NCLT rules that adjudication on force majeure clause under Lease Agreement is impermissible in Summary Proceedings

A Division Bench of the National Company Law Tribunal, Mumbai (NCLT) comprising Mohammed Ajmal (Judicial Member) and V. Nallasenapathy (Technical Member) in Atul Rajwadkar, Liquidator for Gupta Infrastructure (India) Private Limited v. Ranjan Agarwal, REED 2021 NCLT Mum 06552, where an Application under section 60(5) read with sections 33(5) and 35 of the Insolvency and Bankruptcy Code, 2016 was filed by the Liquidator of the Corporate Debtor, held that detailed appraisal of the terms and conditions of the Lease Agreement, including the application of force majeure clause requires inclusive judicial enquiry and it is impermissible for it to adjudicate on the same in summary proceedings as the present case.

The NCLT by order dated 1 February 2018 admitted an Application filed by Bank of India under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) against Gupta Infrastructure (India) Private Limited (Corporate Debtor) seeking initiation of Corporate Insolvency Resolution Process (CIRP). The CIRP however could not succeed and NCLT by order dated 2 January 2019 directed Liquidation of the Corporate Debtor and appointed the Applicant as the Liquidator.

The Corporate Debtor is the owner of a mall namely, Chhattisgarh City Centre Mall, Raipur. The Respondent was the licensee of one of the shops in the said mall and the Leave and License Agreement (Agreement) executed between them was due to expire on 2 October 2021. The Respondent didn’t pay the rent regularly and as on the date of filing of the Application on 7 January 2021, an amount of Rs. 4,72,230/- remained outstanding.

It is also pertinent to note that the Respondent by e-mail dated 13 July 2020, had claimed to terminate the agreement by invoking the force majeure clause in the Agreement. However, the Respondent continued to occupy the premises on the ground that he was not allowed to remove his belongings from the shop room. Resultantly, this Application was filed by the Liquidator of the Corporate Debtor under section 60(5) read with section 33(5) and Section 35 of the IBC seeking direction against the Respondent to handover possession of the shop in question to the Corporate Debtor.

The NCLT noted that the detailed appraisal of the terms and conditions of the lease and their ramifications including application of the force majeure clause would require an incisive judicial enquiry and it would not be possible to go there in a summary proceeding as the present one. Further, the NCLT stated that since the Corporate Debtor is under CIRP, it would also be not appropriate for the Respondent to continue in the lease premises. Moreover, the Respondent’s continuance in the shop would thwart the resolution process and would frustrate the object of the IBC. Accordingly, the NCLT directed the Respondent to handover the vacant possession of the shop room to the Applicant. The Applicant was also granted the liberty to approach the appropriate judicial authority for realisation of the outstanding rent / dues, if any, from the Respondent.