New Okhla Industrial Development ... vs Abhishek Anand

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No. 998 of 2021 (Arising out of Order dated 14.10.2021 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi (Bench-VI) in I.A. No.1612/(ND)/2021, Connected with C.P. No.(IB)-260/(ND)/2017)

IN THE MATTER OF:

New Okhla Industrial Development Authority, Main Administrative Building, Sector 6, Noida, Uttar Pradesh-201301. .... Appellant

Vs

Abhishek Anand Liquidator of Mega Soft Infrastructure Pvt. Ltd. E-103, Lower Ground Floor, GK Enclave-I, New Delhi -110048. ... Respondent

Present:

For Appellant: Mr. Sourav Roy, Mr. Prabudh Singh and Mr. Kaushal Sharma, Advocates.

For Respondent: Mr. Mrityunjay Kumar, Advocate for Liquidator. Mr. Abhishek Anand (in person Liquidator).

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal under Section 61 of the Insolvency and Bankruptcy

Code, 2016 (hereinafter referred to as the "IB Code") has been filed against

the order dated 14.10.2021 passed by National Company Law Tribunal,

New Delhi (Bench-VI) in I.A. No.1612/(ND)/2021 in (IB)-260/(ND)/2017.

Company Appeal (AT) (Insolvency) No. 998 of 2021 1 By the impugned order the Adjudicating Authority has allowed the

Application filed by the Liquidator by issuing direction to the Respondent

(New Okhla Industrial Development Authority) to transfer the plot in

question in the name of auction purchaser and in event the Respondent

Authority intends to recover any of its prior dues, it may prefer its claim in

appropriate Form before the Liquidator. The Adjudicating Authority

further directed that auction purchaser shall be liable to pay the ground

rent and interest thereon and other charges, if any, to the Respondent

arising after the date of auction of the purchase of the said institutional

property.

2. The facts and sequence of events giving rise to this Appeal are:

(i) The Appellant had allotted the Plot No.02/2 admeasuring

4615.13 sq. mtrs located at Sector 154, Gautam Buddh Nagar,

Noida in favour of Corporate Debtor M/S Mega Soft

Infrastructure Pvt. Ltd.

(ii) The Adjudicating Authority in Company Petition filed by

Neelam Singh against the Corporate Debtor initiated the

Corporate Insolvency Resolution Process ("CIRP") by an order

dated 23.08.2017. The Adjudicating Authority vide order

dated 28.02.2018 ordered the liquidation of the Corporate

Debtor and appointed the Respondent as Liquidator.

(iii) Liquidator issued an E-Auction Sale Notice of the Plot. The

Appellant had sent letter to the Liquidator that its total

pending dues are Rs.20,50,000/- and also informed about the

Company Appeal (AT) (Insolvency) No. 998 of 2021 2 pendency of the Original Suit No.184/2018 titled M/s.

Mahavir Hanuman Developers Private Limited vs. M/s. Mega

Soft Infrastructure Pvt. Ltd. Before the Court of Ld. Civil Judge

(Senior Division) Gauttam Budh Nagar.

(iv) Liquidator vide its letter dated 13.02.2021 informed the

Appellant that Plot No.02/2 at Sector 154, Gautam Buddh

Nagar, which was leased to the Corporate Debtor vide lease

deed dated 22.07.2015 has been put to E-Auction on

04.01.2021 in which M/s. Groovy Structures LLP was ranked

H1. The Appellant on 05.03.2021 again wrote to the Liquidator

that amount due against the Plot No.02/2 is Rs.40,50,108/-.

(v) The Liquidator filed an Application being I.A. No.1612 of 2021

before the Adjudicating Authority praying for following relief:

"a. Direct the Respondent to transfer the Plot No.02/2 at Sector 154, Gautam Buddha Nagar, Uttar Pradesh-201310 ("Noida Property") in favour of Groovy Structures LLP, the Highest Bidder;

b. Issue directions to the Respondent to file Claim Form for payment of pending dues towards lease rent and interest as per provisions of the Insolvency and Bankruptcy Code, 2016;

c. Pass such other order/s as this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the instant case."

Company Appeal (AT) (Insolvency) No. 998 of 2021 3 (vi) The Application was objected by the Appellant. In the reply,

the Appellant stated that there is policy for transfer of the

institutional property, which also contemplate payment of

transfer charges to the extent of 10% of the current allotment

premium of the Plot and there are several other conditions of

transfer. In the reply, however, it was stated that Respondent

(Appellant before us) has no objection in transferring Plot

No.02/2, Sector 154 Noida, in case the Applicant makes an

Application in compliance with the terms and conditions of the

Policy of the Respondent after adopting the procedure to be

followed as per the Policy.

(vii) The Adjudicating Authority heard the parties on the

Application and disposed of the Application by issuing

following direction in paragraph 8:

"a. Respondent shall transfer the said plot in the name of the auction purchaser in terms of provisions of IB Code, 2016 and the IBBI (LP) Regulations.

b. Respondent authority if it intends to recover any of its prior dues may prefer its claim in appropriate Form before the liquidator. c. The auction purchaser shall be liable to pay the Ground Rent and interest thereon and other charges, if any, to the Respondents arising after the date of auction purchase of the said institutional property."

Company Appeal (AT) (Insolvency) No. 998 of 2021 4

(viii) The Appellant aggrieved by the said direction has come

upon in this Appeal.

3. We have heard Shri Sourav Roy, learned Counsel for the Appellant

and Shri Mrityunjay Kumar, learned Counsel for the Liquidator.

4. Learned Counsel for the Appellant submits that there is Policy

namely "The Policy & Procedure for Institutional Property Management -

March, 2009" for transfer of Institutional Properties, under which an

appropriate Application made by an Applicant/ Appellant, the Respondent

is bound to consider the request for transfer. Learned Counsel further

submits that Adjudicating Authority by impugned order has used the

expression "shall transfer the said plot in the name of the auction purchaser",

which ties the hand of the Appellant to even consider the Transfer

Application as per existing Policy. It is submitted that Adjudicating

Authority at best could have directed for consideration of the Application

for Transfer in the name of auction purchaser, which could have obliged

the Appellant to consider the Application as per the Transfer Policy,

however, issuing direction in the mandatory form is not in accordance with

the legislative scheme. It is submitted that the Appellant is entitled to

consider the transfer as per its Policy, which cannot be overridden by

Adjudicating Authority in exercise of any power under IB Code. It is

submitted that the Appellant cannot claim any pre-CIRP dues from the

auction purchaser for which it has been granted liberty by the Adjudicating

Authority to file its claim before the Liquidator. The learned Counsel

submits that the observation of the Adjudicating Authority that under

Company Appeal (AT) (Insolvency) No. 998 of 2021 5 Section 238, the provisions of the Code shall override any provisions of

regulating the transfer of the subject Plot is not as per law. Section 238 of

the IB Code does not override the relevant provisions of regulating the

Transfer Policy by the Appellant, since there is no conflict between

provisions relating to Transfer Policy and IB Code. Learned Counsel for the

Appellant submits that the Appellant is ready to consider the Transfer

Application in accordance with Policy as stated above. He further submits

that although Application has been received for Transfer as per Transfer

Policy, but the same was not considered and was rejected by the Appellant

due to pendency of this Appeal.

5. Learned Counsel for the Respondent refuting the submissions of the

learned Counsel for the Appellant submits that Appellant has been

insisting for payment of their earlier dues amounting to Rs.40,50,148/-.

The Appellant being an Operational Creditor for its dues prior to CIRP, they

are entitled to file their claim before the Liquidator. It is submitted that

the Respondent along with auction purchaser had already filed a Transfer

Application in accordance with Transfer Policy on 16.02.2022, which

however has been rejected by the Appellant on 03.03.2022 on the ground

of pendency of Court cases. It is submitted that auction purchaser was

clearly entitle for transfer of the Plot in his name and no error has been

committed by the Adjudicating Authority in issuing direction to the

Appellant to transfer the Plot in the name of auction purchaser.

6. We have considered the submission of the learned Counsel for the

parties and have perused the record.

Company Appeal (AT) (Insolvency) No. 998 of 2021 6

7. The Appellant in the Appeal at paragraph 7.26 of the Appeal has

come up with a case:

"7.26 That the Appellant filed its Reply in the aforesaid Application submitting that as per the Policy and Procedure for the Institutional Property Management ("Policy"), the transfer of the institutional property is permissible only after fulfilling the formalities as enshrined under the said Policy. The Appellant further submitted an amount of Rs.41,43,922/- (Rupees Forty-One Lacs Forty-Three Thousand Nine Hundred and Twenty- Two only) with respect to the Plot is due and payable to the Appellant as on 31st May, 2015 and the same is accruing on daily basis. The Appellant also stated that it has no objection in transferring the Plot in case the Respondent makes an application in compliance of the terms and conditions of the Policy after adopting the procedure to be followed as per the said Policy. A true copy of the Reply filed by the Appellant in IA No.1612 of 2021 is annexed herewith and marked as Annexure A - 15."

8. Insofar as the dues of the Appellant of Rs. 40,50,108/- (claimed As

Rs.41,43,922/- in Appeal), learned Counsel for the Appellant submits that

in respect of the said dues, the Appellant is to take steps as permitted by

the Adjudicating Authority in the impugned order by filing claim before the

Liquidator. Parties are ad idem on the question with regard to prior dues

of the Appellant in respect of the Plot, the same cannot be put as a

Company Appeal (AT) (Insolvency) No. 998 of 2021 7 condition for transfer of the Plot. However, the transfer of Plot is to be

considered by the Appellant as per the terms and conditions of the Transfer

Policy of March 2009, which has been brought on record along with the

Appeal paper-book.

9. The Respondent itself in its reply to the Appeal has come up with a

case that Respondent is ready to comply with all the Policy in relation to

transfer of the above property. In paragraph 40(a.) of the reply, following

is pleaded by Respondent:

"40.(a). That it is to be submitted that the Respondent is ready to comply with all the Policy in relation to the transfer of the Noida Property and in this regards have signed the Transfer Memorandum of the Noida Property along with the Auction Purchaser. The copy of Transfer Memorandum is annexed herewith and marked as Annexure R/11."

10. It is also been brought on record that Respondent has submitted a

Transfer Application on 16.02.2022 in the format prescribed as per the

Transfer Policy, which Noida Authority has rejected on 03.03.2022 on the

ground of pendency of Court cases. The learned Counsel for the Appellant,

however, submits that Appellant is ready to consider the said Application

in accordance with the Transfer Policy. The learned Counsel for the

Appellant submits that the direction issued by the Adjudicating Authority

in the mandatory form, ought to be deleted with liberty to the Appellant to

consider the Application in accordance with Transfer Policy.

11. The learned Counsel for the Appellant has also placed reliance on

judgment of Hon'ble Supreme Court in Municipal Corporation of Greater

Company Appeal (AT) (Insolvency) No. 998 of 2021 8 Mumbai vs. Abhilash Lal and Ors. (2020) 13 SCC 234. In the above

case, an Appeal was filed by the Municipal Corporation of Greater Mumbai

("Corporation") against the order of the NCLAT. In the Appeal it was

contended on behalf of the Corporation that direction of the Adjudicating

Authority was in violation of Section 92 of the Municipal Corporation of

Greater Mumbai Act, 1888 ("MMC Act"), which was the provision governing

the disposal of municipal property. Section 92 of the MMC Act provided

that with sanction of the corporation, the Commissioner may by lease, sell

or otherwise convey any immovable property to the corporation. The

Hon'ble Supreme Court after considering the provision of Section 238 of

the IBC, laid down following in paragraph 42 and 43:

"42. Now, this Court proposes to deal with the contention that the provisions of the Code override all other laws and hence, that the resolution plan approved by NCLT acquires primacy over all other legal provisions. Facially, this argument appears merited. Section 238 enacts that:

"238. Provisions of this Code to override other laws.--The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law."

43. The scope of this provision has been the subject- matter of debate in several judgments of this Court. In Employees Organization v. Jaipur Metals & Electricals Ltd. [Employees Organization v. Jaipur Metals & Electricals Ltd., (2019) 4 SCC 227], the correctness of a

Company Appeal (AT) (Insolvency) No. 998 of 2021 9 High Court's view [Jaipur Metals Electricals Ltd., In re, 2018 SCC OnLine Raj 1472] which refused to transfer winding-up proceedings pending before it and set aside NCLT's order admitting an insolvency resolution application at the behest of a financial creditor, was in issue. This Court held as follows, setting aside the judgment impugned in that case : (SCC pp. 235-36, paras 19-20)

"19. ... It is clear that Respondent 3 has filed a Section 7 application under the Code on 11-1- 2018, on which an order has been passed admitting such application by NCLT on 13-4-2018. This proceeding is an independent proceeding which has nothing to do with the transfer of pending winding-up proceedings before the High Court. It was open for Respondent 3 at any time before a winding-up order is passed to apply under Section 7 of the Code. This is clear from a reading of Section 7 together with Section 238 of the Code which reads as follows:

'238. Provisions of this Code to override other laws.--The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.'

20. Shri Dave's ingenious argument that since Section 434 of the Companies Act, 2013 is amended by the Eleventh Schedule to the Code,

Company Appeal (AT) (Insolvency) No. 998 of 2021 10 the amended Section 434 must be read as being part of the Code and not the Companies Act, 2013, must be rejected for the reason that though Section 434 of the Companies Act, 2013 is substituted by the Eleventh Schedule to the Code, yet Section 434, as substituted, appears only in the Companies Act, 2013 and is part and parcel of that Act. This being so, if there is any inconsistency between Section 434 as substituted and the provisions of the Code, the latter must prevail. We are of the view that NCLT was absolutely correct in applying Section 238 of the Code to an independent proceeding instituted by a secured financial creditor, namely, the Alchemist Asset Reconstruction Company Ltd. This being the case, it is difficult to comprehend how the High Court could have held that the proceedings before NCLT were without jurisdiction. On this score, therefore, the High Court judgment [Jaipur Metals Electricals Ltd., In re, 2018 SCC OnLine Raj 1472] has to be set aside."

The Hon'ble Supreme Court further held that Section 238 cannot be

read as overriding Municipal Corporation of Greater Mumbai's right in its

public duty to control and regulate how its properties are dealt with. In

paragraph 47, following has been laid down:

"47. In the opinion of this Court, Section 238 cannot be

read as overriding MCGM's right--indeed its public

duty--to control and regulate how its properties are to

be dealt with. That exists in Sections 92 and 92-A of the

Company Appeal (AT) (Insolvency) No. 998 of 2021 11 MMC Act. This Court is of the opinion that Section 238

could be of importance when the properties and assets

are of a debtor and not when a third party like MCGM is

involved. Therefore, in the absence of approval in terms

of Sections 92 and 92-A of the MMC Act, the adjudicating

authority could not have overridden MCGM's objections

and enabled the creation of a fresh interest in respect of

its properties and lands. No doubt, the resolution plans

talk of seeking MCGM's approval; they also acknowledge

the liabilities of the corporate debtor; equally, however,

there are proposals which envision the creation of charge

or securities in respect of MCGM's properties.

Nevertheless, the authorities under the Code could not

have precluded the control that MCGM undoubtedly has,

under law, to deal with its properties and the land in

question, which undeniably are public properties. The

resolution plan, therefore, would be a serious

impediment to MCGM's independent plans to ensure that

public health amenities are developed in the manner it

chooses, and for which fresh approval under the MMC

Act may be forthcoming for a separate scheme

formulated by that corporation (MCGM)."

Company Appeal (AT) (Insolvency) No. 998 of 2021 12

12. The above judgment of the Hon'ble Supreme Court fully supports the

contention of the learned Counsel for the Appellant that Section 238 of the

IB Code cannot be pressed to override the power of the Appellant as

entrusted to it under the UP Industrial Area Development Act, 1976. We,

thus, are of the opinion that the order of NCLT allowing the Application

filed by the Liquidator regarding transfer of Plot in favour of auction

purchaser does not obviate the consideration of transfer of Application as

per the existent Policy namely the Policy & Procedure for Institutional

Property Management - March, 2009. The Adjudicating Authority ought to

have issued direction to consider the Transfer Application for transferring

the auctioned Plot in accordance with the existent Policy. We, thus, are of

the view that the direction of the Adjudicating Authority issued in

paragraph 8(a) has to be read to mean that Adjudicating Authority directed

the Appellant to consider the transfer of the Plot and expression "shall

transfer" need not be read to mean that the Appellant has to transfer the

Plot without the Respondent complying with the requirements of the

Transfer Policy. The Respondent having already made an Application on

16.02.2022 in the prescribed proforma and is ready to comply all the terms

and conditions of the Policy, the Appellant may consider the Application

made on 16.02.2022 on merits and take an appropriate decision at an early

date without considering its order dated 03.03.2022, by which the

Application was rejected on the ground of pendency of Court case.

13. In view of foregoing discussions, we dispose of this Appeal with

following directions:

Company Appeal (AT) (Insolvency) No. 998 of 2021 13

(i) The Application dated 16.02.2022 filed by the Respondent in

terms of existent Transfer Policy be considered by the

Appellant on merits in accordance with law.

(ii) The Appellant to dispose of the Application dated 16.02.2022

at an early date preferably within a period of two months from

the date of this order.

Parties to bear their own costs.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical)

[Ms. Shreesha Merla] Member (Technical)

NEW DELHI

19th April, 2022

Ash/NN

Company Appeal (AT) (Insolvency) No. 998 of 2021 14