The National Company Law Appellate Tribunal (NCLAT), New Delhi bench comprising the Chairperson Justice Ashok Bhushan and the Technical Member Barun Mitra was hearing an Appeal on Tuesday and observed that the present was a case where the Leave and License Agreement was executed without any consideration and the document, which has been relied on by the Appellant was an unregistered document. The Bench noted that an Agreement without consideration is void unless it is in writing and registered.
The present Appeal was filed against the order passed by National Company Law Tribunal, Kolkata Bench, Kolkata in IA No.48/KB/2022 filed by the then Interim Resolution Professional. The Appellant, who claimed to be in possession of an asset of immovable property belonging to the Corporate Debtor, aggrieved by the impugned order, by which direction was issued to handover possession, has come up in this Appeal.
Facts:
An Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was filed by the Financial Creditor against the Corporate Debtor, which Application was admitted by the Adjudicating Authority. The Interim Insolvency Professional was appointed.
In pursuance of the order dated 09.11.2021, a public announcement was made by the IRP on 12.11.2021. Assets of the Corporate Debtor were spread over several parts of the country. An IA No.48/KB/2022 on 13.01.2022 was filed by the IRP impleading the Appellant and seeking a direction to restore the possession of the immovable property.
The Adjudicating Authority after hearing the parties passed an interim order in IA No.48/KB/2022 directing the Respondent to hand over possession of the property to the IRP within a period of two weeks from the date of passing of the order. The Appellant aggrieved by the order has come up in this Appeal.
Appellant’s Submission:
The Authorised Representative of the Appellant, challenging the impugned order submitted that the Adjudicating Authority has no jurisdiction to pass the impugned order. It was submitted that the Adjudicating Authority cannot function as a Civil Court. The Application filed by the IRP before the Adjudicating Authority was not maintainable. The impugned order was unreasoned order without giving an opportunity to the Appellant. The Appellant was in possession of the immovable property in pursuance of the Leave and License Agreement dated 30.12.2019 executed by the Corporate Debtor. An amount of Rs.5,00,000/- was paid as earnest money. The agreement contemplated that physical possession shall be handed over to the purchaser at the time of execution and registration of the Sale Deed. Further, the Appellant has made payment of an amount of Rs.17.95 lakhs to the vendors of the Corporate Debtor. It was further noticed that the Licensor failed to obtain a No Objection Certificate and confirmation of the release of original documents of the premises from two Banks within a period of 90 days from the date of signing of the said Agreement for Sale to pay the balance amount, execute the sale deed and hand over possession of the License Premises to the Licensee. The License Agreement further contemplated that Licensor shall not charge any license fee from the Licensee for grant of Leave and License. Leave and License Agreement further granted permission to the Licensee to use and occupy the said premises.
Respondent’s Submission:
The Counsel for the Respondent appearing for Resolution Professional refuting the submissions made on behalf of the Appellant submitted that the Appellant has no right to continue in the possession of the assets belonging to and owned by the Corporate Debtor. It was submitted that the Appellant claims the right to possession on the basis of the Leave and License Agreement, which was claimed to be executed on 30.12.2019 without any consideration. The Leave and License Agreement was void since it was executed without consideration and further, the document was an unregistered document. The property was mortgaged to two Banks. The Appellant was exercising illegal physical control on the premises located at Baddi, State of Himachal Pradesh, for which an Application was filed by the then IRP. The ownership of Corporate Debtor s admitted by the Appellant. The Agreement to Sell never fructified into any Sale Deed. The appellant was obliged to handover the possession of the property to the IRP/RP, which was owned by the Corporate Debtor
Appellate Tribunal’s Analysis:
The Agreement to Sell, which was relied on by the Appellant dated 30.12.2019 contemplated the sale of the immovable property of the Corporate Debtor for consideration of Rs.1.70 crores. In the Agreement, the Appellant claimed to have paid Rs.30 lakhs. The Appellate Authority found that there was no proof by the Appellant for making payment of the balance amount of Rs.1.40 crores. The Leave and License Agreement, which was relied on by the Appellant dated 30.12.2019 was an unregistered document, where the Corporate Debtor claimed to have granted permission to the Licensee to occupy the property together with the building till the time Licensor and Licensee execute the Sale Deed. The Leave and Licensee Agreement was thus admittedly without any consideration. Section 18 of the Insolvency and Bankruptcy Code, 2016 enumerates the duties of the IRP to take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor, or with information utility or the depository of securities or any other registry that records the ownership of assets. It was thus the obligation of IRP to take control and custody of all assets on which Corporate Debtor has ownership right. The present was a case where ownership of the asset was not denied even by the Appellant. The submission, which has now been pressed by the Counsel for the Appellant was that Adjudicating Authority has no jurisdiction to entertain the Application, i.e., IA No.48/KB/2022 nor has jurisdiction to pass any order. The Leave and License Agreement under which the Appellant is occupying the assets could not have been cancelled by the Adjudicating Authority, nor the Leave and License could be disregarded by the Adjudicating Authority by directing the Resolution Professional to take possession of the assets.
The Appellate Authority noted that the judgment of the Embassy Property Developments Private Limited v. State of Karnataka and Others, REED 2019 SC 12501, has no application in the facts of the present case. In the present case, the only direction issued by the NCLT was that the Appellant hand over the possession of the property to the RP within two weeks of the assets, which belonged to the Corporate Debtor. As noted above, under Section 18(1)(f), it is the statutory obligation of the IRP to take control of all assets of the Corporate Debtor.
The next question was to be considered as to whether the Appellant has any right to resist taking possession of the assets by the IRP. The defence, which has been taken before us on behalf of the Appellant was on the Leave and License Agreement dated 30.12.2019. The Leave and License Agreement was executed without any consideration. Clause 2 of the Leave and License Agreement clearly contemplated that Licensor shall not charge any License Fee from the Licensee, for grant of Leave and License of the said premises. Section 25 of the Indian Contract Act, 1872 provides that an Agreement without consideration is void unless it is in writing and registered.
The Appellate Authority noted that the present was a case where the Leave and License Agreement was executed without any consideration and the document, which has been relied on by the Appellant was an unregistered document. Thus, it was not saved by exception as carved out in Section 25, sub-section (1). The document is a void document, which shall not give any right to the Appellant to resist taking up the possession by the RP of the assets belonging to the Corporate Debtor.
The Appellate Authority, thus, was satisfied that the Adjudicating Authority had not committed any error in directing the Appellant to hand over the possession of the assets belonging to the Corporate Debtor. The Appeal was dismissed.
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