RP could take Control of Rights over the Leasehold Rights Transferred to CD

Case Details: New Okhla Industrial Development Authority v. Amit Agarwal Resolution Professional of Boulevard Projects (P.) Ltd. - [2023] 149 taxmann.com 33 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Anant Bijay Singh, Judicial Member & Ms Shreesha Merla, Technical Member
  • Saurav Roy, Kaushal Sharma & Prabudh Singh, Advs. for the Appellant.
  • Prashant Kumar, Adv. for the Respondent.

Facts of the Case

In the instant case, the appellant (i.e. development authority) executed a lease deed for a plot in favour of the corporate debtor for a term of 90 years. Subsequently, the CIRP was initiated against the corporate debtor and the Resolution Professional (RP) took control of the premises on the said plot.

The appellant filed an application before the Adjudicating Authority (NCLT) for the removal of the demised premises from the pool of assets of the corporate debtor. However, the same was dismissed. Thereafter, an appeal was made to the National Company Law Appellate Tribunal (NCLAT) against the order passed by the NCLT.

The appellant contended that the RP could only take control and custody of those assets over which the corporate debtor had ownership rights. In the instant case, the corporate debtor was merely a lessee to the appellant, and no conveyance deed was executed between the parties. Therefore, ownership was not transferred and only leasehold rights were transferred to the corporate debtor.

It was noted that the corporate debtor had spent a considerable amount to develop the said plot and the appellant did not deny that all risks and rewards incidental to the ownership of the said plot were transferred to the corporate debtor under the lease deed.

NCLAT Held

The NCLAT held that since the asset was leasehold rights and not the ‘plot’ per se, leasehold rights are intangible assets falling within the ambit of section 18(f)(iv) of the IBC. Therefore, the RP was empowered to take control and custody of the same. According, the appeal was to be dismissed.

List of Cases Reviewed

• • Order of NCLT (New Delhi) in I.A. No. 792/PB/2021, in C.P. No. (IB)-967/PB/2018, dated 2-3-2021 (para 23) affirmed.

List of Cases Referred to

• • Tata Consultancy Services v. State of A.P. [2004] 141 Taxman 132 (SC)/[2005] 1 SCC 308 (para 2)
  • Mohd. Noor v. Mohd. Ibrahim [1994] 5 SCC 562 (para 2)
  • Hotel Queen Road (P.) Ltd. v. Union of India 2015 SCC Online Del 9807 (para 2)
  • Embassy Property Developments (P.) Ltd. v. State of Karnataka [2019] 112 taxmann.com 56/[2020] 157 SCL 445 (SC)/13 SCC 308 (para 2)
  • Weather Makers (P.) Ltd. v. Parabolic Drugs Ltd. [2018] 97 taxmann.com 183/149 SCL 546 (NCLT – Chd.) (para 2)
  • Sangita Fiscal Services (P.) Ltd. v. Duncans Industries Ltd. [2022] 139 taxmann.com 351 (NCLT – Kol.)/MANU/NC/1367/2021 (para 2)
  • Rajendra K. Bhutta v. Maharashtra Housing & Area Development Authority [2020] 114 taxmann.com 655/160 SCL 95 (SC)/[2020] 13 SCC 208 (para 3)
  • A.R. Krishnamurthy v. CIT [1989] 1 SCC 754 (para 3)
  • New Okhla Industrial Development Authority v. Anand Sonbhadra 2021 SCC Online NCLAT 353 (para 3)
  • P. Mohanraj v. Shah Brothers Ispat (P.) Ltd. [2021] 125 taxmann.com 39/167 SCL 327 (SC)/6 SCC 258 (para 11)
  • New Okhla Industrial Development Authority v. Anand Sonbhadra [2022] 138 taxmann.com 293 (SC)/2022 SCC Online SC 631 (para 13).