Special issues-Rent/Lease/License/ Tenancy Rights issue

Liability arises on the part of Corporate Debtor in respect of sale agreement, which, being in the nature of a financial lease under Ind AS, is covered under Section 5(8)(d) of the Code? – Ghaziabad Development Authority Vs. Mr. Amit Agarwal – NCLT Principal Bench

The Hon’ble NCLT Principal Bench is of the view that the judgment, in Sandeep Mittal v. ASREC (India) Ltd. and Ors. (2024) ibclaw.in 573 NCLAT relied by Corporate Debtor is on a different footing based on a different factual matrix in which primarily the ingredients of Section 5(8)(f) of the Code were covered whereas in the present case ingredients of Section 5(8)(d) of the Code is applicable wherein it is a case of liability of Corporate Debtor, as is in the form a financial lease with the element of time value of money being incorporated in the agreement to sale itself and part transacted and balance defaulted with interest liability.

Liability arises on the part of Corporate Debtor in respect of sale agreement, which, being in the nature of a financial lease under Ind AS, is covered under Section 5(8)(d) of the Code? – Ghaziabad Development Authority Vs. Mr. Amit Agarwal – NCLT Principal Bench Read Post »

Adjudicating Authority does not have any jurisdictional power to consider the issue concerning the determination of the terms and validity of the Leave and License Agreement | Under no circumstances the Resolution Professional can short circuit the procedure and seek approval of a resolution plan that leads to cancellation of the leave and license, on the ground that it has been approved by the CoC – Victory Iron Works Ltd. Vs. Jitendra Lohia, RP of Avani Towers Pvt. Ltd. – NCLT Kolkata Bench

It is a trite, axiomatic and settled law that this Adjudicating Authority is not a civil court to resolve a civil dispute, thus, extinguishment of the right on leave and license cannot be gone into by this forum. This Adjudicating Authority does not have any jurisdictional power to consider the issue concerning the determination of the terms and validity of the Leave and License Agreement. However, the Section 25 of the I&B Code casts a duty upon the RP to represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings, which includes its right to get the leave and license legally terminated by a due process of law so that a clear title passes on to the Successful Resolution Applicant. But under no circumstances the Resolution Professional can short circuit the procedure and seek approval of a resolution plan that leads to cancellation of the leave and license, on the ground that it has been approved by the CoC. 

Adjudicating Authority does not have any jurisdictional power to consider the issue concerning the determination of the terms and validity of the Leave and License Agreement | Under no circumstances the Resolution Professional can short circuit the procedure and seek approval of a resolution plan that leads to cancellation of the leave and license, on the ground that it has been approved by the CoC – Victory Iron Works Ltd. Vs. Jitendra Lohia, RP of Avani Towers Pvt. Ltd. – NCLT Kolkata Bench Read Post »

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 »

Decree of Civil Court is sufficient to put the claim for arrears of rent under Section 14(1)(a) and not under14(1)(d) of IBC and CIRP Regulation 31(b) is not applicable – Ms. G. Swathi Vs. Mr. Bathina Venka Reddy Liquidator of DQ Entertainment (International) Pvt. Ltd. and Ors. – NCLT Hyderabad Bench

Hon’ble NCLT Hyderabad Bench held that the claim of the Applicant does not fall under Section 14(1)(d), but under Section 14(1)(a) as he has filed civil suit for the recovery of possession etc. The decree of Civil Court has already been passed in favour of the Applicant vide judgment dated 21.06.2022 in Civil Suit bearing No.215 of 2021. The decree of the Civil Court is sufficient to put the claim for arrears of rent under Clause 14(1)(a) and not under14(1)(d).

Decree of Civil Court is sufficient to put the claim for arrears of rent under Section 14(1)(a) and not under14(1)(d) of IBC and CIRP Regulation 31(b) is not applicable – Ms. G. Swathi Vs. Mr. Bathina Venka Reddy Liquidator of DQ Entertainment (International) Pvt. Ltd. and Ors. – NCLT Hyderabad Bench Read Post »

Does Section 35(1)(d) of IBC entitle a Liquidator to grant sub-leases over properties not owned by the Corporate Debtor? – Prabhat Jain, Liquidator of Narmada Cereal Pvt. Ltd. Vs. MP Industrial Development Corporation Ltd. and Ors. – NCLAT New Delhi

The Hon’ble NCLAT held that the Section 35(1)(d) of the Code does not entitles a Liquidator to grant sub-leases over properties not owned by the Corporate Debtor and therefore Section 238 of the Code cannot be interpreted in a manner that has the effect of overriding the Respondent No. 1 duty to enforce the relevant Rules on how public lands are to be regulated.

Does Section 35(1)(d) of IBC entitle a Liquidator to grant sub-leases over properties not owned by the Corporate Debtor? – Prabhat Jain, Liquidator of Narmada Cereal Pvt. Ltd. Vs. MP Industrial Development Corporation Ltd. and Ors. – NCLAT New Delhi Read Post »

Decree of the Civil Court is sufficient to put the claim for arrears of rent under Clause 14(1)(a) and not under14(1)(d) of IBC – Dr. Nasreen Hussain Vs. Mr. Bathina Venka Reddy Liquidator of DQ Entertainment (International) Pvt. Ltd. and Ors. – NCLT Hyderabad Bench

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Decree of the Civil Court is sufficient to put the claim for arrears of rent under Clause 14(1)(a) and not under14(1)(d) of IBC – Dr. Nasreen Hussain Vs. Mr. Bathina Venka Reddy Liquidator of DQ Entertainment (International) Pvt. Ltd. and Ors. – NCLT Hyderabad Bench Read Post »

Whether units allotted to commercial space buyers prior to initiation of CIRP, required to be excluded from the assets of the Corporate Debtor and can the buyers claim to have become owners of the commercial spaces? – Praveen Arya and Ors. Vs. Anju Aggarwal RP of Corporate Debtor and Anr. – NCLAT New Delhi

The Hon’ble NCLAT held that:

(i) The Hon’ble Supreme Court had occasion to consider a homebuyer’s project in Jaypee Kensingston Boulevard Apartment Welfare Association & Ors. v. NBCC (India) Ltd. & Ors. (2021) ibclaw.in 63 SC, where Hon’ble Supreme Court has held that Resolution Plan has to comprehensively deals with all the assets and liabilities of the Corporate Debtor and no housing project could be segregated for the reason that the same has been completed or is nearing completion.
(ii) Alok Sharma v. IP Construction Pvt. Ltd. (2022) ibclaw.in 459 NCLAT, judgment at best can be held to lay down ratio that moratorium under Section 14, does not prohibit execution of Sale Deed, but the said judgment itself cannot be held to declare that unit allottees are the owners of units allotted to them.
(iii) By virtue of allotment of commercial space in favour of the Appellant(s), including the Lease Deed dated 24.12.2014 in favour of Nupur Garg, the Appellant(s) cannot claim to have become owners of the commercial spaces. The Corporate Debtor continues to own the assets and the plea of the Appellant(s) that assets be excluded from CIRP of the Corporate Debtor, or the Appellant(s) are owners of the commercial space/ units allotted to them, cannot be accepted.

Whether units allotted to commercial space buyers prior to initiation of CIRP, required to be excluded from the assets of the Corporate Debtor and can the buyers claim to have become owners of the commercial spaces? – Praveen Arya and Ors. Vs. Anju Aggarwal RP of Corporate Debtor and Anr. – 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 »

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