SC Dismisses Appeal Against Exclusion of Property from CIRP as CD Had Lost Possessory Rights Before Initiating CIRP

Case Details: Neesa Leisure Ltd. v. Rajasthan State Industrial And Investment Corporation - [2024] 164 taxmann.com 715 (SC)

Judiciary and Counsel Details

• Dr. Dhananjaya Y. Chandrachud, CJI., J.B. Pardiwala & Manoj Misra, JJ.
• Samir Malik, Vaun Kalra, Mahip Singh, Nikunj Mahajan & Ms Farha Malik, Advs. for the Appellant.
• Anjali Doshi, Rajat Gupta, Advs. & Anuj Bhandari, AOR for the Respondent.

Facts of the Case

In the instant case, the Respondent-RIICO allotted institutional land to the corporate debtor and executed a lease deed. The corporate debtor developed a hotel under the name and style of ‘Cambay Sapphire’ over the land under the lease.

However, the Respondent, vide its letter, cancelled the lease deed and the account of the corporate debtor was declared a non-performing asset (NPA) and proceeded under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and symbolic possession was taken by secured creditors.

Thereafter, the secured creditor filed an application under section 7 of the IBC before the NCLT against the corporate debtor for initiation of the corporate insolvency resolution process (CIRP), which was admitted, and the appellant was appointed as a resolution professional (RP).

Later, RP filed an application before the NCLT under section 60(5) of the IBC for taking possession of demised premises in view of section 14(1)(d) of the IBC. The NCLT vide the impugned order dismissed the said application on the ground that the corporate debtor had lost possessory rights over the said property more than three years before initiation of the CIRP and could not have created a third party right in favour of ‘E’ with whom the corporate debtor had entered into a contract/lease agreement and allegedly handed over possession of the hotel.

The appellant then challenged the said order before the NCLAT. The NCLAT vide the impugned order upheld the NCLT’s order on the ground that since the demised premises were excluded from the CIRP as it had ceased to be part of the corporate debtor’s assets before the CIRP’s initiation and, therefore, it could not be covered under Section 14 of the IBC.

Supreme Court Held

In view of the facts, the Supreme Court held that there was no substantial question of law involved in the instant appeal. Thus, there was no reason to interfere with the NCLAT’s order, and accordingly, an instant appeal was to be dismissed.

List of Cases Reviewed

• Neesa Leisure Ltd. v. Rajasthan State Industrial and Investment Corporation [2024] 164 taxmann.com 714 (NCLAT – New Delhi) (para 1) Affirmed, See Annex