitled to get the possession in accordance with the law with the help of police.”
Adinath Jewellary Exports v. Mr. Brijendra Kumar Mishra, Liquidator of Shrenuj & Co. Ltd. & Anr. [Company Appeal [AT] (Insolvency) No. 748 of 2022], wherein the Hon’ble National Company Law Appellate Tribunal, Principal Bench held that:
“35.Admittedly, the Leave and License 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 the subject premises and continued to pay license fees for use of the premises. It is also noted that the Liquidator, through his legal counsel, sent a notice dated 04.01.2022 (attached at Page No. 46 to 49 of the Appeal Paper Book) for vacation of the licenced premises and payment of outstanding licence fee.
42.Further, Section – 35(1)(d) imposes a duty on the Liquidator to take such measures to protect and prevent the asset and property of the Corporate Debtor as he considers necessary, and Section 35(1)(n) gives the power to the Liquidator to apply to the Adjudicating Authority for such orders or directions as may be necessary for the liquidation of the Corporate Debtor.
61.We are of the opinion that the NCLT possesses the correct jurisdiction in considering an application for vacation of the premises in question and that the NCLT was correct in passing the Impugned Order which would be necessary to put the premises in question with the Liquidator and pending the final disposed of I.A. No. 1635 of 2020. Therefore, we are clear that the Impugned Order does not need any intervention.
62.In the light of above-stated discussion, we are of the opinion that the NCLT possesses the correct jurisdiction for considering an application for vacation of the premises in question in the circumstances of the present case, and the NCLT was correct in passing the Impugned Order which would be necessary to place the custody of the premises in question with the Liquidator pending the final disposal of I.A. No. 1635 of 2020 so that the liquidation process is completed timely and in accordance with the legal provisions. We are therefore, of the clear view that the Impugned Order does not need any intervention. The Appeal is, therefore, dismissed with no order as to costs.”
7.1 By Respondent.
Vishal Khalsaria Vs (2016) 3 SCC 762, wherein it was held as follows:
30.issue of determination of tenancy is also one which is well settled. While Section 106 of the Transfer of Property Act, 1882 does provide for registration of leases which are created on a year-to-year basis, what needs to be remembered is the effect of non-registration, or the creation of tenancy by way of an oral agreement. According to Section 106 of the Transfer of Property Act. 1882, a monthly tenancy shall be deemed to be a tenancy from month to month and must be registered if it is reduced into writing. The Transfer of Property Act, however, remains silent on the position of law in cases where the agreement is not reduced into writing. If the two parties are executing their rights and liabilities in the nature of a landlord- tenant relationship and if regular rent is being paid and accepted, then the mere factum of non-registration of deed will not make the lease itself nugatory. If no written lease deed exists, then such tenants are required to prove that they have been in occupation of the premises as tenants by producing such evidence in the proceedings under Section 14 of the SARFAESI Act before the learned Magistrate. Further, in terms of Section 55(2) of the special law in the instant case, which is the Rent Control Act the onus to get such a deed registered is on the landlord. In the light of the same, neither can the landlord nor the banks be permitted to exploit the fact of non-registration of the tenancy deed against the tenant.
31.Further, the learned counsel for the appellants rightly placed reliance on a three- Judge Bench decision of this Court in Anthony. At the cost of repetition, in that case it was held as under: (SCC p. 399, para 12)
12.But the above finding does not exhaust the scope of the issue whether the appellant is a lessee of the building. A lease of immovable property is defined in Section 105 of the TP Act. A transfer of a right to enjoy a property in consideration of a price paid or promised to be rendered periodically or on specified occasions is the basic fabric for a valid lease. The provision says that such a transfer can he made expressly or by implication. Once there is such a transfer of right to enjoy the property a lease stands created. What is mentioned in the three paragraphs of the first part of Section 107 of the TP Act are only the different modes of how leases are created. The first paragraph has been extracted above and it deals with the mode of creating the particular kinds of leases mentioned therein. The third paragraph can be read along with the above as it contains a condition to be complied with if the parties choose to create a lease as per a registered instrument mentioned therein. All other leases, if created necessarily fall within the ambit of the second paragraph. Thus, dehors the instrument parties can create a lease as envisaged in the second paragraph of Section 107 which reads thus:
All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession."
K.L. Jute Products Pvt. Ltd. v. Tirupati Jute Industries Ltd. (2020 SCC OnLine NCLAT 426) was referred Para 64-66 of the above judgment are relevant.
"64.It is well settled that the Resolution Professional is required to examine and confirm the Resolution Plan subject to the same being in conformity with the ingredient of Section 30(2) of the Code A Resolution Professional can submit his ex facie opinion to the ‘Committee of Creditors' that the law was or was not violated. It is true that the Section 30(2)(e) of the Code does not authorise the Resolution Professional to determine whether the Resolution Plan does or does not violate the relevant provisions of Law.
65.In reality, ascribing conditions in the 'Resolution Plan' by the Appellant/Resolution Applicant is an unacceptable one, in the considered opinion of this Tribunal. Therefore, the Adjudicating Authority in the impugned order came to the right conclusion that the plan of the Resolution Applicant/Appellant was in negation of Law.
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 disregard to 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 that the "Existing Resolution Professional."
It is contended that in the case before NCLAT in Jhanvi Rajpal Automotive Pvt. Ltd., a fresh lease was granted by the Resolution Professional himself on 17.09.2021 which lease contained a specific clause for eviction with 15 days’ notice. Therefore, the Hon'ble NCLAT held that "when the Corporate Debtor has the ownership rights over the premises which premises can be taken in control by IRP/RP, we are of the view that for the eviction of the appellant especially in filing a suit is not contemplated in statutory scheme contained in IBC." In fact, this matter was carried to Hon'ble Supreme Court in Civil Appeal No. 736 of 2021 and the Hon'ble Apex Court though did not interfere with the orders of the NCLAT but "kept the question of law open." In the present case it is respectfully submitted that the Multi-storied Building was constructed by this Respondent and in terms of MoU dated 26.07.2012, this Respondent is entitled to stay for 30 years or in the event of eviction, a quit notice of 3 years and refund of the amount spent as stated supra is mandatory.
In the light of the contest as mentioned above, the point that emerges for our consideration is;
Whether the Adjudicating Authority under IB Code, has no jurisdiction to direct the Respondent herein to vacate and deliver the vacant possession of the property in its possession belonging to the corporate debtor to the Liquidator?
We have heard Mr. Avinash Desai, Ld. Senior Counsel assisted by Ld. Counsel Mr. Amir Bavani, for the Liquidator and Mr. MS Prasad Ld. Senior Counsel assisted by Ld. Counsel Ms. A. Satya Siri for the Respondent. Perused the records, the written submissions and the case law.
According to the Ld. Sr. Counsel for the applicant, despite the request of the Applicant/Liquidator vide his letter dated 26.11.2022 to the Respondent to deliver the premises bearing house No. 1-8-322 to 335 near American Consulate, Begumpet, Secunderabad, admeasuring 15092 Sq.yds, herein referred to as ‘The Property’, the Respondent refused to deliver the same, hence the present application is filed. Ld. Sr. Counsel, further contends that, there is no dispute that the property described as above absolutely belongs to the Corporate Debtor hence forms part of the Liquidation estate. Therefore, the contest of the Respondent that since it had raised a structure in a part of said property with its own and the funds raised by way of loans from financial institutions the said structure never formed part of the lease deed dated 30.07.2017, as such the said structure though constructed in the leased hold property the applicant cannot seek delivery of the same is unsustainable. In this context Ld. Counsel contends that mere raising of a structure in the property of the corporate debtor by the respondent which is also a related party to the corporate debtor, will not take away the said property from out of the liquidation estate of the corporate debtor and as such the respondent is bound to vacate and deliver vacant possession of the same to the applicant. Ld. Sr. Counsel further submits that, the so called lease dated 30.09.2017 entered by the Corporate Debtor with the Respondent in respect of the subject property for a period of five years since expired on 30.09.2022 and as there was no further extension of the said lease, the Respondent’s possession of a part of the liquidation estate is illegal, hence the Respondent is liable to vacate the property and deliver vacant possession of the same to the applicant.
Per contra, Ld. Sr. Counsel would contend further that, in the year 2006-07, it has been considered profitable for both the Corporate Debtor and the Respondent Company to construct various buildings in the open land which will increase the value of the subject property. The Respondent Company stated that based on such understandings, the Respondent invested huge amounts for the construction of the buildings and GHMC also approved the construction vide BPS proceedings dated 22.10.2010 vide Annexure R-7. The Respondent Company and Corporate Debtor entered into an MoU, thereafter on 26.07.2012, under Annexure R-8. The Respondent Company is also filing the audited balance sheets from 2009 to 2013 vide Annexure R1 to R5 during which period the construction has taken place and the investment is capitalized and the Respondent Company is also filing audited Balance sheet for the year 2018-2019 dated 06.06.2019 filed as Annexure R-6. This clearly establishes that the entire superstructure i.e., all the buildings on the leased land are constructed by the Respondent Company at its own costs to be refunded by the Corporate Debtor before handing over of the possession by the Respondent to Corporate Debtor.
According to the Ld. Sr. Counsel, all the buildings which were constructed after the Corporate Debtor purchased the land are by the Respondent Company alone and therefore, the Respondent Company cannot be evicted summarily and without refunding the money invested by the Respondent for the construction of the buildings.
Ld. Sr. Counsel further contends that, since the Respondent Company is in occupation of the land and the heritage building for the last 30 years, and admittedly an MOU was executed between the Respondent Company and the Corporate Debtor way back in the year 2012 to place on record the understanding of the Respondent Company and Corporate Debtor which has been in vogue since 2006, the contention of the Applicant that the lease deed executed in 2017 for a period of 5 years since expired on 30.09.2022 the respondent shall deliver possession of the property, is not factually correct and the Applicant/ Liquidator is not fully conversant with affairs of the Corporate Debtor.
Having heard the Ld. Sr. Counsels of both sides, at the out set we wish to refer to the ruling in M/s. Jhanvi Rajpal Automotive Pvt. Ltd., Vs R.P. of Rajpal Abhikaran Pvt. Ltd and Anr, in Company Appeal (AT) (Insolvency) No. 1417 of 2022, where in an identical fact situation, Hon’ble NCLAT, Principal Bench held that;
“The present is not a case where lease in favour of the Appellant is subsisting. The lease has come to an end on 31st December, 2021. Further the lease renewal in favour of the Appellant was by RP himself on 17.09.2021 (Fresh Lease) which lease contained specific clause for eviction by 15 days’ notice.
20.“Accepting the contention of the Learned Counsel for the Appellant that RP is obliged to file a suit for eviction of the Appellant under MP Accommodation Control Act, 1961 even though lease in favour of the Appellant has expired shall be unduly prolonging the insolvency process which is a time bound process. When the Corporate Debtor has the ownership rights over the premises which premises can be taken in control by IRP/RP, we are of the view that for eviction of the Appellant especially in event when lease in favour of the Appellant has come to an end, filing a suit is not contemplated in the statutory scheme contained in IBC”.
21.“Thus, the contention of the Appellant that RP has to file a suit for eviction of the Appellant under the MP Accommodation Control Act, 1961 cannot be accepted. We thus, in view of the foregoing discussions are of the considered opinion that Adjudicating Authority has rightly allowed -21- Company Appeal (AT) (Insolvency) No. 1417 of 2022 the Application filed by the RP directing the Appellant to vacate from the premises so that Resolution Plan which has been approved can be implemented. We thus do not find any merit in the Appeal; the Appeal is dismissed”. In Hon’ble Supreme Court in R.V. Bhupal Prasad v. State of A.P. and Ors., AIR 1996 SC 140, has held that,
" Tenant at sufferance is one who comes into possession of land by lawful title, but who holds it, by wrong after the termination of the term or expiry of the lease by efflux of time. The tenant at sufferance is, therefore, one who wrongfully continues in possession after the extinction of a lawful title. There is little difference between him and a trespasser. "
Therefore, from the afore mentioned authoritative pronouncements, and from the undeniable facts that the respondent is in occupation of the property of the corporate debtor despite expiry of the lease deed dated 30.09.2022 it is overwhelmingly clear that, the possession of the respondent is wrongful, hence the respondent is not entitled under law to resist the present application. On the other hand, the respondent is liable to pay damages to the applicant.
In so far as the ruling in Vishal N. Kalsaria Case (supra), relied on by the respondent is concerned, it is to be noted that, Hon’ble Supreme Court of India, in Bajrang Shyamsunder Agarwal vs Central Bank of India, Criminal Appeal No. 1371 OF 2019 (Arising out of SLP (CRL.) NO. 9590/2015), having referred Vishal N. Kalsaria (supra), it was held that,
“the second case which dealt with the issue of tenants’ rights under the SARFAESI Act is Vishal N. Kalsaria Case (supra)”.
“This Court was concerned with the question Whether a “protected tenant” under the Maharashtra Rent Control Act, 1999 can be treated as a lessee and whether the provisions of the SARFEASI Act, will override the provisions of the Rent Act?”, Therefore, it is clear that the said ruling has a limited application. Even otherwise, it has been specifically held in the above ruling that,
“In any case, if any of the tenants claim that he is entitled to possession of a secured asset for a term of more than a year, it has to be supported by the execution of a registered instrument. In the absence of a registered instrument, if the tenant relies on an unregistered instrument or an oral agreement accompanied by delivery of possession, the tenant is not entitled to possession of the secured asset for more than the period prescribed under Section 107 of the T.P. Act.”
“The lower Courts are correct in ordering delivery of possession to the respondent no. 1bank as the tenancy stands determined”
We are therefore of the view that the ruling in Vishal N. Kalsaria, is helpful to the applicant rather than to the respondent.
Therefore, in the light of our discussion, we allow the application and the Respondent is directed to vacate and handover the vacant physical possession of premises bearing house no. 1-8-322 to 335, near American Consulate, Begumpet, Secunderabad, admeasuring 15092 sq. yards which is described in the petition, on or before 29.01.2024 and in default the petitioner is at liberty to approach this tribunal for necessary further directions.
It is further ordered that arrears of the rent payable till the date of handing over of physical possession shall also be paid by the Respondent to the Applicant/Liquidator.
The Liquidator upon taking delivery of the scheduled mentioned property shall proceed further in accordance with the provisions of the Code and complete liquidation process as expeditiously as possible.
Accordingly, IA(IBC) 265/2023 is disposed of.