The Mumbai Bench of the National Company Law Tribunal (NCLT) has held that where occupation of the corporate debtor’s immovable property during CIRP is governed by a fresh, limited-period arrangement approved by the Committee of Creditors and executed by the Resolution Professional, the occupant cannot rely on an earlier doubtful or legally ineffective tenancy claim to resist delivery of possession after expiry of that arrangement. The Tribunal further held that an unregistered lease in respect of mortgaged property cannot confer rights beyond the limited period recognised by law, particularly where the property was already subject to security enforcement and no written consent of the secured creditor had been obtained under Section 13(13) of the SARFAESI Act.
The NCLT also held that by virtue of Sections 60(5)(c) and 238 of the IBC, the NCLT has jurisdiction to decide such possession and tenancy-related issues when they arise out of or relate to the insolvency resolution process, notwithstanding proceedings or interim orders before the Rent Tribunal. Accordingly, the Tribunal directed Respondent Nos. 1 to 3 to hand over peaceful and vacant possession of the corporate debtor’s land and building at SP-2, RIICO Industrial Area, Shivdaspura, Jaipur, Rajasthan to the Resolution Professional within 15 days from the date of the order. It further directed Respondent No. 1 to pay all outstanding occupation charges or rent for the period of continued occupation until actual handover of possession, with such rent to accrue to the financial creditors.
The Division Bench comprising Sushil Mahadeorao Kochey (Judicial Member) and Prabhat Kumar (Technical Member) closely examined the timing and nature of the tenancy documents and found serious doubt in the respondents’ case that they had been protected tenants since 2014. It noted that the corporate debtor had been in default for years, that SARFAESI proceedings had already been initiated by the secured creditor, and that under Section 13(13) of the SARFAESI Act, the borrower could not lease secured assets without prior written consent of the secured creditor, which had not been obtained.
The Tribunal further noted that the alleged earlier agreement of April 01, 2014 was unregistered and could not create tenancy rights beyond one year in respect of mortgaged property, and that the later registered agreement of January 2024 did not support the assertion of uninterrupted possession since 2014. It also took note of the related-party element, observing that Respondent No. 2, director of the tenant company, was the son of Respondent No. 4, the suspended director of the corporate debtor, and found the 2014 document to be an afterthought and ante-dated.
The Tribunal also held that the subsequent registered agreement dated Nov 20, 2024, executed by the Resolution Professional pursuant to CoC approval, superseded the earlier arrangement and governed the respondent’s continued occupation. That agreement expressly limited the term, required vacation within 10 days of notice, and conferred jurisdiction on the NCLT, Mumbai. Since Respondent No. 1 acted upon that agreement and did not immediately challenge it for lack of free consent, the Tribunal rejected the contention that it was procured by coercion.
Further, the Tribunal observed that the Rent Tribunal’s interim order had been passed during the moratorium and that, in view of Sections 60(5)(c) and 238 of the IBC, questions relating to possession of the corporate debtor’s premises in the course of CIRP fell within the Tribunal’s jurisdiction. The Tribunal also emphasized that continued occupation by the respondent after expiry of the approved arrangement could not be allowed to frustrate the CIRP, obstruct the Resolution Professional’s statutory duties, or affect value maximisation, especially when the resolution plan had already been approved.
Briefly, the application was filed by the Resolution Professional of Krystal Stone Exports Limited under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 seeking peaceful possession of the corporate debtor’s land and building at RIICO Industrial Area, Shivdaspura, Jaipur from Respondent No. 1, which was occupying the premises as tenant, along with directions for payment of rent until possession was handed over.
The corporate debtor had first been admitted into CIRP on Sep 24, 2019; that process was later set aside by the NCLAT on Sep 26, 2023 and remanded for fresh hearing, after which a fresh admission order was passed on May 03, 2024 and the applicant was confirmed as Resolution Professional on Sep 19, 2024. During this background, Respondent No. 1 relied on a registered rent agreement dated Jan 09, 2024 said to run from Dec 01, 2023 to Nov 30, 2028, while the Resolution Professional stated that, after CoC approval, a fresh registered rent agreement was executed for a limited period from Nov 03, 2024 to Jan 28, 2025 and later extended only up to March 29, 2025.
The respondent nevertheless continued in occupation, claimed tenancy since 2014, asserted protection under the Rajasthan Rent Control Act, 2001 and Section 116 of the Transfer of Property Act, and relied upon an interim order of the Rent Tribunal restraining dispossession without due process.
