NCLAT Upholds Eviction of Hotel Operator from Hotel Property Post Resolution Plan [Read Order]

The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal filed by Nazru S. Basheer, proprietor of Hotel MB International, challenging an NCLT order that directed him to vacate the hotel premises following the approval of a resolution plan for Pancard Clubs Ltd.

The dispute is centered around a Conducting Agreement executed in July 2017, under which the hotel building, owned by Pancard Clubs Ltd., a company that later underwent insolvency, was leased to Basheer for a period of six years. The appellant had been operating Hotel MB International under this agreement.

In May 2025, the National Company Law Tribunal (NCLT), Mumbai Bench, directed Basheer to hand over vacant possession of the property, noting that the term of the agreement had expired in August 2023 and no rights remained with the appellant to continue occupying the premises. The NCLT order was passed in I 2023 during the CIRP of Pancard Clubs.

The case stems from a 2017 agreement between Pancard Clubs and the appellant, giving the latter operational control over the hotel, a restaurant, and a gift shop. The agreement included payment of royalty and offered the possibility of extension at the corporate debtor's discretion.

GST on Real Estate & Works Contracts – Your Ultimate Guide to GST in the Real Estate Sector!, Click Here

In 2022, insolvency proceedings were initiated against Pancard Clubs Ltd. under Section 7 of the IBC. A resolution professional (RP) was appointed, who, in the course of reviewing assets and agreements, identified the hotel premises as part of the corporate debtor’s estate. Notices were issued to Basheer in December 2022 and again in April and May 2023, demanding outstanding royalty and return of possession.

The RP then filed I.A. No. 3958 of 2023, seeking a direction from the NCLT to recover possession. A parallel application under Sections 45 and 48 of the IBC was also filed to challenge the original agreement as a preferential transaction. In April 2024, a resolution plan was approved, and the successful resolution applicant, Chemhub Tradelink Pvt. Ltd., took over and continued prosecuting the possession-related application.

Basheer argued that although the agreement was signed in 2017, he only took possession in 2021. Therefore, he claimed the six-year term should be counted from that date. He further contended that significant investments had been made in running the hotel, and Clause 28 of the agreement allowed for extension, which had not been explicitly denied by the corporate debtor.

He also argued that once the resolution plan was approved, the NCLT ceased to have jurisdiction, and the possession claim became unnecessary. Additionally, he raised a technical objection that the RP had dropped monetary claims under the application during the hearing but still pursued the possession claim. He also contended that the pending application under Sections 45 and 48, which sought to challenge the Conducting Agreement as a preferential transaction, created an overlapping issue.

GST on Real Estate & Works Contracts – Your Ultimate Guide to GST in the Real Estate Sector!, Click Here

The NCLAT rejected all the arguments put forward by the appellant. It noted that the agreement expired in August 2023. Even if there was an expectation of extension, that hope was rendered void once the moratorium under Section 14 of the IBC came into effect with the commencement of CIRP. The Tribunal clarified that during the moratorium, the affairs and properties of the corporate debtor remain frozen, and no unilateral expectation of extension can override that legal status.

The Tribunal also found no merit in the argument that the NCLT had lost jurisdiction after the approval of the resolution plan. It cited previous judgments, such as Jhanvi Rajput Automotive Pvt. Ltd. v. RP of Rajpal Abhikaran Pvt. Ltd., to reaffirm that the Adjudicating Authority retains powers under Section 60 of the IBC even post-resolution, especially when it concerns properties of the corporate debtor.

Holding that the appellant’s possession ceased to be lawful once the agreement expired, and that there was no vested right to continue occupying the property post-CIRP, the NCLAT dismissed the appeal and upheld the NCLT’s directive for eviction.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates