NCLAT ruled that the moratorium under Section 14(1)(d) bars the recovery of property occupied by the Corporate Debtor.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Rakesh Kumar Jain (Judicial Member) and Technical Members Mr. Naresh Salecha and Mr. Indevar Pandey reviewed an appeal and held that the moratorium under Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016, imposes an absolute bar on the transfer of possession of property occupied by the Corporate Debtor during CIRP, and any order directing such transfer without a conclusive CoC resolution is unsustainable in law. The NCLAT held that the Adjudicating Authority erred in entertaining the lessors' applications despite the statutory prohibition and remanded the matter for proper adjudication.
The appeal was filed by Sh. Chandrakant Khemka, the ex-promoter director of M/s Nandini Impex Private Limited, under Section 61(1) of the Insolvency and Bankruptcy Code, 2016, challenged the order dated 07.08.2023 passed by the NCLT, Kolkata Bench. The impugned order arose from interlocutory applications filed in an insolvency proceeding initiated by UCO Bank under Section 7 of the IBC. The NCLT had directed the Resolution Professional (RP) to hand over possession of the White House Property to the applicants, based on a resolution purportedly passed by the Committee of Creditors (CoC), while the issue of occupational charges was scheduled for further hearing.
The appellant contended that the order violated the moratorium imposed under Section 14(1)(d) of the IBC, which prohibits the transfer of possession of property occupied by the Corporate Debtor during the Corporate Insolvency Resolution Process (CIRP). It was argued that the order lacked reasoning, was issued without proper notice to stakeholders, and was based on a misleading representation by the RP regarding the CoC’s decision. Further, the appellant relied on Supreme Court precedents, emphasizing the necessity of recording reasons in judicial orders and contended that the CoC had not taken any final decision on vacating the property. The existence of pending civil suits before the Delhi High Court concerning possession and lease arrears was also highlighted.
Upon reviewing the submissions and case records, the NCLAT examined whether the impugned order was valid in light of Section 14(1)(d). The Tribunal found that the CoC had only discussed the issue of vacating the property in its meetings but had not passed a formal resolution to that effect. Despite this, the RP represented in court that the property was not required, leading to the order by the NCLT. The NCLAT held that the RP’s representation was not backed by a properly confirmed CoC resolution, contradicting the respondents’ claim that the decision had unanimous approval.
The Tribunal further clarified that the moratorium under Section 14(1)(d) was mandatory and binding on the Adjudicating Authority (AA). It emphasized that while Section 18(a) of the IBC excludes third-party-owned assets from the Interim Resolution Professional’s scope, this definition was specific to Section 18 and had no bearing on Section 14(1)(d). The Tribunal found that the AA had failed to examine the maintainability of the applications despite the statutory prohibition under the moratorium provisions. Moreover, the AA had passed a non-speaking order without considering the relevant legal provisions, and it had only partially adjudicated the matter, leaving certain prayers undecided.
The NCLAT allowed the appeal, set aside the impugned order, and remanded the case to the AA for a comprehensive adjudication, including consideration of the appellant’s pending application. The AA was directed to decide the matter in accordance with the law, without being influenced by prior observations, and to complete the adjudication within four weeks. The parties were directed to appear before the Tribunal on 26.11.2024.
Mr. Abhijeet Sinha, Sr. Advocate, Mr. Aman Gupta and Mr. Akarsh Pandey, Advocates, represented the Appellant.
Mr. Rishav Banerjee and Mr. Saurav Jain, Advocates, appeared for Respondent No. 1/RP.
Mr. Gaurav Mitra, Mr. Ashish Chaudhury and Mr. Abhishek Arora, Advocates, appeared for Respondent No. 2 to Respondent No. 4.
Mr. Rachit Mittal and Mr. Parish Mishra, Advocates, appeared for Respondent No. 5/CoC.
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