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Can the NCLT, under Section 60(5) of the IBC, pass an order for the eviction of tenancy rights in a property of the Corporate Debtor? | Can insolvency laws override statutory tenancy protections? | Whether tenancy disputes fall outside the scope of insolvency resolution? – Sumati Suresh Hegde and Ors. Vs. Anand Sonbhadra, RP of Champalalji Finance Pvt. Ltd. and Ors. – NCLAT New Delhi

The Hon’ble NCLAT held that:

(i) IRP did not pursue the suit for eviction which was a right procedure, rather filed an application under Section 60(5) r/w Section 25(2)(a) of the Code before the Tribunal by short circuiting the route of eviction of the present appellants under the garb of the provisions of the Code.
(ii) The Tribunal has committed a patent error in passing the order of eviction considering the possession of the Appellants as of the lessee.
(iii) There is a sharp difference between the lease and a tenancy.
(iv) In the present case, there has been no change of the tenancy rights of the Appellants by way of a contract and the law which is to operate in respect of termination of tenancy are the provisions of the Maharashtra Rent Control Act, 1999 and not the Code.
(v) It is also otherwise well settled that once a tenant always a tenant unless the status changes by contract or by operation of law.
(vi) The Application under Section 60(5) of the IBC is only maintainable if the issue involved is related to insolvency resolution process.

Can the NCLT, under Section 60(5) of the IBC, pass an order for the eviction of tenancy rights in a property of the Corporate Debtor? | Can insolvency laws override statutory tenancy protections? | Whether tenancy disputes fall outside the scope of insolvency resolution? – Sumati Suresh Hegde and Ors. Vs. Anand Sonbhadra, RP of Champalalji Finance Pvt. Ltd. and Ors. – NCLAT New Delhi Read Post »

Development rights created in favour of Corporate Debtor constitute ‘property’ within the meaning of Section 3(27) of the IBC and the RP has to include in Information Memorandum the assets in which the corporate debtor has development rights | Adjudicating Authority does not lack jurisdiction in deciding whether development rights are part of the CIRP or it should be excluded and parties need not have to be relegated to the Civil Court – K.H. Khan and Anr. Vs. Art Constructions Pvt. Ltd. and Ors. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) The development rights created in favour of the corporate debtor constitute “property” within the meaning of Section 3(27) of the IBC.
(ii) The Adjudicating Authority had jurisdiction to examine the application on merits and take a decision as to whether the subject land can be treated to be asset of the corporate debtor or not.
(iii) The proceedings conducted by the Sole Arbitrator and the orders passed by the Sole Arbitrator does not amount to an arbitral award under the Arbitration & Conciliation Act, 1996 determining the rights of both the parties so as to bind both the parties in any subsequent proceedings.
(iv) IRP/RP has rightly included the subject land in the Information Memorandum/ CIRP and he was not precluded by virtue of Section 18(f) explanation from asserting development rights in the subject land.

Development rights created in favour of Corporate Debtor constitute ‘property’ within the meaning of Section 3(27) of the IBC and the RP has to include in Information Memorandum the assets in which the corporate debtor has development rights | Adjudicating Authority does not lack jurisdiction in deciding whether development rights are part of the CIRP or it should be excluded and parties need not have to be relegated to the Civil Court – K.H. Khan and Anr. Vs. Art Constructions Pvt. Ltd. and Ors. – NCLAT New Delhi Read Post »

Whether the payment of interest free Security Deposit as advance for use of the Leased premises falls within the purview of Operational Debt as defined under Section 5(21) of the IBC? – Corob India Pvt. Ltd. Vs. Mr. Birendra Kumar Agrawal RP of Renaissance Indus Infra Pvt. Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:
(i) The Security Deposit had been advanced as interest free Security Deposit. The Security Deposit was never disbursed or deposited against consideration for time value of money. Only in the event of failure to refund the Security Deposit from the date such refund was due that the deposit was to be returned with interest of 18%. It was bereft of all elements of commercial borrowing. Clearly therefore, the present transaction was not disbursement for time value of money and does not fall within the canvas of financial debt as defined under Section 5(8) of the IBC.

(ii) The sum of Security Deposit made in the facts of the present case which was given in the form of advance by the Appellant to the Corporate Debtor for prospective occupation of the leased premises on rent, this deposit was in the nature of advance for use of the premises. Hence, the payment of Security Deposit as advance for use of the Leased premises is clearly included in the “provision of services” and therefore falls within the purview of operational debt.

Whether the payment of interest free Security Deposit as advance for use of the Leased premises falls within the purview of Operational Debt as defined under Section 5(21) of the IBC? – Corob India Pvt. Ltd. Vs. Mr. Birendra Kumar Agrawal RP of Renaissance Indus Infra Pvt. Ltd. – NCLAT New Delhi Read Post »

Does Section 14(1)(d) of IBC permit RP or CoC in its commercial wisdom to handover possession of a property (lease property) belonging to the 3rd party in possession of Corporate Debtor? – Chandrakant Khemk Vs. Santanu Bhattacharjee, RP of Nandini Impex Pvt. Ltd. and Ors. – NCLAT New Delhi

In this judgment, the Hon’ble NCLAT clarifies following issues:

A. Whether the application of the appellant is maintainable
B. Was there final decision of the CoC with proper voting, with regard to vacation of the registered office of the Corporate Debtor.
C. No exceptions from the Section 14(1)(d).
D. Whether CoC or RP can take a decision to hand over the property in possession of Corporate Debtor to third parties.
E. Where there is a prohibition on recovery of property under Section 14(1)(d), Can the owner/lessors even file an application before the AA for recovery of such property?
F. Section 18 is not connected to Section 14(1)(d) in any manner.
G. Section 14(1)(d) does not seem to provide discretion to AA.

Does Section 14(1)(d) of IBC permit RP or CoC in its commercial wisdom to handover possession of a property (lease property) belonging to the 3rd party in possession of Corporate Debtor? – Chandrakant Khemk Vs. Santanu Bhattacharjee, RP of Nandini Impex Pvt. Ltd. and Ors. – NCLAT New Delhi Read Post »

Is a disputed claim included in the definition of ‘claim’ under Section 3(6) of the Insolvency and Bankruptcy Code, 2016? – Gujarat State Road Development Corporation Vs. Mr. Avil Menezes RP of Valecha Kachchh Toll Roads Ltd. and Ors. – NCLT Mumbai Bench

In this important decision of Hon’ble NCLT Mumbai Bench following issues are clarified:

A. Is disputed claim included in the definition of claim under Section 3(6) of the Insolvency and Bankruptcy Code, 2016.
B. Duty cast upon IRP/RP is not confined to the administrative function of the collection of claims but to verify the claims.
C. A debt not capable of verification by IRP/RP based on the documents cannot be admitted.
D. Does Concession granted by Applicant fall within the definition of operational debt.
E. Treatment of claims and counterclaims under the Resolution Plan.
F. Admission of subsequent claim or modification of claim cannot have the effect of re-running the CIRP de novo.

Is a disputed claim included in the definition of ‘claim’ under Section 3(6) of the Insolvency and Bankruptcy Code, 2016? – Gujarat State Road Development Corporation Vs. Mr. Avil Menezes RP of Valecha Kachchh Toll Roads Ltd. and Ors. – NCLT Mumbai Bench Read Post »

Provisions of Income Tax Act do not create any charge or security interest | Resolution Professional (RP) is empowered to seek additional evidence to analyse claims | CIRP Regulation does not provide any discretion to RP for admitting a claim after the extended period| Posting the status of claims on Corporate Debtor’s website & IBBI portal amounts to deemed knowledge and constructive notice – Commissioner of Income Tax (TDS-1), Mumbai Vs. Mr. Sundaresh Bhat RP of JBF Petrochemical Ltd. – NCLAT New Delhi

In this important judgment, Hon’ble NCLAT clarifies various issues related:

A. Powers of Resolution Professional in verification of claim.
B. CIRP Regulation does not provide any discretion to RP for admitting a claim after the extended period.
C. Putting up status of claims of the creditors on the websites of Corporate Debtor as well as the IBBI portal is amounted to deemed knowledge and constructive notice on the creditors with respect to rejection of its claim.
D. Whether such undecided claims can be entertained once the Resolution Plan is approved by the CoC and the Adjudicating Authority.
E. The provisions of Income Tax Act do not create any charge or security interest.

Provisions of Income Tax Act do not create any charge or security interest | Resolution Professional (RP) is empowered to seek additional evidence to analyse claims | CIRP Regulation does not provide any discretion to RP for admitting a claim after the extended period| Posting the status of claims on Corporate Debtor’s website & IBBI portal amounts to deemed knowledge and constructive notice – Commissioner of Income Tax (TDS-1), Mumbai Vs. Mr. Sundaresh Bhat RP of JBF Petrochemical Ltd. – NCLAT New Delhi Read Post »

Discharge of Principal Borrower when Resolution Plan is approved in CIRP of Surety? | Guarantee extinguished after approval of Resolution Plan? | Simultaneous IBC Proceedings against Corporate Debtor and Guarantor | Subrogation in Insolvency | Assets of Subsidiary Company in Resolution Plan of Holding Company – BRS Ventures Investments Ltd. Vs. SREI Infrastructure Finance Ltd. and Anr. – Supreme Court

In this important judgment, Hon’ble Supreme Court clarifies following issues:

A. Liability of Guarantor / Surety
B. Discharge of Principal Borrower when Resolution Plan is approved in CIRP of Surety/ Guarantor vs. Discharge of Surety/ Guarantor when Resolution Plan is approved in CIRP of Principal Borrower?
C. Simultaneous Proceedings under the IBC against Corporate Debtor and Guarantor
D. Subrogation under Section 140 of the Indian Contract Act, 1872.
E. Whether the assets of the Corporate Debtor were part of CIRP in respect of Corporate Guarantor.

Discharge of Principal Borrower when Resolution Plan is approved in CIRP of Surety? | Guarantee extinguished after approval of Resolution Plan? | Simultaneous IBC Proceedings against Corporate Debtor and Guarantor | Subrogation in Insolvency | Assets of Subsidiary Company in Resolution Plan of Holding Company – BRS Ventures Investments Ltd. Vs. SREI Infrastructure Finance Ltd. and Anr. – Supreme Court Read Post »

Whether leasehold rights granted to Corporate Debtor by virtue of Registered Lease Deed is an ‘asset’ within the meaning of Section 18(f) of IBC or the said land be excluded from CIRP of Corporate Debtor – Shristi Infrastructure Development Corporation Ltd. Vs. Avishek Gupta, RP Sarga Hotel Pvt. Ltd. and Anr. – NCLAT New Delhi

Hon’ble NCLAT held that the leasehold rights which are owned by the Corporate Debtor consists of right to enjoy the immoveable property by virtue of Registered Lease Deed dated 31.03.2007. Explanation (a) to Section 18 of IBC does not come into way of the Corporate Debtor in enjoying the leasehold rights i.e. enjoyment of the property by virtue of Registered Lease Deed. We, thus, do not find any substance in the submission of the Appellant that the leasehold rights should be excluded from the assets of the corporate debtor. The leasehold rights which was granted to the Corporate Debtor by virtue of Registered Lease Deed dated 31.03.2007 is right to enjoy the property and erect building of the land is a right which is an ‘asset’ within the meaning of Section 18(f) and the said asset is owned by the corporate debtor by virtue of Registered Lease Deed.

Whether leasehold rights granted to Corporate Debtor by virtue of Registered Lease Deed is an ‘asset’ within the meaning of Section 18(f) of IBC or the said land be excluded from CIRP of Corporate Debtor – Shristi Infrastructure Development Corporation Ltd. Vs. Avishek Gupta, RP Sarga Hotel Pvt. Ltd. and Anr. – NCLAT New Delhi Read Post »

Resolution Professional does not have right to inspect a third party’s property when the lease period had already expired and to take possession of the leased property by virtue of Section 14(1)(d) of IBC when the property was not under the possession of Corporate Debtor at the time of CIRP admission – Mrs. Durdana Aabid Ali and Ors. Vs. Vijay Kumar V Iyer RP of Future Retail Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that RP cannot be said to have the right to inspect the subject property of a third party at a time when the lease period had already expired. The subject property could not be included in the list of assets of the Corporate Debtor since there is no subsisting contract between the Appellant and Corporate Debtor which would entitle the RP to claim any right, title or interest in the subject property. Section 14(1)(d) will not come to the rescue of the RP, since what is prohibited therein, is only the right of the Corporate Debtor not to be dispossessed but not the right to have renewal of the lease of such property. Under Section 14(1)(d) of IBC, recovery of any property by any owner or lessor which is occupied by the Corporate Debtor is prohibited. The purpose of moratorium is only to preserve the status quo but not to create a new right.

Resolution Professional does not have right to inspect a third party’s property when the lease period had already expired and to take possession of the leased property by virtue of Section 14(1)(d) of IBC when the property was not under the possession of Corporate Debtor at the time of CIRP admission – Mrs. Durdana Aabid Ali and Ors. Vs. Vijay Kumar V Iyer RP of Future Retail Ltd. – NCLAT New Delhi Read Post »

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