The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) has held that eviction of tenant from the property of corporate debtor can only be sought under the Act in which tenancy was created and such power of eviction cannot be exercised by the adjudicating authority under Section 60(5) of the Insolvency Bankruptcy Code (IBC), 2016.
On March 17, 2023, the CD was the target of insolvency proceedings, and the RP was named. After that, the RP went to the CD’s property and discovered that the appellants were occupying it. After that, the RP applied under section 60(5) of the code to have the appellants removed from the premises.
The appellants contended before the tribunal that the late Shri Suresh Padmanabha Hegde was a tenant on the property in dispute, and that this tenant status was protected by the Maharashtra Rent Control Act. The CD asserted that it had bought this property from the appellants’ original owner/landlord and filed a suit for eviction under RAE Suit No. 149 of 2011, stating unequivocally that “the plaintiff predecessor in title let out to the defendant the premises” with reference to the property in question, but that the eviction was sought using a legitimate need to demolish the existing structure in order to raise a new building.
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The lawsuit was filed on December 23, 2016. While the lawsuit was still underway, on March 17, 2023, CIRP was started when Edelweiss Asset Reconstruction Company Limited’s application against the CD under Section 7 of the code was accepted.
Referencing Section 18(1)(f) and Section 25 of the Code, the Tribunal noted that the IRP/RP is responsible for assuming immediate custody of all CD assets; as a result, the property in question must be returned to him following the current appellants’ eviction. The Tribunal further held that the provisions of Section 238 will take precedence over the Act’s provisions that protect the appellants’ tenancy.
The appellant argued that by confusing tenancy with lease and concluding that the RP had the authority to seize the leased property, the adjudicating authority erred. Additionally, it was contended that the appellant could not be evicted under section 25 of the code without an eviction complaint being filed under the appropriate Act since they are protected by the tenancy laws as monthly renters.
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It was argued that Section 60(5) of the Code does not apply since the disagreement over tenancy rights and the tenant’s eviction is unrelated to the CD’s insolvency and has nothing to do with the insolvency resolution procedure. The Hon’ble Supreme Court’s ruling in Embassy Property Developments (P) Ltd. vs. State of Karnataka (2020) is what he has cited.
A tenancy and a lease differ significantly, according to the tribunal bench consisting of Mr. Naresh Salecha, a technical member, and Justice Rakesh Kumar Jain, a judicial member. While the tenancy lasts until it is altered by a contract or by operation of law, the lease has a set duration that can be ended by giving notice in accordance with Section 106 of the Transfer of Property Act, 1882.
It was viewed that there has been no change of the tenancy rights of the Appellants by way of a contract and the law which is to operate in respect of termination of tenancy are the provisions of the Act and not the Code. The Tribunal dismissed the law.
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