RP Can Recover Corporate Debtor’s Assets from Unauthorized Occupants Without Resorting to Civil Suit: NCLAT [Read Order]

The National Company Law Appellate Tribunal (NCLAT) has reiterated that a Resolution Professional (RP) is empowered to recover possession of a corporate debtor’s assets from unauthorized occupants through proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) and need not initiate a separate civil suit for eviction.

The matter arose after the commencement of the Corporate Insolvency ResolutionProcess (CIRP) against Majestic Hotels Ltd. on July 3, 2024. Upon taking charge the Resolution Professional found that several areas of the hotel, including a salon on the second floor, thirteen shops on the third floor and certain guest rooms, continued to be occupied by former promoters, their associates and related entities. Despite notices issued by the RP seeking voluntary vacation of the premises, possession was not handed over.

The Tru Prime Pvt. Ltd. opposed the eviction proceedings and argued that it occupied parts of the hotel under profit sharing agreements executed with the corporate debtor. The appellant contended that the RP lacked jurisdiction to seek eviction through insolvency proceedings and that any recovery of possession could only be pursued before a competent civil court. It further submitted that the Adjudicating Authority could not summarily adjudicate disputed questions regarding the validity of the agreements.

The RP countered that the agreements neither created any leasehold nor licence rights and were unsupported by the records of the corporate debtor. It was argued that the occupied premises formed part of the assets of the corporate debtor and that the RP was statutorily obligated under the IBC to take custody and control of such assets for effective resolution.

The Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) observed that once CIRP commences the RP is duty-bound to secure and preserve the assets of the corporate debtor.

Finding that Tru Prime failed to establish any legally enforceable right to remain in occupation, the Appellate Tribunal held that the RP was justified in invoking the IBC framework to recover possession. The appeal was accordingly dismissed.

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