Neesa Leisure Limited Through Its Rp Mr. ... vs Rajasthan State Industrial And ...

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Ins.) No. 510 of 2022 IN THE MATTER OF: NEESA LEISURE LIMITED Through Its Resolution Professional Mr. Amit Jain Having office at: Building No. 10, Tower - B, 08th Floor, DLF Cyer City, Phase-II Gurgaon - 122 022 Eamil: rpneesa@kpmg.com ...Appellant

Versus

RAJASTHAN STATE INDUSTRIAL AND INVESTMENT CORPORATION Having office at: 22, Godam Industrial Area Jaipur - 302 006 Eamil: chairman@riico.co.in ...Respondent

Present: For Appellant: Mr. Sumant Batra, Ms. Apoorva Chowdhury, Advocates For Respondent: Mr. Anuj Bhandari, Adv.

JUDGMENT

Per: Justice Rakesh Kumar Jain:

This appeal is directed against the order dated 31.03.2022 passed by

the Adjudicating Authority (National Company Law Tribunal, Ahmedabad,

Court No. II) by which an application bearing I.A. No. 646/AHM/2021 filed

by the Resolution Professional (RP) (Amit Jain) of the Neesa Leisure Limited

(Corporate Debtor) in CP (IB) 127/AHM/2017 under Section 60(5) of the

Insolvency and Bankruptcy Code, 2016 (In short 'Code') seeking certain

reliefs against the Rajasthan State Industrial and Investment Corporation

(RIICO) has been dismissed.

2 2. In brief, RIICO allotted institutional land admeasuring 5,740 square

meters situated on plot no. CC-11, Industrial Area Neemrana, Alwar to the

Appellant vide allotment letter dated 11.07.2007 and executed a lease deed

dated 21.06.2008. The Respondent also issued no objection certificate (NOC)

to the Appellant on 19.07.2008 for creation of equitable mortgage over the

land to avail financial assistance from financial institution/scheduled banks

for carrying out the development. The Corporate Debtor initially availed

various loan facilities from Axis Bank, Bank of India, Corporation Bank,

Oriental Bank of Commerce and L & T for development of the Hotel on the

land and created an equitable mortgage on it in favour of the Axis Bank on

15.07.2008.

3. The Corporate Debtor developed a hotel under the name and style of

'Cambay Sapphire' over the land under the lease. However, the Respondent,

vide its letter dated 01.12.2015, cancelled the lease deed pertaining to the

land and eventually the hotel constructed thereon for the reasons stated

therein. The Corporate Debtor challenged the order dated 01.12.2015 by

way of an appeal provided under Rule 24(2) of the RIICO Disposal of Land

Rules, 1979 before the Managing Director of RIICO but the appeal was

dismissed on 19.05.2017. A second appeal filed by the Corporate Debtor

against the order dated 19.05.2017 before the Chairman of RIICO was also

dismissed 16.03.2018. Meanwhile, the account of the Corporate Debtor was

declared Non-performing Asset (NPA) and was proceeded under the

Securitisation and Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 2002 (SARFAESI Act) on 02.12.2015 and symbolic

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possession was taken by the secured creditors on 09.03.2017. Axis Bank

executed an assignment agreement in favour of Asset Care & Reconstruction

Enterprises Ltd. (ACRE) on 27.03.2017. ACRE sent a letter on 08.06.2018 to

the unit head of RIICO for restoration of allotment which was cancelled on

01.12.2015 to enable the banks for recovery of their dues by sale/auction of

the mortgaged property. The said letter was rejected on 27.06.2018. The

order dated 27.06.2018 was challenged by ACRE in an appeal before the

Managing Director, RIICO which was dismissed on 03.06.2019. The ACRE

further filed second appeal against the order dated 03.06.2019 before the

Chairman, RIICO which was dismissed on 30.07.2021.

4. ACRE filed an application under Section 7 of the Code before the

Adjudicating Authority against the Corporate Debtor for the initiation of

CIRP which was admitted on 26.04.2019 and R.D. Chaudhary was

appointed as IRP. However, in the second meeting of the Committee of

Creditors (CoC) held on 24.10.2019, it approved the replacement of the IRP

by Mr. Amit Jain who was appointed as the RP of the Corporate Debtor and

which was confirmed by the Adjudicating Authority vide its order dated

17.12.2019. The RP took over the control and management of the Corporate

Debtor. Various resolution plans were submitted by the prospective

resolution applicants which were discussed and negotiated in the 12th, 13th

and 14th CoC meetings of the Corporate Debtor but in the 14th CoC meeting,

held on 19.10.2020, the CoC approved the final revised resolution plan

submitted by Express Resorts and Hotels Limited (Express) on 24.10.2020

by a majority of 67.85%. It is alleged that the Appellant had already filed an

Company Appeal (AT) (Ins.) No. 510 of 2022 4

application bearing I.A. No. 851 of 2020 before the Adjudicating Authority

under Section 30(6) of the Code for approval of the Resolution Plan

submitted by Express which is allegedly pending adjudication. It is alleged

that the Appellant filed two applications bearing I.A. No. 484 of 2019 and

then I.A. No. 29 of 2020 under Section 19 of the Code seeking direction to

the suspended board of directors to furnish all the necessary documents

and details regarding the lease agreements, properties of the Corporate

Debtor before the Adjudicating Authority because they were not cooperating

with the Appellant. Vide order dated 02.11.2020, the Adjudicating Authority

directed the suspended board of directors of the Corporate Debtor to provide

all the required documents of the property and lease agreements etc. to the

Adjudicating Authority before 06.11.2020 and disposed of these

applications. It is alleged that the Appellant received a notice dated

11.06.2021 on 28.06.2021 purported to have been issued by RIICO in the

name of the suspended board of directors, in which hearing was scheduled

on 29.06.2021. The Appellant vide email dated 29.06.2021 requested the

Respondent to adjourn the hearing scheduled on 29.06.2021 and requested

that all correspondences be made in the name of the Appellant as being the

RP of the Corporate Debtor but it is alleged that time and again the

Appellant was being ignored and proceedings were carried out with the

suspended board of directors. The Appellant has alleged that it received a

notice dated 11.08.2021 on 17.08.2021 issued by the RIICO to handover the

premises of the hotel within 30 days and an order was also passed which

was challenged by the Appellant by way of Writ Petition (C) No. 9955 of 2021

before the High Court of Rajasthan, Jaipur for quashing of the order dated

Company Appeal (AT) (Ins.) No. 510 of 2022 5

11.08.2021 and alternatively filed I.A. No. 646 of 2021 under Section 60(5)

of the Code before the Adjudicating Authority. It is alleged that vide order

dated 18.09.2021, the writ petition was disposed of by the High Court

granting the liberty to approach the Adjudicating Authority to protect the

property in question (hotel). It is further alleged that the Respondent took

possession of the land premises on 20.09.2021. It is also alleged that the

order of the Ld. Single Judge of the High Court dated 18.09.2021 was

challenged by way of intra-court appeal bearing Special Appeal Writ No.

1029 of 2021.

5. However, the appeal which has been preferred is on account of

dismissal of the application bearing I.A. No. 646/AHM/2021 in which the

following prayers were made:

"a) The Hon'ble Tribunal be pleased to pass an order staying the proceedings pursuant to the Cancellation Order passed by the Respondent in relation to the cancellation of the lease deed for the Land Premises and the Hotel, including all proceedings for the re-possession of the Land Premises;

b) Pending the hearing and final disposal of the present Application, the Hon'ble Tribunal be pleased to pass an order for restricting the Respondent from acting in furtherance of the Cancellation order in relation to the Hotel and Land premises;

c) Pending the hearing and final disposal of the present Application, the Hon'ble Tribunal be pleased to pass an order for restricting the Respondent from taking the possession of the Hotel and the Land Premises from the Corporate Debtor;

d) Pending the hearing and final disposal of the present Application, the Hon'ble Tribunal be pleased to pass an order directing the Respondent to immediately furnish the Applicant herein with all necessary/ relevant documents in relation to the pending and disposed off proceedings relating to the Corporate Debtor/ Company.

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e) Pending the hearing and final disposal of the present Application, this Hon'ble Tribunal be pleased to pass an order directing the Respondent to submit their claim with respect to the Corporate Debtor with the RP/ Applicant in the form prescribed in IBC;

f) Pending the hearing and final disposal of the present Application, the Hon'ble Tribunal be pleased to pass an order directing the Respondent to not take any adverse/ coercive action detrimental to the financial interest of the Corporate Debtor;

g) The Hon'ble Tribunal be pleased to grant ex-parte ad interim reliefs in terms of prayers (c) and (d) above, in the facts and circumstances of the present case;

h) For such other orders as may be necessary in the interest of justice."

6. The application has been dismissed observing that the Appellant had

lost possessory rights more than three years prior to the initiation of CIRP

and could not have created a third party right in favour of Elica Hospitality

LLP with whom the Appellant had entered into a contract/lease agreement

dated 01.12.2017 and allegedly handed over the possession of 'Cambay

Sapphire', for a period of 7 years commencing from 01.04.2017 to

01.03.2024. It has also been held that Section 14 of the Code is not

available to the Appellant to seek repossession of the demised premises

because it ceased to be the property of the Corporate Debtor much prior to

the initiation of CIRP.

7. Counsel for the Appellant has vehemently argued that after the

initiation of CIRP, moratorium was imposed and as per Section 14(1) (d) of

the Code, recovery of any property by an owner or lessor where such

property is occupied by or in the possession of the corporate Debtor is

Company Appeal (AT) (Ins.) No. 510 of 2022 7

prohibited. In support of his submissions, he has relied upon a decision of

the Hon'ble Supreme Court in the case of Mr. Rajendra K. Bhutta Vs.

Maharashtra Housing Area Development & Anr. (2020) 13 SCC 208. It is

argued that the land in question has construction of a hotel which can be

occupied by the resolution applicant with the consent of the RIICO after

paying its debts otherwise in order to reclaim the land under lease the hotel

may be reduced in rubble. However, he has not denied that premises has

been sealed by the RIICO w.e.f. 20.09.2021.

8. On the other hand, Counsel appearing on behalf of the Respondent

has referred to the termination /cancellation letter dated 01.12.2015

(Annexure-A4) to contend that though the allotment was made on

11.07.2007 and lease deed was executed on 21.06.2008 but till 2015 the

Corporate Debtor failed to complete the construction by covering at least

20% of the plot area with pucca structure besides failing on other aspects

also and was thus asked to handover the possession within seven days and

was further informed that otherwise the plot shall be deemed to have been

taken into possession by RIICO. It is further submitted that against the

order of cancellation of lease, the appeal was dismissed on 19.05.2017 and

second appeal was dismissed on 16.03.2018 whereas the CIRP proceedings

were initiated on 26.04.2019 much after the determination of lease by way

of termination/cancellation and as such the Appellant was not in lawful

possession when the moratorium was imposed. He has also submitted that

the Appellant is asking for repossession of the disputed premise alleging

that possession could not have been taken by the Respondent due to the bar

Company Appeal (AT) (Ins.) No. 510 of 2022 8

under Section 14(1)(d) of the Code. It is further submitted that the decision

relied upon by the Appellant in the case of Rajendra Kr. Bhutta (Supra) is

not applicable to the facts and circumstances of this case as the question

which has been raised by the Appellant has not been answered in the said

judgment. It is also argued that the Respondent is the lawful owner of the

land in dispute after cancellation and determination of the lease and it was

the duty of the Appellant as a lessee to handover the vacant possession of

the demise premises to the Respondent after its determination.

9. We have heard Counsel for the parties and perused the record.

10. The Appellant (RP) has filed the application bearing I.A. No.

646/AHM/2021 for taking possession of the demise premises in view of

Section 14(1)(d) of the Code. Therefore, it would be relevant to refer to the

provision of Section 14 of the Code which read as under:

"Section 14: Moratorium.

*14. (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:--

(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

(b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;

(c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

Company Appeal (AT) (Ins.) No. 510 of 2022 9

(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

[Explanation.--For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period;] (2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.

[(2A) Where the interim resolution professional or resolution professional, as the case may be, considers the supply of goods or services critical to protect and preserve the value of the corporate debtor and manage the operations of such corporate debtor as a going concern, then the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium, except where such corporate debtor has not paid dues arising from such supply during the moratorium period or in such circumstances as may be specified.] [(3) The provisions of sub-section (1) shall not apply to -- [(a) such transactions, agreements or other arrangements as may be notified by the Central Government in consultation with any financial sector regulator or any other authority;]

(b) a surety in a contract of guarantee to a corporate debtor.] (4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process:

Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be."

Company Appeal (AT) (Ins.) No. 510 of 2022 10

11. Section 14(1)(d) provides that the recovery of any property by an

owner or lessor where such property is occupied by or in the possession of

the corporate debtor is prohibited. In support of this submission, Counsel

for the Appellant has relied upon a decision of the Hon'ble Supreme Court

rendered in the case of 'Rajendra K. Bhutta Vs. Maharashtra Housing and

Area Development Authority and Anr., (2020) 13 SCC 208, in which the

question was about the correct interpretation of Section 14(1)(d) of the Code.

12. In the case of Rajendra K. Bhutta (Supra), the Maharashtra Housing

and Area Development Authority (MHADA) passed a resolution on

01.11.2007 to execute a joint development agreement with the corporate

debtor i.e. Guru Ashish Construction (P) Ltd. and Goregaon Siddharth Nagar

Sahakar Griha Nirman Sanstha Ltd. (a society) which envisaged

redevelopment insofar as 672 tenements in Siddharth Nagar, Goregaon,

Mumbai were concerned. The State of Maharashtra approved the resolution

and a tripartite joint development agreement was entered into. The UBI

executed a loan agreement in favour of the Corporate Debtor but the

Corporate Debtor defaulted in repayment of loan, as a result, the bank

preferred an application under Section 7 of the Code on 15.05.2017 which

was admitted on 24.07.2017, appointing an interim resolution professional

and declaring the moratorium in terms of Section 14 of the Code. MHADA,

after imposition of the moratorium under Section 14 of the Code, issued a

termination notice on 12.01.2018 to the Corporate Debtor stating that upon

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expiry of 30 days from the date of receipt of the notice, the joint development

agreement would stand terminated.

13. In the case of Rajendra K. Bhutta (Supra), the application under

Section 7 was admitted on 24.07.2017 and notice of termination was issued

on 12.01.2018. The Appellant wherein filed an application before the NCLT

to restrain MHADA from taking over possession till completion of the

CIRP, on the ground that recovery of possession shall be in derogation of

the moratorium imposed under Section 14 of the Code but the said

application was dismissed. Further, NCLAT also dismissed the appeal

holding that it cannot be treated to be the asset of the Corporate Debtor for

the application of provisions of Section 14(1)(d) of the Code. The Hon'ble

Supreme Court, however, allowed the appeal.

14. We have carefully gone through the aforesaid decision which is in fact

not applicable to the facts of this case because in the reported case the

termination notice was issued by MHADA after the CIRP whereas in the

present case the lease deed was terminated way back on 01.12.2015,

constructive possession was taken, the Corporate Debtor was admitted into

CIRP and moratorium was imposed on 26.04.2019. It has also been

observed by the Tribunal that the Corporate Debtor had lost possessory

rights more than three years prior to the initiation of the CIRP. The property

of third party, occupied by the Corporate Debtor had been expressly

excluded from the purview of term asset.

15. Thus, in view of the aforesaid facts and circumstances, since the

demised premises ceased to be the property of the Corporate Debtor much

Company Appeal (AT) (Ins.) No. 510 of 2022 12

prior to the initiation of CIRP, therefore, it cannot be covered under Section

14 much less 14(1)(d) of the Code.

16. In view of the aforesaid discussion, we do not find any merit in the

present appeal and the same is thus hereby dismissed. No costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical)

New Delhi

07th December, 2022

Sheetal

Company Appeal (AT) (Ins.) No. 510 of 2022