Insolvency and Bankruptcy Code, 2016 – s.14(1)(d) – Interpretation of a Tripartite Joint Development Agreement was entered into between the society representing persons occupying tenements, Maharashtra Housing and Area Development Authority (MHADA) and the Corporate Debtor in a project for the development of 47 acres of land – The Corporate Debtor entered into a Loan Agreement with a bank for a sum of Rs. 200 crores – The Corporate Debtor defaulted in repayment of loan – Consequent to which, an application u/s.7 of the Code was admitted, appointing interim resolution professional and a moratorium u/s. 14 was also declared – After the imposition of the moratorium period u/s. 14, the MHADA issued a termination notice of the Joint Development Agreement to the Corporate Debtor – It was further stated that the Corporate Debtor would have to hand over possession to MHADA, which would then enter upon the plot and take possession of the land including all structures thereon – The Appellant-Interim Resolution Professional filed an application before the NCLT to restrain MHADA from taking over possession of the land till completion of the CIRP – The NCLT dismissed the said applciation and stated that s.14(1)(d) does not cover licences to enter upon land in pursuance of the Joint Development Agreements – The NCLAT held that the land belonged to the MHADA and which was not formally transferred in favour of the Corporate Debtor and hence, it cannot be treated to be the asset of the ‘Corporate Debtor’ for application of the provisions of s.14(1)(d) of the Code – Before the Supreme Court, the appellant contended that it is wholly incorrect to state that a mere ‘licence to enter’ was granted, the reading of the relevant documents as a whole clearly show that the legal possession was actually handed over to the Corporate Debtor – It was further contended that any recovery of a property by an owner where such property is ‘occupied by’ the Corporate Debtor would clearly fall with s.14(1)(d) – Held: A bare reading of s.14(1)(d) of the Code would make it clear that it does not deal with any of the assets or legal right or beneficial interest in such assets of the Corporate Debtor – Where recovery of property is to be made by an owner u/s.14(1) (d), such recovery would be of property that is ‘occupied by’ a Corporate Debtor – The expression ‘occupied by’ would mean or be synonymous with being in actual physical possession or being actually used by – In the instant case, it is clear that the Joint Development Agreement read with the Deed of modification has granted a license to the developer (Corporate Debtor) to enter upon the property, with a view to do all things that are mentioned in it, there can be no gainsaying that after such entry, the property would not be ‘occupied by’ the developer – Therefore, the impugned judgment of NCLAT is set aside and the NCLT is directed to dispose of the resolution professional’s application. Maxims – reddendo singula singulis – discussed.
Words and Phrases – ‘occupied by’ and ‘possession’ – discussed.
Allowing the appeal, the Court
HELD: 1. The provisions of the Joint Development Agreement would show that, at the very least, a license is granted in favour of the developer to enter upon the land to demolish existing structures, construct and erect new structures, and allot to erstwhile tenants, tenements in such constructed structures in three categories – (1) the earlier tenants/licensees of structures that were demolished; (2) tenements to be allotted free of cost to Maharashtra Housing and Area Development Authority (MHADA); and (3) what is referred to as “free sale component” which the developers then sell and exploit to recover or recoup cost and make profit. It is wholly unnecessary for this Court to refer to any other clauses of the Joint Development Agreement. It is also not necessary for the purpose of this case to state as to whether an interest in property is or is not created by the said Joint Development Agreement. [Paras 6][320-A-C]
2. A bare reading of Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016 would make it clear that it does not deal with any of the assets or legal right or beneficial interest in such assets of the corporate debtor. For this reason, any reference to Sections 18 and 36, as was made by the NCLT, becomes wholly unnecessary in deciding the scope of Section 14(1)(d), which stands on a separate footing. Under Section 14(1)(d) what is referred to is the “recovery of any property”. The ‘property’ in this case consists of land, ad-measuring 47 acres, together with structures thereon that had to be demolished. ‘Recovery’ would necessarily go with what was parted by the corporate debtor, and for this, one has to go to the next expression contained in the said sub-section. [Para 7][320-D-E]
3. The conspectus of the Supreme Court judgments would show that the expression “occupied by” would mean or be synonymous with being in actual physical possession of or being actually used by, in contra-distinction to the expression “possession”, which would connote possession being either constructive or actual and which, in turn, would include legally being in possession, though factually not being in physical possession. Since it is clear that the Joint Development Agreement read with the Deed of Modification has granted a license to the developer (Corporate Debtor) to enter upon the property, with a view to do all the things that are mentioned in it, there can be no gain saying that after such entry, the property would not be “occupied by” the developer. [Para 15][331-E-F]
4. There is no doubt whatsoever that important functions relating to repairs and re-construction of dilapidated buildings are given to MHADA. Equally, there is no doubt that in a given set of circumstances, the Board may, on such terms and conditions as may be agreed upon, and with the previous approval of the Authority, handover execution of any housing scheme under its own supervision. However, when it comes to any clash between the Maharashtra Housing and Area Development Act, 1976 and the Insolvency Code, on the plain terms of Section 238 of the Insolvency Code, the Code must prevail. This is for the very good reason that when a moratorium is spoken of by Section 14 of the Code, the idea is that, to alleviate corporate sickness, a statutory status quo is pronounced under Section 14 the moment a petition is admitted under Section 7 of the Code, so that the insolvency resolution process may proceed unhindered by any of the obstacles that would otherwise be caused and that are dealt with by Section 14. The statutory freeze that has thus been made is, unlike its predecessor in the SICA, 1985 only a limited one, which is expressly limited by Section 31(3) of the Code, to the date of admission of an insolvency petition up to the date that the Adjudicating Authority either allows a resolution plan to come into effect or states that the corporate debtor must go into liquidation. For this temporary period, at least, all the things referred to under Section 14 must be strictly observed so that the corporate debtor may finally be put back on its feet albeit with a new management. [Para 16][333-F-H; 334-A-B] The Member, Board of Revenue v. Arthur Paul Benthall [1955] 2 SCR 842; Koteswar Vittal Kamath v. K. Rangappa Baliga & Co. (1969) 1 SCC 255 : [1969] 3 SCR 40; Kailash Nath Agarwal and Ors. v. Pradeshiya Industrial & Investment Corporation of U.P. Ltd and Anr. (2003) 4 SCC 305 : [2003] 1 SCR 1159; Industrial Supplies Pvt. Ltd. and Anr. v. Union of India and Ors. (1980) 4 SCC 341 : [1981] 1 SCR 375; Chief Inspector of Mines v. Lala Karam Chand Thapar [1962] 1 SCR 9; Dunlop India Limited v. A.A. Rahna and Anr. (2011)
5 SCC 778 : [2011] 5 SCR 1080 – relied on.
Municipal Corporation of Greater Mumbai (MCGM) v. Abhilash Lal & Ors. (2020) 13 SCC 234; Sushil Kumar Agarwal v. Meenakshi Sadhu and Ors. (2019)
2 SCC 241 : [2018] 12 SCR 756 – distinguished. Ude Bhan and Others v. Kapoor Chand and Others AIR (1967) P&H 53 (FB) – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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