Undisclosed Related Party MoU Cannot Justify Continued Occupation of Corporate Debtor’s Hotel Property During CIRP: NCLAT [Read Order]

The National Company Law Appellate Tribunal (NCLAT), New Delhi, has upheld the eviction of the promoter family from a five-star hotel owned by the corporate debtor and held that an undisclosed related-party Memorandum of Understanding (MoU) and an arbitral award could not justify continued occupation of the company’s property during the Corporate Insolvency Resolution Process (CIRP).

The dispute arose after the Resolution Professional (RP) sought possession of certain areas of the hotel including the entire ninth floor which remained occupied by the suspended management and their family members despite commencement of CIRP. The RP contended that these premises formed part of the corporate debtor’s assets and were required for effective conduct of the insolvency process.

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Raman Khangura claimed a right to continue occupying the premises on the basis of an MoU dated November 5, 2015 under which the corporate debtor allegedly agreed to compensate her after her residential property mortgaged to secure the company’s loans was auctioned by Punjab & Sind Bank. She further relied upon an arbitral award dated March 19, 2019, which purportedly recognized her occupancy rights until the compensation amount was exhausted.

The appellants argued that the arbitral award was binding and could not be disregarded by the insolvency authorities without being set aside under the Arbitration and Conciliation Act, 1996. They maintained that the occupancy arrangement constituted a valid contractual right enforceable against the corporate debtor.

Opposing the appeals, the RP submitted that neither the MoU nor the arbitral award formed part of the corporate debtor’s records, statutory filings, financial statements, or related-party disclosures. It was argued that the arrangement was a related-party transaction that had never been disclosed as required under the Companies Act, raising serious doubts regarding its authenticity.

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The Bench observed that the alleged MoU was unregistered and unstamped and therefore incapable of conferring any legally enforceable occupancy rights over immovable property. The Tribunal further held that even assuming Raman Khangura had a monetary claim against the corporate debtor, her remedy was to lodge a claim in the CIRP and not to retain possession of corporate debtor assets.

The two-member Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) dismissed appeals and held that a Resolution Professional is entitled to take control and custody of assets owned by the corporate debtor and need not initiate separate eviction proceedings to recover such properties.

Finding no infirmity in the NCLT’s order, the Tribunal dismissed both appeals and granted the appellants a final two-week period to vacate the premises, failing which the Resolution Professional was permitted to seek police assistance for eviction.

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