Supriyo Kumar Chaudhuri & Anr vs Jhunjhunwala Oil Mills Ltd& Anr

IN THE MATTER OF: Supriyo Kumar Chaudhuri, ...Appellant No. Liquidator of JVL Agro Industries Limited, 1 BDO Restructuring Advisory LLP, C/o BDO India LLP, 4th Floor, Duckback House, 41, Shakespeare Sarani, Kolkata-700017

JVL Agro Industries Limited, ... Appellant No. Through its Liquidator, 2 Village Tilmapur Ghazipur Road, Ashapur, Varanasi, U.P. - 221007

Versus

Jhunjhunwala Oil Mills Ltd., ... Contesting Ashapur, P.O. Sarnath, Respondent No.

Varanasi. Uttar Pradesh-221007 1 Standard Chartered Bank, ... Proforma Crescenzo, 7th floor, c/28/29, Respondent No. G Block Bandra Kurla, 2 Complex (East) - Mumbai-51.

Present:

For Appellants : Ms. Swati Dalmia, Mr. Palzer Moktan, Mr. Indranil Ghosh, Advocates

For Respondents : Mr. Gautam Singh, Advocate.

Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 1 of 28 With

Company Appeal (AT) (Ins) No. 04 of 2022

IN THE MATTER OF: Jhunjhunwala Oil Mills Ltd. ...Appellant Ashapur, P.O. Sarnath, Varanasi. U.P. 221007.

Versus

JVL Agro Industries Ltd. ...Respondent Through Liquidator (erstwhile RP) No. 1 Village Tilmapur Ghazipur Road, Ashapur, Varanasi. U.P. 221007.

Supriyo Kumar Chaudhuri, ... Respondent Liquidator of JVL Agro Industries Limited, No. 2 BDO Restructuring Advisory LLP, C/o BDO India LLP, 4th Floor, Duckback House, 41, Shakespeare Sarani, Kolkata-700017

Present:

For Appellants : Mr. Gautam Singh, Advocate

For Respondents : Ms. Swati Dalmia, Mr. Palzer Moktan, Mr. Indranil Ghosh, Advocates.

Judgment (Date: 23.1.2023)

[Per.: Dr. Alok Srivastava, Member (Technical)]

These appeals, namely, (i) Company Appeal (AT) (Ins) No.

794 of 2021 and (ii) Company Appeal (AT) (Ins) No. 04 of 2022 have

been filed under section 61 of Insolvency and Bankruptcy Code,

2016 (in short 'IBC') by the Appellants, who are aggrieved by order

Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 2 of 28 dated 6.8.2021 (hereinafter called 'Impugned Order') in CA (IB) No.

58/2022 respectively, passed in the three interlocutory

applications filed in CP (IB) No. 223/ALD/2019 by the

Adjudicating Authority (National Company Law Tribunal,

Allahabad Bench). The Adjudicating Authority has dealt with the

three applications, namely, IA No. 199/2020, C.A. No. 57/2020

and CA No.58/2020 through the common order, which is the

Impugned Order.

2. CA NO. 57/2020 and CA No. 58/2020 were filed by

Jhunjhunwala Oil Mills Limited (in short 'JOML') praying for

direction to the Resolution Professional (in short 'RP') of the

corporate debtor JVL Agro Industries Pvt. Ltd. (in short 'JVL Agro' )

to pay the rent alongwith interest of the premises owned by JOML

which was used by JVL Agro and also to vacate the premises of

JOML. IA No. 199/2020 was filed by the liquidator of JVL Agro

with prayer for direction to Respondents No. 1 to 5 in IA No.

199/2020 to open the padlocks inserted at the entry gate of the

office premises of the corporate debtor situated at Village

Tilmapur, Gazipur Road, Ashapur, Varanasi and further to restore

the physical possession of the said office to the liquidator.

Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 3 of 28

3. Shorn of unnecessary details, the facts of the case are that

the corporate debtor is undergoing liquidation process pursuant to

order dated 19.8.2021 passed by the Adjudicating Authority. The

Appellant/Liquidator has stated that the corporate debtor has

been in possession of the premises, situated at Village Tilmapur,

Gazipur Road, Ashapur, Varanasi (hereinafter called 'said

premises') since the year 2007. The Appellant/Liquidator has

further stated that the corporate debtor shifted its registered office

to the 'said premises' on 14.2.2018, which was purely an

arrangement between two companies belong to the same group of

companies and therefore no rent agreement was signed between

the corporate debtor JVL Agro and JOML, and on the basis of no

objection certificate was granted by JOML to use its premises.

Further, there was no indication of any rent to be paid regarding

the use of the 'said premises' by the corporate debtor. He has

further stated that the corporate debtor filed an intimation with

the Registrar of Companies in Form INC-22, which was signed by

S.N. Jhunjhunwala, who is the promoter/shareholder/director of

the corporate debtor JVL Agro and also a shareholder of JOML

holding 47,600 shares in JOML. In addition, Shri S.N.

Jhunjhunwala's father also holds 16,500 shares in JOML.

Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 4 of 28

4. The Appellant/Liquidator has further stated that after

commencement of the Corporate Insolvency Resolution Process (in

short 'CIRP') of the corporate debtor JVL Agro vide order dated

25.7.2018, and appointment of Shri Supriyo Kumar Chaudhuri as

Resolution Professional (in short 'RP') on 10.9.2018, two

applications, namely, CA No. 57/2020 and CA No. 58/2020 were

filed by JOML seeking payment of rent in respect of the 'said

premises' by the corporate debtor and vacation of the 'said

premises' and thereafter, while these two applications were

pending and moratorium regarding the corporate debtor's assets

was in operation, the officers of JOML placed padlocks on the 'said

premises' on 28.7.2020 without any authority. He has added that

the RP filed an application being CA 199 of 2020 on 31.7.2020

seeking removal of padlocks placed illegally on the 'said premises'

by the officers of JOML and action against JOML and its directors

including restoration of physical possession of the 'said premises'

to the corporate debtor/RP. He has further added that in its reply

to IA 199/20, JOML for the first time brought on record an

undated and unstamped letter purportedly indicating acceptance

for payment of rent for the 'said premises' by the corporate debtor,

which, it is alleged, is a manufactured document created as an

afterthought to show purported rent agreement between JVL

Agro/corporate debtor and JOML, whereupon Impugned Order Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 5 of 28 was passed on 6.8.2021, leading to the filing of appeal being

CA(AT)(Ins) No. 794/2021 by the Appellant JVL Agro..

5. The Appellant JOML with regard to its appeal CA (AT) (Ins)

No. 04/2022 has claimed that the corporate debtor JVL Agro

shifted is registered office in the said premises in the year 2018,

when a monthly rent of Rs. six lakhs plus GST was orally agreed

for payment by the corporate debtor, with an understanding that

an agreement would soon be entered into between the two parties

to this effect. The Appellant JOML has further stated that JVL

Agro had earlier issued an acceptance letter in February 2018,

whereafter its registered office was shifted in the 'said premises',

but a formal rent agreement could not be executed and even

payment of monthly rent was postponed on some pretext or the

other. He has further stated that after CIRP was initiated against

the corporate debtor JVL Agro in July 2018, JOML sent an e-mail

dated 28.8.2018 to the corporate debtor/RP to enter into an

agreement regarding renting of the 'said premises', inter alia,

demanding payment of overdue rent. It has claimed that it

followed up this e-mail with remainder e-mails, but did not get any

response from the RP. The Appellant has added that since JOML

was facing financial difficulty and an application under section 7 of

IBC had been filed by State Bank of India against JOML, the Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 6 of 28 Appellant/JOML arranged for a 'one time settlement' with the

State Bank of India and also entered into registered sale agreement

for the 'said premises' and property with a party Rudra Realtech

Private Limited in order to clear its dues with the State Bank of

India and, therefore, sought vacant possession of the 'said

premises' from the corporate debtor, and since the corporate

debtor did not accede to Appellant/JOML's request, it filed two

applications being No. CA 57/2020 and CA 58/2020 before the

Adjudicating Authority for payment of rent and vacation of the

'said premises', and these two applications alongwith IA 199/2020

were disposed of by order dated 6.8.2021 (the Impugned Order)

passed by the Adjudicating Authority. The Appellant/JOML has

further stated that it is aggrieved by the part of the order whereby

vacant possession of the said premises has not been directed to be

handed over to JOML and further the rent directed to be paid is as

per the assessment done by the District Magistrate and not the

amount of Rs. six lakhs plus GST per month, which was agreed to

between the two parties.

6. We heard the arguments of the Learned Counsels for both

the parties and perused the record.

Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 7 of 28

7. The Learned Counsel for the Appellant has started her

arguments by pointing out that the appellant had filed IA No.

199/2020 before the Adjudicating Authority as the corporate

debtor/RP was locked out of the 'said premises' where the

registered office of the corporate debtor was located and where the

records and other documents of the corporate debtor were stored.

Referring to the Impugned Order, she has claimed that the prayers

made in IA 199/2020 were not adequately considered and

adjudicated upon by the Adjudicating Authority, and the

Impugned Order, without assigning any reason, has disposed of

the Appellant's IA No. 199/2020. She has pointed out in

particular to the fact that IA No. 199/2020 specifically sought

order for restoring the possession of the 'said premises' to the

corporate debtor/Resolution Professional since the 'said premises'

was in possession of the corporate debtor at the time of initiation

of CIRP, and no recovery of the 'said premises' could have been

made as per the provisions of section 14(1)(d) of the IBC. She has

further argued that the corporate debtor has continued to be in

procession of the 'said premises' since the year 2007 and the

registered office of the corporate debtor was shifted there in

February 2018 as per an arrangement between the two companies

viz. JVL Agro and JOML belonging to the same group of

companies.

Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 8 of 28

8. The Learned Counsel for Appellant has further argued that

the arrangement between the two companies JVL Agro and JOML

regarding the use of 'said premises' was in accordance with a 'no

objection' granted by JOML regarding use of JOML's premises

situated at Village Tilmapur, Gazipur Road, Ashapur, Varanasi

and the no objection letter also admitted that the 'said premises'

had been used by JVL Agro for its administrative office from past.

She has further referred to the statutory filing in Form No. INC-22,

whereby the corporate debtor JVL Agro intimated that its

registered office is in the 'said premises' w.e.f. 14.2.2018 and the

Board's resolution of JVL Agro regarding shifting of its registered

office from Jhunjhunwala Bhawan, Nati Imli, Varanasi-221001 to

the 'said premises' in Village Tilmapur, Ghazipur Road, Ashapur,

Varanasi was approved by the Board of Directors, JVL Agro in its

meeting on 14.2.2018.

9. The Learned Counsel for Appellant has further claimed that

after the Appellant/corporate debtor was illegally locked out of the

'said premises' , the RP, before filing IA No. 199/2020, made a

complaint dated 28.7.2020 to the Officer Incharge, Sarnath Thana,

Varanasi and complaint dated 30.7.2020 to the Senior

Superintendent of Police, Varanasi District, wherein the Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 9 of 28 Appellant/RP clearly pointed out that the act of putting padlocks

in 'said premises' is coercive, unlawful and in contravention of

moratorium declared after initiation of CIRP of the corporate

debtor. The Learned Counsel for Appellant JVL Agro has referred

to the undated letter which is purported by JOML to have been

issued by Director, JVL Agro accepting to pay rent of Rs. six lakhs

plus GST per month, and claimed that such a letter is of dubious

origin as it has no date of issue nor the name of the director JVL

Agro written therein, who has purportedly signed the letter.

Further, she has pointed out that the letterhead on which this

purported NOC regarding payment of rent of Rs. six lakhs plus

GST per month is claimed is different from the letter head used by

JVL Agro in its complaint to Officer In-charge, Sarnath Thana and

to the SSP, Varanasi and also on which the minutes dated

14.2.2018 of the Board of Directors of JVL Agro have been issued,

and therefore there is a serious doubt about the authenticity and

genuineness of the NOC purportedly issued by JVL Agro regarding

payment of monthly rent.

10. The Learned Counsel for Appellant JVL Agro has lastly

argued that she is relying on section 14(1)(d) of the IBC, which

provides that the recovery of any property by an owner or lessor,

where such property is occupied by or in the possession of the Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 10 of 28 corporate debtor, is prohibited during the moratorium period.

She has also contended that if there is a contractual dispute

regarding payment of rent and vacation of 'said premises', the

Adjudicating Authority had no jurisdiction to pass an order related

to the contract (even though there was none), which is not directly

related to insolvency resolution of the corporate debtor. In this

connection, she has referred to the judgment of Hon'ble Supreme

Court in the matter of Rajendra K. Bhutta vs. Maharashtra

Housing and Area Development Authority and another, [(2020)

13 SCC 208] to claim that if there is any conflict between a state

legislation (MHADA Act in the Rajendra K. Bhutta case) and the

IBC, the provisions of IBC must prevail. She has further referred

to para 28 of the judgment in Rajendra K. Bhutta case (supra) to

contend that recovery of property occupied by the corporate debtor

does not refer to rights or interests created in property but only

actual physical occupation of the property. The Learned Counsel

for appellant has also referred to the judgment of Hon'ble Supreme

Court in Tata Consultancy Services Ltd. v. SK Wheels (P) Ltd.

[(2022) 2 SCC 583], wherein it is clearly held that the residuary

jurisdiction of NCLT cannot be invoked if the termination of a

contract is based on grounds unrelated to the insolvency of

corporate debtor, and therefore, in the absence of jurisdiction,

NCLT could not have passed the Impugned Order directing Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 11 of 28 payment of rent during the CIRP period and inter alia, allowing the

possession of the 'said premises' to remain with JOML which was

coercively taken over by JOML in the moratorium period.

11. The Learned Counsel for Respondent/JOML in CA (AT) (Ins.)

No. 794/2021 has argued that Mr. Ashutosh Jhunjhunwala is not

the son of Mr. S.N. Jhunjhunwala, but his nephew and therefore,

JVL Agro and JOML are not sister concerns belonging to the same

group of companies but two separate legal entities which operate

on the basis of their own interests. He has claimed that the

Appellant/JVL Agro has not filed any document to show that the

corporate debtor has been using the said premises since 2007 and

the said premises started getting used as registered office of the

corporate debtor only from 14.2.2018. He has referred to the NOC

issued by JVL Agro to claim that an agreement to pay rent of Rs.

six lakhs plus GST per month was accepted by the JVL Agro and a

proper rent agreement was to have been executed between the

parties, but for various reasons such agreement could not be

executed. He has referred to e-mail dated 28.8.2018 sent by

JOML to the RP of the corporate debtor to claim that JOML

informed about the signing of the rent agreement with effect from

1.8.2018 at an agreed rent of Rs. six lakhs plus GST and a one

month's security deposit of Rs. six lakhs plus GST in advance. He Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 12 of 28 has further referred to e-mail reminders dated 31.8.2018 and

24.9.2019 to claim that despite repeated reminders, the RP did not

respond to his request. He has referred to the provision under

section 14(2-A) that the provision of the 'said premises' on rent was

akin to supply of services critical to protect and preserve the value

of the corporate debtor and manage the operations of the corporate

debtor as a going concern and the supply of such services were to

be continued during the period of moratorium. Therefore, the rent

accrued on the basis of renting of the 'said premises' should be

paid to the landlord JOML.

12. Regarding the question of jurisdiction of Adjudicating

Authority in looking at a dispute relating to payment of rent, he

has contended that section 60 (5)(b) of the IBC gives jurisdiction to

the Adjudicating Authority to entertain or dispose of any claim

made by or against the corporate debtor, which is the present

case.

13. In connection with CA No. CA(AT)(Ins.) No. 04/2022,

wherein JOML has raised the issue of the quantum of rent

payable, the Learned Counsel for JOML has pointed out that the

calculation made by the District Magistrate in assessing the rental

value is not correct as the assessment was made by the officials of Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 13 of 28 the Public Works Department and not by the District Magistrate.

He has further pointed out that since the monthly rent of Rs. six

lakhs plus GST was agreed to be paid by the corporate debtor,

there is no question of any reassessment of the rental value and

furthermore he has presented assessment of rental value done by

an independent valuer, wherein the present fair rental valuation of

the property as Rs.4,46,000/- per month is assessed and the

assessment report has been submitted by him in the rejoinder to

corporate debtor's reply filed by JOML in CA NO. 04/2022. He has

referred to the judgment of Hon'ble Supreme Court in the matter of

Tata Consultancy Services Ltd. (supra) to claim that NCLT has

jurisdiction to adjudicate disputes, which arise solely from or

which relate to the insolvency of the corporate debtor, which is the

case in the present appeal.

14. The issues that arise for consideration in the present appeal

are two-fold:-

(i) Whether the 'said premises' of JOML being used as

Registered Office of the corporate debtor JVL Agro

could be 'recovered' by the landlord JOML during the

subsistence of moratorium after the initiation of CIRP,

and Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 14 of 28

(ii) Whether any monthly rent was agreed upon and is

payable to the landlord JOML by the corporate debtor

JVL Agro whether before the imposition of moratorium

or during the moratorium period?

15. We first look at the issue whether 'said premises' owned by

JOML, situated at Village Tilmapur, Gazipur Road, Ashapur,

Varanasi were being used by the corporate debtor prior to the

initiation of CIRP of JVL Agro. We note that JVL Agro started

using the 'said premises' belonging to JOML since 14th February,

2018. In this regard, a letter expressing no objection, which is

undated and signed by Ashutosh Jhunjhunwala, Director of

JOML, is produced by the RP (attached at pg.43 of the appeal

paperbook, vol.I). This letter is not disputed by JOML. It records

that the JOML has 'no objection' to the use of the 'said premises'

as the registered office of the corporate debtor JVL Agro and these

premises have already been used by JVL Agro as its administrative

office premises since past. We further note the filing by the

corporate debtor in form No. INC-22 on the website of Ministry of

Corporate Affairs, wherein it is stated the Registered Office of the

corporate debtor is situated at Village Tilmapur, Gazipur Road,

Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 15 of 28 Ashapur, Varanasi since 14.2.2018. Further, we also note that

the Board of Directors of JVL Agro resolved in its meeting on

14.2.2018 that the registered office of JVL Agro is being shifted

from Jhunjhunwala Bhawan, Nati Imli, Varanasi-221001 to Village

Tilmapur, Gazipur Road, Ashapur, Varanasi. We also note that

the complaint dated 28.7.2020 to Officer In-charge, Sarnath Thana

and another similar complaint dated 30.7.2020 addressed to SSP,

Varanasi by the RP states very clearly that JVL Agro has continued

to hold possession of the said premises prior to the

commencement of CIRP and it is presently in actual possession of

the 'said premises'. We also note the letter containing no-objection

issued by Mr. Ashutosh Jhunjhunwala stating that JOML has no

objection to the 'said premises' being used as registered office of

JVL Agro. Both these letters have not been disputed by the

Appellant, JOML.

16. Therefore, on the basis of above stated letters, we are of the

clear view that the 'said premises' were definitely in possession of

JVL Agro from 14.2.2018, if not earlier, and was definitely in the

possession of the corporate debtor on 25.7.2018 when the CIRP of

the corporate debtor was initiated.

Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 16 of 28

17. We now consider the issue whether the insertion of padlocks

on the gates of the 'said premises' was permitted in view of

moratorium which was in force. For better appreciation of the

issue, relevant provision in section 14 of the IBC is reproduced

below:-

"14. Moratorium. - (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:-

Xx xx xx xx

(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

Xx xx xx xx

(2-A) 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."

18. Section 14(1)(d) of the IBC stipulates that during the period

of moratorium, recovery of any property by an owner or lessor,

where such property occupied by or in the possession of the

corporate debtor is prohibited. We also note that the provision in

Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 17 of 28 section 14(2-A)which stipulates that where the Interim Resolution

Professional considers the supply of goods and services critical to

protect and preserve the value of the corporate debtor and manage

the operations of such corporate debtor as a going concern, the

supply of such goods or services shall not be terminated,

suspended or interrupted during the period of moratorium, except

when the corporate debtor has not paid dues arising from such

supply of services during the moratorium period.

19. In the first instance case, we have already noted that the

'said premises' owned by JOML were in possession of the corporate

debtor JVL Agro at least from 14.2.2018 which is about five

months prior to the date of initiation of CIRP of the corporate

debtor. Therefore, the recovery of any property by the owner was

expressly prohibited under section 14(1)(d) of the IBC during the

period when moratorium was in force. The insertion of padlocks

by JOML at the 'said premises' happened on 28.7.2020, which is

as is stated in the complaint made by the RP to the Officer In-

charge, Sarnath Thana, Varanasi and later to SSP, Varanasi and

hence complaints are not disputed by JOML. Thus, this recovery

which was done by the owner JOML of the 'said premises' on

28.7.2018, is clearly after the initiation of CIRP on 25.7.2018 and

Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 18 of 28 therefore, during the period of enforcement of moratorium and

thus, such a recovery is a clear infringement of section 14(1)(d) of

the IBC. We do not think that section 14(2-A) is attracted in the

present case as the RP had not considered the renting of the 'said

premises'' critical to protect and preserve the value of the corporate

debtor nor had made any request to JOML to continue renting of

the 'said premises' to the corporate debtor. The 'said premises',

therefore, should have lawfully been with the RP/ corporate debtor

and continue in its lawful possession during the continuation of

the CIRP of the corporate debtor.

20. The second issue to be considered is whether any rent was

payable to the owner of the 'said premises' JOML by the corporate

debtor during the period of subsistence of moratorium.

21. In this connection, we note the following no objection

certificate given by JOML regarding the use of this premises to the

corporate debtor, JVL Agro:-

"It is hereby confirmed that we have no objection to the use of our premises situated at Village Tilmapur, Ghazipur Road, Ashapur, Varanasi - 221007 (U.P.) India as the registered office of the Company JVL Agro Industries Limited. Varanasi which has already been used by the M/s JVL Agro

Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 19 of 28 Industries Limited as its administrative office premises since past."

We further note that this NOC does not mention payment of any

monthly rent to the owner of the premises.

22. We also notice the e-mail dated 28.8.2018 of JOML, which

is also referred in the context of payment of rent, which is as

follows:-

"Dear Sir,

JVL. Agro Industries is using its office in our campus that is Jhunjhunwala Oil Mills Lid., Ashapur, Varanasi, UP. Total office space of JVL is 7000 Sqft. Carpet area and apart from this we have given an area for its D.G set. As our Ashapur plant unit is shut down therefore it is in your kind notice to come in a rent agreement initially for 6 months which will start from 1st August 2018. The following term & condition is below mentioned:-

1. Rs. 5 Lakhs+GST as against monthly rent of JVL office carpet area of 7000 Sqft. Which will be paid in advance in our account.

2. In addition, we are providing security services, parking & water to JVL Agro Industries; in that account Rs. 1 Lakh+GST has to be paid monthly in advance.

3. 3. One month Security deposit in advance of Rs. 6 Lakhs (against Rent & Additional services).

You are requested to take prompt action on this issue and if the need be discussed with our management."

Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 20 of 28

23. Quite clearly this e-mail, which was sent by JOML to the RP

during the moratorium period accepts that the premises of JOML

are being used by JVL Agro and it calls upon the RP to enter into

rent agreement initially for six months from 1.8.2018 on certain

terms and conditions, which mainly relate to payment of monthly

rent of Rs. 6 lakhs plus GST. This e-mail is followed up by two

more e-mails dated 31.8.2018 and 24.9.2018 (all three e-mails

attached at pp. 210-212 of appeal paperbook vol.II), but notably

the Appellant JOML has not attached or referred to any document

or evidence in support of its contention that there was any

agreement regarding payment of rent starting from 14.2.2018 or if

such rent was paid or any demand for payment of rent was made

prior to the initiation of CIRP.

24. We further peruse the NOC which is claimed to be issued by

JVL Agro addressed to JOML (attached at pg. 246 of appeal

paperbook Vol.II). Evidently, this NOC is undated and the

letterhead is also different from the letterhead used by JVL Agro,

which is attached at pg. 48 of the appeal paperbook, Vol.I).

Further, the letter does not disclose the name/identity of the

director, who has signed this NOC. In the face of such

uncertainties, this NOC appears to be of doubtful origin and does

not inspire confidence to place reliance upon it. Further e-mail Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 21 of 28 dated 28.8.2018 and reminder e-mails dated 31.8.2018 and

24.9.2018 sent by the JOML to RP do not indicate if any rent was

being paid prior to date of sending of these e-mails. Therefore, on

the basis of documents submitted both the parties, we are of the

view that no rent was agreed upon to be paid by the corporate

debtor to JOML nor any such payment was made for any period

starting from 14.2.2018. It is clear that the issue of payment of

rent was created by JOML only after the corporate debtor went

into CIRP.

25. Thus, we are convinced by the arguments of the corporate

debtor JVL Agro/RP that no rent was agreed upon to be paid for

use of 'said premises' when the 'said premises' were offered to be

used as registered office of the corporate debtor nor any rent was

paid prior to the initiation of the CIRP of the corporate debtor. We

also take note of section 14(2-A) of the IBC, which the landlord

JOML has placed reliance upon regarding payment of rent during

the moratorium period. A plain reading of this provision makes it

clear that supply of certain goods and services has to be

considered critical by IRP/IP to protect and preserve the value of

the corporate debtor. Quite clearly in this case, the IRP/RP has

neither recorded such a need nor requested the landlord JOML for

continuing the supply of rental services to the corporate debtor. Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 22 of 28 Therefore, we are of the view that section 14(2-A) is not attracted

in the present case. Moreover, we have already seen how the

present case is covered under section 14(1)(d) of the IBC, whereby

the recovery of the 'said premises' in the possession of the

corporate debtor, though owned by JOML, is expressly prohibited

during the moratorium period.

26. We now consider the argument of the Learned Counsel for

Appellant JVL Agro (corporate debtor) that NCLT does not have

any residuary jurisdiction to adjudicate contractual disputes,

which are not directly connected with the insolvency resolution of

the corporate debtor and the opposing argument of the Learned

Counsel for JOML rebutting the same. In this connection, the

following extract from the Rajendra K. Bhutta judgment (supra)

is relevant:-

"25.......... However, when it comes to any clash between MHADA Act and the Insolvency Code, on the plain terms of Section 238 of the Insolvency Code, the Code must prevail. This is for the very good reason that when a moratorium is spoken of by Section 14 of the Code, the idea is that, to alleviate corporate sickness, a statutory status quo is pronounced under Section 14 the moment a petition is admitted under Section 7 of the Code, so that the insolvency resolution process may proceed unhindered by any of the obstacles that would otherwise be caused and that are dealt with by Section 14. ......

Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 23 of 28 Xx xx xx xx

28. ........ As we have pointed out hereinabove, it is clear that Section 14(1)(d) of the Insolvency and Bankruptcy Code, when it speaks about recovery of property "occupied", does not refer to rights or interests created in property but only actual physical occupation of the property.'

27. We also take note of the observations of Hon'ble Supreme

Court in the matter of the Tata Consultancy Services Ltd.

(supra), wherein the following is held:-

"28. In Gujarat Urja, the contract in question was terminated by a third party based on an ipso facto clause i.e. the fact of insolvency itself constituted an event of default. It was in that context, this Court held that the contractual dispute between the parties arose in relation to the insolvency of corporate debtor and it was amenable to the jurisdiction of NCLT under Section 60(5)(c). This Court observed that: (SCC pp. 262-63, para 69)

"69. ... NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of corporate debtor... The nexus with the insolvency of corporate debtor must exit."

(emphasis supplied)

Thus, the residuary jurisdiction of NCLT cannot be invoked if the termination of a contract is based on grounds unrelated to the insolvency of corporate debtor.

29. It is evident that the appellant had time and again informed corporate debtor that its services were deficient, and it was falling foul of its contractual obligations. There is nothing to indicate that the termination of the facilities agreement was motivated by the insolvency of corporate debtor. The trajectory of events makes it clear that the Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 24 of 28 alleged breaches noted in the termination notice dated 10-6- 2019 were not a smokescreen to terminate the agreement because of the insolvency of corporate debtor. Thus, we are of the view that NCLT does not have any residuary jurisdiction to entertain the present contractual dispute which has arisen dehors the insolvency of corporate debtor. In the absence of jurisdiction over the dispute, NCLT could not have imposed an ad interim stay on the termination notice. NCLAT has incorrectly upheld the interim order of NCLT.

xx xx xx xx

31. The narrow exception crafted by this Court in Gujarat Urja must be borne in mind by NCLT and NCLAT even while examining prayers for interim relief......"

28. A perusal of the above stated relevant extracts of the

judgments of the Hon'ble Supreme Court in Rajendra K. Bhutta

(supra) and Tata Consultancy Services Ltd. (supra) make it

clear that the residuary jurisdiction of NCLT can only be invoked

after the termination of a contract is based on grounds that are

relevant to the insolvency resolution of the corporate debtor. We

further note that the judgment of Tata Consultancy Services

Ltd. (supra) makes it clear that NCLT does not have any

residuary jurisdiction to entertain contractual dispute which has

arisen in insolvency of the corporate debtor.

29. On the contention of the Learned Counsel of JOML that

NCLT does have jurisdiction to adjudicate and dispose of any

claim made by or against the corporate debtor as per section 60(5) Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 25 of 28 of IBC, we are of clear view that such claim can be looked into if it

is circumscribed by the conditions enumerated by the Hon'ble

Supreme court in the matter of Rajendra K. Bhutta (supra) and

Tata Consultancy Services Ltd. (supra). We, therefore, follow

the observations of the Hon'ble Supreme Court in the above two

judgments in so far as the circumstances of the present case are

concerned and hold that insofar as any dispute between the

rental contract of the corporate debtor is concerned, the NCLT

could not have adjudicated upon it, and thus the direction for

assessment of rental value by District Magistrate and payment of

rent accordingly are beyond the jurisdiction of the Adjudicating

Authority.

30. We are, therefore, of the clear view that no rent is payable to

the owner JOML of the 'said premises' by the corporate debtor

during the period of moratorium as claimed by JOML.

31. We also take note of the arguments presented by the

Learned Counsel for JOML claiming that JOML is in financial

distress and in order to relieve such distress, it proposed a one-

time settlement to its bank State Bank of India and, in order to

honour the one-time settlement, it proposes to sell of the 'said

premises' to Rudra Realtech Limited. While the arguments made Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 26 of 28 by the Learned Counsel for JOML could be correct insofar as any

financial distress of the JOMC is concerned, we are of the clear

view that while the insolvency resolution of the corporate debtor is

going on and the moratorium is in force, the provision of section

14(1)(d) will be applicable and the owner cannot forcibly or

otherwise recover the premises, which are in possession of the

corporate debtor from a date prior to the date of initiation of CIRP.

32. In view of the detailed discussion on the issues framed by

us, we hold the clear view that the Adjudicating Authority has

gone beyond its jurisdiction in ordering payment of rent by the

corporate debtor during the period of moratorium. We also find

that the Adjudicating Authority did not adjudicate on the prayer

made by the RP in IA No. 199/2020 for restoration of the

possession of the 'said premises', which it should have done to

settle the dispute early. In view of the fact that liquidation order

with respect to the corporate debtor has already been passed by

the Adjudicating Authority, no orders are now necessary in

connection with IA 199/2020 in the present appeals.

33. We thus hold that the Impugned Order is erroneous, and

therefore, liable to be set aside. We set aside the Impugned

Order. The appeal is disposed of accordingly. Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

Page 27 of 28

34. There is no order as to costs.

[Justice Rakesh Kumar] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical)

New Delhi 23rd January, 2023

/aks/

Company Appeal (AT) (Ins) No. 794 of 2021 Company Appeal (AT) (Ins) No. 04 of 2022

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