NCLT cannot Approve Resolution Plan in absence of proof of Leasehold Rights over Primary Assets: NCLAT [Read Order]

The New Delhi bench of the National Company Law Appellate Tribunal (NCLAT) held that National Company Law tribunal (NCLT) cannot approve resolution plan in absence of proof of leasehold rights over primary assets and upheld the order which refused to sanction a resolution plan wherein a disputed parcel of land was the primary asset.

The appeal have been filed challenging the same order passed by National Company Law Tribunal, Division Bench. The Adjudicating Authority disposed of all IAs by the said order. The State of Bihar in the year 1961 acquired land from a Company Gayday Iron and Steel Company Ltd. (“Gayday”) situated at Hazaribag, Bihar (Kodarma, Jharkhand).

The Gayday was admitted into liquidation in the year 1982 by the Calcutta High Court and an Official Liquidator was appointed. A Civil Appeal No.1513 of 1982 was filed before the Supreme Court by Bihar State Industrial Development Corporation (“BSIDC”) questioning the liquidation proceeding. The BSIDC deposited an amount of Rs.1.10 crores before the Registrar, Supreme Court.

On an application under Section 14 of the SARFAESI Act, an order was passed by the Deputy Commissioner for handing over possession of the assets to SBI. Magadh challenged the order dated 20.02.2017 before the Jharkhand High Court by filing the Writ Petition No.2223 of 2019. Magadh in the Writ Petition pleaded that the Lease Deed dated 24.09.2007 claimed to be executed in favour of the CD by the BSIDC and Magadh is a forged and fabricated document.

Magadh pleaded that no Lease was ever executed in favour of the CD. The Jharkhand High Court vide order dated 11.06.2019 noticing that the Writ Petition raises appreciation of factual aspects, which cannot be gone into, it was left open for Magadh to agitate the dispute before the Forum under Section 17 of the SARFAESI Act.

In the year 2019, SBI filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) against the CD before the NCLT,Kolkata. By order dated 03.11.2021 Corporate Insolvency Resolution Process (“CIRP”) commenced against the CD. Magadh filed a Company Appeal (AT) (Ins.) No.45 of 2022, challenging the order dated 03.11.2021 initiating the CIRP against the CD, which Appeal was dismissed as withdrawn on 13.09.2022 permitting the Magadh to file an IA in pending CP(IB)/1782/KB/2019.

In the CIRP of the CD, Form-G was published and one Agile Metaliks Pvt. Ltd. (“Agile”) submitted its Resolution Plan, which was approved by 100% vote share of the CoC on 04.08.2022. In the CoC, the SBI has 96% vote share. On 05.08.2022, BSIDC filed IVNP (IB) No.15/KB/2022 seeking a declaration that BSIDC is the owner of the asset and RP be directed not to take any steps in connection with the property.

The Adjudicating Authority by the impugned order held that Lease Deed dated 24.09.2007 claimed by the CD, does not inspire confidence. The Lease Deed casts a doubt, whether it is a forged or fabricated document. The Adjudicating Authority held that issues relating to forged and fabrication, cannot be decided in summary proceedings. It was further observed that the original lease dated 24.09.2007 was not produced before the Adjudicating Authority. It was held that Deed dated 24.09.2007 mention about upfront payment of Rs.16 crores, but no evidence of payment of upfront payment of Rs.16 crores or yearly payment of lease rent have been produced before the Adjudicating Authority.

The Adjudicating Authority held that the case set up by the CD that it became a Lessee in 2007 fails to inspire confidence. The Adjudicating Authority took the view that Financial Creditor, i.e. SBI extended financial assistance to the CD on the basis of the forged document. The right of the CD being not clear, the land ought not to be included in the Information Memorandum as Leasehold interest of the CD. The Adjudicating Authority held that in view of the above, the Plan cannot be approved.

The Adjudicating Authority has observed that it is doubtful that a lease was ever created in favour of CD by Magadh as well as BSIDC, both having denied executing any lease in favour of the CD, which observation has been made in paragraph 16 (c). The Adjudicating Authority after noticing the clauses of the Deed dated 24.09.2007, it has observed that the original Lease Deed was not produced despite repeated opportunities granted. The Adjudicating Authority also held that there is no evidence of any payment of consideration of Rs.16 crores upfront or yearly payment of lease rent, which is mentioned in the Lease Deed dated 24.09.2007. The said observation has been made in paragraph 16(l). The Adjudicating Authority in paragraph 16(m) observed that circumstances are galore that genuinity of the Lease Deed is suspicious.

It is also relevant to notice that Magadh has already filed a FIR against the officials of the CD and the SBI and the investigation is pending. Magadh after coming to know of the order dated 20.02.2017 of Deputy Commissioner for taking possession of the assets of Magadh, had immediately filed Writ Petition and had at very first instance pleaded that Lease Deed was never executed by Magadh and it is a forged and fabricated document.

The Adjudicating Authority rightly was not satisfied about the rights of the CD in the asset in question. The mere fact that SBI relying on the said Deed dated 24.09.2007, sanctioned the financial facilities or disbursed the amount, cannot bring any additional strength to the Lease Deed dated 24.09.2007.

The two member bench of Justice Ashok Bhushan and Mr. Barun Mitra (Technical Member) observed that while it is true that the NCLT cannot decide the allegations of fraud and forgery under the IBC, it can determine whether a particular asset forms part of the estate of the corporate debtor or not under the CIRP.

Further noted that since BSIDC became the owner of the said land only in 2009, its authority to lease the land in 2007 was doubtful. No evidence was produced to demonstrate that consideration to the tune of Rs. 16 crores was paid. Additionally, no proof of annual lease rent as recited in the deed was furnished.

When the Lease Deed dated 24.09.2007 claimed by the CD is unenforceable and void, the bench observed that order of Adjudicating Authority impugned in the Appeal has been passed after due consideration of all relevant factors and deserves to be upheld. The bench observed that order of the Adjudicating Authority and this judgment shall not preclude the SBI to take such other measures to recover its dues from the CD as permissible in law.

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