Eviction Suit can be filed in Proper Court on Dispute of Title of CD: NCLAT remands Matter for Re-adjudication

The Principal Bench of the National Company Law Appellate Tribunal (NCLAT) has held that an eviction suit can be filed in proper court on the dispute of title of Corporate Debtor and remanded the matter for re-adjudication.

The Corporate Debtor is a company incorporated on 24.08.1987, under the Companies Act, 1956 provisions. The Corporate Debtor itself filed an application under Section 10 of the Code for initiation of the Corporate Insolvency Resolution Process (“CIRP”) against the company, since it was unable to pay debts to its creditors.

Nitin Jain, the Appellant was appointed as the Resolution Professional of the Corporate Debtor vide order dated 30.08.2019. The Appellant filed an application under Section 33(1)(a) for liquidation of the Corporate Debtor since 330 days of the CIRP period was over and no resolution plan was approved. The Adjudicating Authority passed an order for the liquidation of the Corporate Debtor and appointed the Liquidator.

Before the onset of CIRP, the Corporate Debtor and Universal Tutorial Private Limited Respondent herein had entered into a Leave and Licence agreement for premises in Shiv Parvati Cooperative Housing Society Limited situated at plot no. 106-110 Sector-21, Nerula, Navi Mumbai. In terms of the agreement dated 19.12.2005, the Respondent made a security deposit of sum amounting to Rs. 7,75,440/-.

Further, the parties mutually agreed to extend the said leave and license period. The Directors of the Respondent passed a resolution dated 26.12.2016 according to approval for renewal of Leave and License Agreement between Corporate Debtor and Respondent, for a period of 33 months

Meanwhile, the corporate insolvency resolution process was initiated against the Corporate Debtor vide Order dated 15.02.2019 passed by the Adjudicating Authority. The said Leave and License Agreement dated 09.01.2017 expired on 31.07.2019.

Subsequently, the Appellant was appointed as the Resolution professional vide Order dated 30.08.2019 of the Adjudicating Authority and later on as the Liquidator vide Order dated 11.09.2020. Under his appointment as the Liquidator, the Appellant to take custody and control of the assets of the Corporate Debtor served a notice upon the Respondent dated 24.09.2020 to vacate the said premises. The said notice was done after the expiry of the period specified in the Leave and License Agreement dated 09.01.2017.

A two-member bench comprising Justice Anant Bijay Singh, Member (Judicial) and Naresh Salecha, Member (Technical) observed that the Leave and Licence agreement was not renewed or extended by the Resolution Professional and/or the Liquidator. The Respondent while taking the said premise on Leave and License basis had given a security deposit of Rs. 7,75,440/- on 21.07.2005 to the Corporate Debtor. It is pertinent to mention that the Respondent was paying rent of the said premise @ Rs.1,90,080 from 01.08.2019 onwards.

It was viewed that in Arcelor Mittal India Private Limited v Satish Kumar Gupta (2019), it was held that “the non-obstante Clause in Section 60(5) is designed for a different purpose: to ensure that the NCLT alone has jurisdiction when it comes to applications and proceedings by or against a corporate debtor covered by the Code, making it clear that no other forum has jurisdiction to entertain or dispose of such applications or proceedings.”

Holding that, the Adjudicating Authority had failed to notice the above judgment upheld by Supreme Court, the NCLAT Bench set aside the order and remanded the matter back to the Adjudicating Authority with a request to pass a fresh order in accordance with the law.

To Read the full text of the Order CLICK HERE

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