Possession by Receiver’s Agent Acting as a Custodian Doesn’t Qualify as “Possession” as Defined in Sec. 14 of the IBC

Case Details: Urshila Ajit Kerkar v. Office of the Court Receiver, High Court - [2023] 157 taxmann.com 55 (Bombay)

Judiciary and Counsel Details

• • Amit Borkar, J.
  • Ms Tanmayee Gadre & Gul Madani for the Petitioner.
  • Chirag Mody, Anuj Savla, Mahendra Ghelani, Ms Greeshma Thomas, S.K. Dhekale & Rahul S. Power for the Respondent.

Facts of the Case

In the instant case, the Corporate Insolvency Resolution Process proceedings under the Insolvency and Bankruptcy Code, 2016 were initiated against the Corporate Debtor and were pending before NCLT.

The Corporate Debtor had executed an agreement as an agent of the Court receiver subject to payment of royalty fees. The Court receiver filed a report before the Trial Court seeking a deposit of arrears of royalty from Corporate Debtor.

Further, Court receiver also sought physical possession of a subject flat from Corporate Debtor. The Petitioner, who was the suspended director of Corporate Debtor was in possession property delivered to Corporate Debtor as agent of receiver.

Later, the Petitioner filed an instant petition challenging order of Trial Court, which had granted Court receiver’s prayer. The Petitioner submitted that her right as a suspended director of a corporate debtor was protected by section 14 of the Insolvency and Bankruptcy Code, 2016 prohibiting all persons from seeking recovery of property.

In instant case, receiver was seeking property from an agent of receiver on default of payment of royalty amount.

High Court Held

The High Court observed that receiver’s agent acting as a custodian of property on behalf of parties could not claim himself to be in possession within normal meaning under section 14.

It was further observed that recovery of property by owner/lessor where such property is “occupied by” corporate debtor is not permissible when a moratorium under IBC is declared.

The High Court held that possession of agent could not be termed as possession within meaning of section 14. Therefore, the instant writ petition was dismissed.

List of Cases Reviewed

• • Maria Margarida Sequeira Fernandes v. Erasmo Jack de Sequeira (Dead) through LRs. [2012] 5 SCC 370 (para 19) followed.

List of Cases Referred to

• • Xander Finance Service Ltd. v. Liz Traders and Agents (P.) Ltd. [Company Petition No. 2941/IBC/MB of 2019, dated 25-2-2022] (para 4)
  • State of Rajasthan v. Babu Ram [2007] 6 SCC 55 (para 9)
  • Haryana State Cooperative Land Development Bank Ltd. v. Haryana State Cooperative Land Development Banks Employees Union [2004] 1 SCC 574 (para 9)
  • Shubhabrat Sudhanshu Dutta (Ex-director, Indo Bonito Multinational Ltd. v. Indo Bonito Multinational Ltd. 2017 SCC Online Bom 5558 (para 9)
  • Abhay Lodha Ex-Director of Topworth Steels And Power (P.) Ltd. v. Topworth Steels and Power (P.) Ltd. 2018 SCC Online Bom 20250 (para 9)
  • Anand Rao Korada Resolution Professional v. Varsha Fabrics (P.) Ltd. [2019] 111 taxmann.com 474/[2020] 157 SCL 350 (SC) (para 9)
  • Alchemist Asset Reconstruction Company Ltd. v. Hotel Gaudavan (P.) Ltd. [2017] 88 taxmann.com 202/[2018] 145 SCL 428 (SC) (para 9)
  • Mohd. Sabir Parvez v. Quinn Finace Unlimited Company 2018 SCC Online Hyd 1900 (para 10)
  • Kanhaiyalal v. Dr. D. R. Banaji AIR 1958 SC 725 (para 13)
  • Deokuer v. Sheoprasad Singh AIR 1966 SC 359 (para 14)
  • K. Sundarama Iyer v. Sarvajana Sowkiabil Virdhi Nidhi Ltd. I.L.R. [1939] Mad. 986 (para 14)
  • Maria Margarida Sequeira Fernandes v. Erasmo Jack de Sequeira (Dead) through L.Rs. [2012] 5 SCC 370 (para 17).