Liquidator Can Evict Subsidiaries Occupying Corporate Debtor’s Assets: NCLAT Dismisses Appeal u/s 60(5) IBC [Read Order]

The National Company Law Appellate Tribunal (NCLAT) rejected the appeals on the ground that the liquidator of the corporate debtor had the absolute authority to evict the subsidiaries occupying the properties of the corporate debtor and claim arrears of rent and license fees under Section 60(5) of the Insolvency and Bankruptcy Code, 2016.

The corporate debtor Doshion Pvt. Ltd., possessed properties in Ahmedabad and Mumbai, which were occupied by its subsidiaries under lease and license agreements. One of the leases was unregistered and another new lease was executed and registered after the admission of CIRP and the moratorium order.

Upon the failure of the resolution process the company went into liquidation and the liquidator filed applications before the NCLT Ahmedabad Bench, for eviction and recovery.

The appellants submitted that the disputes arising out of lease and license agreements were purely contractual and beyond the jurisdiction of the NCLT and such disputes should be decided by civil courts or through arbitration.

The appellants also submitted that their possession was legal and the rent has been largely paid. The liquidator submitted that the agreements were unregistered or entered into during the moratorium period making them unenforceable.

Further,the liquidator stated that the assets were of the corporate debtor and had to be part of the liquidation estate under Section 35 of the IBC.

The NCLAT affirmed the decision of the NCLT and held that the new lease agreement entered into after the moratorium period was void, and unregistered agreements could not prejudice the liquidation proceedings.

The Tribunal held that the disputes regarding possession and recovery of rent had a direct bearing on the liquidation proceedings and squarely fell within Section 60(5) of the IBC.

The decision was pronounced by Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Member Technical) held the powers of the liquidator to secure and protect the assets of the corporate debtor during the liquidation process

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