REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.1743 OF 2021

VICTORY IRON WORKS LTD. …APPELLANT(S)

VERSUS

JITENDRA LOHIA & ANR. …RESPONDENT(S)

WITH

CIVIL APPEAL NO.1782 OF 2021

J U D G M E N T

V. RAMASUBRAMANIAN, J.

1.These appeals arise out of a common Order passed by the

National Company Law Appellate Tribunal

1

Principal Bench

dismissing two independent appeals filed by the appellants

herein, against an Order of the National Company Law Tribunal

2

,

thereby confirming an order of the Adjudicating Authority, in two

applications, in the course of the Corporate Insolvency Resolution

Process

3

.

1 For short, “NCLAT”

2 For short, “NCLT”

3 For short, “CIRP”

1

2.We have heard the learned counsel for the parties.

Parties to the Litigation

3.The subject matter of controversy in these appeals is the

land of an extent of about 10.19 acres at Ramrajatala Station

Road, Howrah, West Bengal. M/s Energy Properties Private

Limited

4

which is the appellant in CA No.1782 of 2021 is the

ostensible owner of the said property, in whose name the title

stands. Avani Towers Private Limited, which is the Corporate

Debtor in respect of whom CIRP has been initiated, not only

provided finance to Energy Properties, for the purchase of the

said property, but also holds 40% of the share capital in Energy

Properties, apart from holding a Joint Development Agreement

with Energy Properties in respect of the property in question.

4.M/s Victory Iron Works Ltd.

5

which is the appellant in CA

No.1743 of 2021, claims to be in possession of the property in

entirety, partly by virtue of a Leave and License Agreement and

partly by virtue of an oral understanding.

4 For short, “Energy Properties”

5 For short, “Victory”

2

Brief facts leading to the above appeals

5.A financial creditor by name M/s Sesa International Limited

filed an application under Section 7 of the Insolvency and

Bankruptcy Code, 2016

6

, against Avani Towers Private Limited

which is the Corporate Debtor herein. The company petition was

admitted by the Adjudicating Authority on 15.10.2019.

6.The first meeting of the Committee of Creditors was held on

14.11.2019. Thereafter, the suspended Board of Directors of the

Corporate Debtor informed the Resolution Professional that

Energy Properties were forcefully removing the security guards

from the property. Therefore, the Resolution Professional filed an

application in CA (IB) No.1807/KB/2019 (RP Application) before

the Adjudicating Authority under Section 25 of IBC read with

Regulation 30 of IBBI (Insolvency Resolution Process for

Corporate Persons) Regulations, 2016

7

, praying (i) for a direction

to Energy Properties & Others (including Victory) not to obstruct

the sole and exclusive possession of the property; and (ii) also for

the issuance of direction to the local district administration to

give proper assistance to the Resolution Professional in taking

6 For short, “IBC” or “the Code”, as the case may be.

7 For short, “the Regulations”

3

possession of the property so as to discharge his duties under the

Code.

7.The said application was hotly contested both by Energy

Properties (ostensible owner) and Victory (licensee) on the ground

that an Order of eviction cannot be passed by the Adjudicating

Authority under the Code and that the relationship was not

amenable to the jurisdiction of the Adjudicating Authority.

8.Curiously, even while questioning the jurisdiction of NCLT

to entertain an application of the nature described above, Victory

also filed an independent application in

CA (IB) No.146/KB/2020, seeking an injunction restraining the

Resolution Professional from interfering or disturbing or

intermeddling in the day-to-day business of Victory. We do not

know how such an application was maintainable at the instance

of Victory, when they had questioned the jurisdiction of NCLT to

adjudicate the dispute between the Licensor and Licensee.

9.By an Order dated 12.02.2020, the Adjudicating Authority

directed Victory and Energy Properties not to obstruct the

possession and activities of the Resolution Professional and also

holding at the same time that the order will not prevent Victory

4

from carrying on their activities in the portion of the land given to

them under the Leave and License Agreement. The operative

portion of the order of the Adjudicating Authority reads as

follows:-

“The respondents (or any other person acting through

them in CA(IB) No. 1807/KB/2019) shall not obstruct

RP’s possession and his activities relating to CIRP of the

corporate debtor, until further orders, failing which the

local police are directed to give every assistance to the

RP for completion of CIRP of the corporate debtor

effectively.

ii)Our order dated 09.01.2020 shall not affect the

activities of Victory Iron Works Ltd. in piece of land in

their possession on the basis of leave and licence

agreement dated 11.08.2011 untill the original owner of

the property decides further course of action as far as

leave and licence agreement is concerned. Hence, this

application, i.e. CA(IB) 146/KB/2020 stands disposed

off.”

10.Aggrieved by the said order of the Adjudicating Authority,

two independent appeals were filed, one by Victory and one by

Energy Properties, before the NCLAT. The appeals were dismissed

by NCLAT by an Order dated 08.04.2021. But at the same time,

it was confirmed by NCLAT that the land of the extent of 10000

sq. ft. covered by the Leave and License Agreement dated

11.08.2021 shall continue to be enjoyed by Victory without any

interference by the Resolution Professional. The Appellate

Authority also directed the Resolution Professional to disclose in

5

the Information Memorandum and also in the documents as

required by the Regulations that what is held by the Corporate

Debtor is only the development rights over the said property. It is

against the said order of the NCLAT that both Victory and Energy

Properties have come up with independent appeals.

Dispute in a nutshell

11.The dispute in a nutshell, in this triangular fight, is between

(i) the ostensible owner of the land, namely, Energy Properties,

who purchased the property from the Authorized Officer of UCO

Bank under the Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002

8

, under a

Sale Certificate dated 29.01.2008, on the one hand; (ii) the

Corporate Debtor represented by the Resolution Professional,

who actually financed the purchase of the said property by

Energy Properties, under a Memorandum of Understanding dated

24.01.2008 and who also entered into an agreement on

16.06.2008 with Energy Properties for the joint development of

the said property; and (iii) Victory, to whom a portion of the land

8 For short, “SARFAESI Act”

6

measuring an extent of 10000 sq.ft. (out of the total extent of

land of 10.19 acres), was given under a Leave and License

Agreement dated 19.08.2011, but which Licensee now claims to

be in possession of the entire land of the extent of 10.19 acres.

12.The dispute on hand can be better understood by taking

note of a few essential facts, which are not disputed. These facts

are:

(i)on 24.01.2008, Energy Properties and the Corporate

Debtor entered into a MoU, by which, the Corporate

Debtor agreed to provide financial assistance to the

extent of Rs.2.70 crores to Energy Properties, towards

the purchase of the land in question, that was being

brought to sale by UCO Bank in exercise of the powers

conferred by the SARFAESI Act. This amount of

Rs.2.70 crores agreed to be provided by the Corporate

Debtor, was in addition to another amount of Rs.9.30

crores agreed to be provided by the Corporate Debtor

to Energy Properties, for enabling them to tide over a

crisis. The consideration for the Corporate Debtor

providing financial assistance to Energy Properties,

both for the purchase of the aforesaid property and for

overcoming a crisis, was actually two-fold, namely,

(i) that 40% of shareholding in Energy Properties

should be transferred to the Corporate Debtor; and

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(ii) the Corporate Debtor was to be given the exclusive

right of development of the property.

(ii)Simultaneously with the execution of the aforesaid

MoU, 40% of the total shares of Energy Properties was

transferred to the Corporate Debtor.

(iii)With the funds so provided by the Corporate

Debtor, Energy Properties purchased the land in

question from UCO Bank, under a Sale Certificate

dated 29.01.2008. The total sale consideration

indicated in the Sale Certificate was Rs.2,97,03,484/-

(Rupees Two Crore Ninety-seven Lakhs Three

Thousand Four Hundred and Eighty-four only).

(iv)On 16.06.2008, Energy Properties entered into an

agreement with the Corporate Debtor, whereby the

Corporate Debtor was conferred exclusive rights of

development of the property. The actual physical

possession of the property was also handed over under

this agreement to the Corporate Debtor. The factum of

handing over of possession of the property in entirety

to the Corporate Debtor was also confirmed in two

subsequent MoUs dated 02.03.2010 and 24.06.2010,

executed respectively by (a) the Shareholders of Energy

Properties as well as by (b) Energy Properties

themselves.

(v)Thereafter, the Corporate Debtor executed a Leave and

License Agreement on 19.08.2011, granting a license

to Victory, for the permissive use of 10000 sq.ft. of

8

land out of the total extent of 10.19 acres. Energy

Properties joined this Leave and License Agreement as

a confirming party. This agreement was to be for a

period of 11 months commencing from August-2011.

The license fee fixed under the said Agreement, was

Rs.5,000/- per month.

(vi)However, Victory (the licensee) now claims that they

subsequently got permission to use the whole of the

land, of the total extent of Rs.10.19 acres by paying an

additional license fee of Rs.5,000/- per month.

(vii)Once a CIRP was initiated against the Corporate

Debtor at the instance of a third-party financial

creditor, the Interim Resolution Professional started

claiming that the development rights held by the

Corporate Debtor formed part of the intangible assets

of the Corporate Debtor and that, therefore, the same

must be included in the Information Bulletin and

protected.

(viii)Energy Properties is objecting to the proposal of

Resolution Professional on the ground that the

property, namely, the land does not belong to the

Corporate Debtor and that therefore the said property

should not be included in the assets of the Corporate

Debtor, especially when there are disputes arising out

of the Joint Development Agreement.

(ix)Victory is opposing the claim of the Resolution

Professional on the ground that they are in possession

9

of the entire land and that the Adjudicating Authority

under the IBC does not have the power to evict a

tenant/lessee/licensee in possession of the property.

(x)Both NCLT and NCLAT agreed with the claim of the

Energy Properties and Victory to the limited extent that

the Authorities constituted under the IBC have no

jurisdiction to order the eviction of a third-party

licensee/lessee. Therefore, by their orders impugned

in these appeals, both the Adjudicating Authority

(NCLT) and the Appellate Authority (NCLAT) have

protected the interest of Victory to the extent of land of

10000 sq.ft. covered by the Leave and License

Agreement. But at the same time both NCLT and

NCLAT refused to acknowledge that Victory is in

possession of the entire extent of land of 10.19 acres.

Therefore, NCLT and NCLAT thought that the

development rights that the Corporate Debtor has over

the remaining extent of land is to be preserved and

included in the Information Bulletin. This is what

both Energy Properties and Victory are opposing in

these two appeals.

Rival Contentions

13.It is contended on behalf of Victory, (i) that the asset in

question, namely, the land of the extent of 10.19 acres is owned

by Energy Properties and not by the Corporate Debtor; (ii) that

under Section 25(2)(a) of IBC, the Resolution Professional is

10

entitled to take custody and control only of the assets of the

Corporate Debtor and not the assets of a third party; (iii) that

under Regulation 30 of the Regulations, the Resolution

Professional is entitled to seek the assistance of the local district

administration only for discharging his duties under the Code

and hence the very application moved by the Resolution

Professional under Regulation 30 was misconceived, in the light

of the circumspection indicated in Section 25(2)(a) of IBC; and

(iv) that even as per the very complaint lodged by the Resolution

Professional, Victory is in possession of the entire extent of land

and that, therefore, in the light of the law laid down by this Court

in Embassy Property Developments Private Limited vs. State

of Karnataka and Others

9

; Gujarat Urja Vikas Nigam

Limited vs. Amit Gupta and Others

10

; and Tata Consultancy

Services Limited vs. SK Wheels Private Limited Resolution

Professional, Vishal Ghisulal Jain

11

, the Adjudicating

Authority did not have the jurisdiction to enter into this arena.

9 (2020) 13 SCC 308

10 (2021) 7 SCC 209

11 (2022) 2 SCC 583

11

14.Energy Properties is also assailing the impugned orders on

almost identical grounds. More particularly, it is contended on

behalf of the Energy Properties, (i) that when the Corporate

Debtor is not in possession of the property, he is not entitled to

use the mechanism provided in IBC to recover possession;

(ii) that though Section 18(f) of the Code enables Interim

Resolution Professional to take control and custody of any asset

over which the Corporate Debtor has ownership rights, the

Explanation under Section 18 excludes the assets owned by a

third party in the possession of the Corporate Debtor, held under

contractual arrangements, from the purview of the definition of

the term “assets” within the meaning of Section 18; and (iii) that

the decisions of this Court in Embassy Property Developments

Private Limited, Gujarat Urja Vikas Nigam Limited and Tata

Consultancy (supra) have clinched the issue without any pale of

doubt.

15.Supporting the impugned orders, it is contended on behalf

of the Resolution Professional and also on behalf of the

Committee of Creditors, (i) that the impugned orders have not

hampered the rights of Victory under the Leave and License

12

Agreement in any manner; (ii) that under the Development

Agreement as well as the two MoUs which followed, the

possession of the entire extent of land has been handed over to

the Corporate Debtor; (iii) that what is sought to be included in

the Information Memorandum are the development rights that

the Corporate Debtor has over the property in question; (iv) that

those development rights constitute intangible assets of the

Corporate Debtor; (v) that it is settled by the decision of this

Court in Sushil Kumar Agarwal vs. Meenakshi Sadhu &

Others

12

that the right of development of a property is an

intangible asset of the developer and it is especially so when this

development project was shown in the balance sheets of the

Corporate Debtor year after year; and (vi) that, therefore, the

impugned orders do not warrant any interference.

Discussion and Analysis

16.From the rival contentions, it appears that two issues arise

for our consideration. They are, (i) what is the nature of the right

or interest that the Corporate Debtor has over the property in

question, for the purpose of deciding the inclusion of the same in

the Information Memorandum prepared by the Resolution

12 (2019) 2 SCC 241

13

Professional under Regulation 36 of the Regulations?; and

(ii) whether NCLT and NCLAT have exercised a jurisdiction not

vested in them in law by seeking to recover/protect the

possession of the Corporate Debtor?

Issue No.1

17.The IBC is divided into five parts, with Part-I containing the

preliminaries, Part-II containing provisions dealing with

Insolvency Resolution and Liquidation for Corporate Persons,

Part-III dealing with Insolvency Resolution and Bankruptcy for

Individuals and Partnership Firms, Part-IV dealing with

Regulation of Insolvency Professionals, Agencies and Information

Utilities and Part-V containing miscellaneous provisions.

18.Interestingly, the Code contains provisions for the definition

of words, at three different places, namely Sections 3, 5 and 79.

Section 3 which is in Part-I contains the definitions of words and

phrases, and these definitions are applicable throughout the

Code, unless the context otherwise requires. Section 5 contains

definitions, applicable to words and phrases used in Part-II alone.

Similarly, Section 79 contains definitions of words and phrases,

appearing in Part-III. In other words, the definitions in Sections 5

14

and 79 have limited application to the respective Parts in which

they appear, but the definitions in Section 3 apply to the Code in

entirety.

19.Section 3(27) of the IBC defines the word “property” as

follows:

“3. Definitions.—In this Code, unless the context

otherwise requires,—

xxx xxx xxx

(27) “property” includes money, goods, actionable

claims, land and every description of property situated

in India or outside India and every description of

interest including present or future or vested or

contingent interest arising out of, or incidental to,

property.”

But the word “asset” is not defined either in Section 3 or in

Section 5 or in Section 79 of the Code, though Section 79(14)

defines the expression “excluded assets”.

20.However Section 3(37) of the Code states that words and

expressions used but not defined in this Code but defined in the

Indian Contract Act, 1872 (9 of 1872), the Indian Partnership

Act, 1932 (9 of 1932), the Securities Contract (Regulation) Act,

1956 (42 of 1956), the Securities Exchange Board of India Act,

1992 (15 of 1992), the Recovery of Debts Due to Banks and

Financial Institutions Act, 1993 (51 of 1993), the Limited Liability

15

Partnership Act, 2008 (6 of 2009) and the Companies Act, 2013

(18 of 2013), shall have the meanings respectively assigned to

them in those Acts.

21.Keeping in mind the provisions of Sections 3, 5 and 79, now

let us come to Section 18 which deals with the duties of Interim

Resolution Professional and Section 25 which deals with the

duties of Resolution Professional. Section 18 reads as follows:

“18. Duties of interim resolution professional. - The

interim resolution professional shall perform the

following duties, namely: —

(a) collect all information relating to the assets,

finances and operations of the corporate debtor for

determining the financial position of the corporate

debtor, including information relating to—

(i) business operations for the previous two

years;

(ii) financial and operational payments for the

previous two years;

(iii) list of assets and liabilities as on the

initiation date; and

(iv) such other matters as may be specified;

(b) receive and collate all the claims submitted by

creditors to him, pursuant to the public

announcement made under sections 13 and 15;

(c) constitute a committee of creditors;

(d) monitor the assets of the corporate debtor and

manage its operations until a resolution

professional is appointed by the committee of

creditors;

(e) file information collected with the information

utility, if necessary; and

(f) take control and custody of any asset over which

the corporate debtor has ownership rights as

recorded in the balance sheet of the corporate

debtor, or with information utility or the depository

of securities or any other registry that records the

ownership of assets including—

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(i) assets over which the corporate debtor has

ownership rights which may be located in a

foreign country;

(ii) assets that may or may not be in

possession of the corporate debtor;

(iii) tangible assets, whether movable or

immovable;

(iv) intangible assets including intellectual

property;

(v) securities including shares held in any

subsidiary of the corporate debtor, financial

instruments, insurance policies; Duties of

interim resolution professional.

(vi) assets subject to the determination of

ownership by a court or authority;

(g) to perform such other duties as may be specified

by the Board.

Explanation. —For the purposes of this section, the term

"assets" shall not include the following, namely:—

(a) assets owned by a third party in

possession of the corporate debtor held

under trust or under contractual

arrangements including bailment;

(b) assets of any Indian or foreign subsidiary

of the corporate debtor; and

(c) such other assets as may be notified by the

Central Government in consultation with

any financial sector regulator.”

Section 25 reads as follows:

“25.Duties of resolution professional. – (1) It shall

be the duty of the resolution professional to preserve and

protect the assets of the corporate debtor, including the

continued business operations of the corporate debtor.

(2) For the purposes of sub-section (1), the resolution

professional shall undertake the following actions,

namely: —

(a) take immediate custody and control of all the

assets of the corporate debtor, including the

business records of the corporate debtor;

(b) represent and act on behalf of the corporate debtor

with third parties, exercise rights for the benefit of

17

the corporate debtor in judicial, quasi-judicial or

arbitration proceedings;

(c) raise interim finances subject to the approval of

the committee of creditors under section 28;

d) appoint accountants, legal or other professionals

in the manner as specified by Board;

(e) maintain an updated list of claims;

(f) convene and attend all meetings of the committee

of creditors;

(g) prepare the information memorandum in

accordance with section 29;

(h) invite prospective resolution applicants, who fulfils

such criterion as may be laid down by him with

the approval of the committee of creditors, having

regard to the complexity and scale of operations of

the business of the corporate debtor and such

other conditions as may be specified by the Board,

to submit a resolution plan or plans.

(i) present all resolution plans at the meetings of the

committee of creditors;

(j) file application for avoidance of transactions in

accordance with Chapter III, if any; and

(k) such other actions as may be specified by the

Board.”

22.It may be noticed from Sections 18 and 25 that the word

“asset” and not the word “property” is what is used in these

provisions, though the word “property” is defined in Section 3(27).

But the said word “asset” used in Sections 18 and 25 is not

defined in the IBC. We have seen from Section 3(37) that it makes

a reference to seven different enactments, to which one can take

recourse, for finding the definition of words and expressions used

but not defined in the Code. Therefore, let us find out whether

those seven enactments will be of any assistance to find out the

meaning of the word “asset” used, but not defined in IBC.

18

23.The Indian Contract Act, 1872 does not define either of the

expressions “asset” or “property”. The Indian Partnership Act,

1932 also does not define either of these two expressions. The

Recovery of Debts and Bankruptcy Act, 1993 does not define the

word “asset” but defines the word “property” in Section 2(jb) as

follows:

“2. Definitions.—In this Act, unless the context

otherwise requires,—

xxx xxx xxx

(jb) “property” means—

(a) immovable property;

(b) movable property;

(c) any debt or any right to receive payment of

money, whether secured or unsecured;

(d) receivables, whether existing or future;

(e)intangible assets, being know-how, patent,

copyright, trade mark, licence, franchise or any

other business or commercial right of similar

nature, as may be prescribed by the Central

Government in consultation with Reserve Bank;”

24.The Securities Contracts (Regulation) Act, 1956, the

Securities and Exchange Board of India Act, 1992 and the

Limited Liability Partnership Act, 2008 also do not define these

two expressions. Even the Companies Act, 2013 does not define

these two expressions. Therefore, for finding an answer to the

meaning of the word “asset” used in Sections 18 and 25, one has

to necessarily undertake a journey from the known to the

unknown.

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25.Before we proceed further, we may have to take note of the

manner in which the word “property” is defined in The Recovery

of Debts and Bankruptcy Act,1993 and the manner in which it is

defined in IBC. While the definition of the word in the 1993 Act

appears to be exhaustive, the definition in IBC is only inclusive

(we have extracted both definitions elsewhere).

26.As we have pointed out earlier, the word “asset” is not

defined, either in IBC or in any of the seven enactments referred

to in Section 3(37) of the Code. But the word “asset” is defined in

Section 102(2) of the Income Tax Act, 1961 to include “property or

right of any kind”. Though Section 102 applies as such to

Chapter X-A of the Income Tax Act, the definition throws light on

the fact that property or right of any kind is considered to be an

asset.

27.Having taken note of the definition of the expression

“property” and the absence of the definition of the word “asset” in

IBC, it is now appropriate for us to return to the facts of this case

and to find out the nature of the rights that the Corporate Debtor

admittedly has in the immovable property namely land of the

extent of acres 10.19. This can be done by making a reference to

20

certain documents and the chain of events borne out by these

documents.

28.The documents to which useful reference can be made are:

(i) MoU dated 24.01.2008; (ii) Shareholders Agreement dated

24.01.2008; (iii) Sale Certificate dated 29.01.2008;

(iv) Development Agreement dated 16.06.2008; (v) Memorandum

Recording Possession dated 02.03.2010 executed by the

shareholders of Energy Properties; (vi) Memorandum Recording

Possession dated 24.06.2010 executed by Energy Properties; and

(vii) Leave and License Agreement dated 19.08.2011. Let us now

see the story as revealed by each of these documents.

29.The first of these documents is the Memorandum of

Understanding dated 24.01.2008, entered into between three

parties namely, (i) Energy Properties; (ii) the Corporate Debtor;

and (iii) the shareholders of Energy Properties. By this MoU, the

Corporate Debtor agreed to provide financial accommodation to

the total extent of Rs.12 crores to Energy Properties, for the

purpose of enabling them to purchase the land in question (by

utilizing a sum of Rs. 2.70 crores) and for the purpose of tiding

21

over a crisis (by utilizing the balance of Rs.9.30 crores). The

covenants contained in the MoU indicate-

That the Corporate Debtor was required to pay the

amount of Rs.2.70 crores directly to UCO Bank and the

Sale Certificate issued by the Bank along with the

original title deeds (parent documents) held by the Bank

were to be handed over by the Bank to a named solicitor

and advocate;

That a Definitive Agreement was to be entered into

between Energy Properties and the Corporate Debtor, to

enable the Corporate Debtor exclusively to undertake the

development of the property;

That if no Definitive Agreement was entered into, then the

Corporate Debtor shall be entitled to create a charge over

the said property, for securing the repayment of the

accommodation amount;

That the quid pro quo for the Corporate Debtor providing

financial accommodation to Energy Properties, was two-

fold, namely, (i) that the shareholders of Energy

Properties should transfer 40% of the total shareholding

in Energy Properties to the Corporate Debtor and 20%

shareholding to the named Solicitor and Advocate; and

(ii) that the Corporate Debtor should be given the

exclusive right to develop the property;

That after the Corporate Debtor developed the property,

60% of the total constructed area with the proportionate

22

undivided share of land will go to the Corporate Debtor

and the remaining 40% of the constructed area shall go

to Energy Properties.

30.The second document is the Shareholders Agreement

executed simultaneously with the MoU on 24.01.2008. This

agreement was entered into, for the purpose of transferring 40%

of shareholding in Energy Properties to the Corporate Debtor and

20% shareholding to the named Solicitor and Advocate.

31.Towards fulfilment of their obligation under the MoU dated

24.01.2008, the Corporate Debtor paid necessary amounts to the

UCO Bank/Energy Properties/the shareholders of Energy

Properties. Therefore, a Sale Certificate was executed by the

Authorized Officer of the UCO Bank on 29.01.2008 in exercise of

the powers conferred by Section 13(12) of the SARFAESI Act read

with Rule 8 of the Security Interest (Enforcement) Rules, 2002.

The sale price indicated in the said sale certificate was

Rs.2,97,03,484/- out of which, a sum of Rs. 2.70 crores was

admittedly paid by the Corporate Debtor.

32.The fourth document to be considered is the Development

Agreement dated 16.06.2008 entered between Energy Properties

23

and the Corporate Debtor. This Development Agreement contains

a reference to both the MoU and the Shareholders Agreement

dated 24.01.2008. It also affirms the fact that the Development

Agreement was what was contemplated under the MoU, to be a

definitive agreement. The Development Agreement contemplated

the handing over of khas and vacant possession of the entire

property to the Corporate Debtor. The Corporate Debtor was

imposed with the obligation to develop a housing complex in the

said property as per the specifications provided in the Fifth

Schedule to the Agreement, at their own cost. One of the

covenants contained in the Development Agreement is that

Energy Properties will not let-out, lease, mortgage and/or charge

the said property without the consent in writing of the Corporate

Debtor.

33.After the execution of the Development Agreement, two

memorandums (titled as Memorandums Recording Possession)

were also executed respectively on 02.03.2010 and 24.06.2010,

the first one by the shareholders of Energy Properties and the

second by Energy Properties themselves. Under these two

memorandums, the shareholders of Energy Properties, as well as

24

the Company Energy Properties, handed over possession of the

property to the Corporate Debtor. These two memorandums

contained specific clauses to the effect that the Corporate Debtor

shall be in exclusive possession of the property.

34.After more than a year of such handing over of possession,

Energy Properties as well as the Corporate Debtor jointly

executed a Leave and License Agreement on 19.08.2011 in favour

of Victory. As a matter of fact, the Corporate Debtor was defined

in the said Agreement as the Licensor and Energy Properties were

described only as a confirming party. Admittedly, this Agreement

was confined to land of the extent of 10000 sq. ft. out of the total

extent of acres 10.19. The Agreement was to be for a period of

11 months and the license fee agreed therein was Rs.5,000/- per

month. Clause 7 of the said Leave and License Agreement is

important to be taken note of and hence it is reproduced as

follows:

“7.GENERAL

This Agreement is personal to AVANI

Nothing contained herein intended to be nor be

construed nor VICTORY shall ever claim any right or

exclusive possession or tenancy in respect to the

licensed area.”

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35.From the sequence of events narrated above and the terms

and conditions contained in the Agreements entered into by the

parties, it is more clear than a crystal that a bundle of rights and

interests were created in favour of the Corporate Debtor, over the

immovable property in question. The creation of these bundle of

rights and interests was actually for a valid consideration. But for

the payment of such consideration, Energy Properties would not

even have become the owner of the property in dispute.

Therefore, the development rights created in favour of the

Corporate Debtor constitute “property” within the meaning of the

expression under Section 3(27) of IBC. At the cost of repetition, it

must be recapitulated that the definition of the expression

“property” under Section 3(27) includes “every description of

interest, including present or future or vested or contingent

interest arising out of or incidental to property”. Since the

expression “asset” in common parlance denotes “property of any

kind”, the bundle of rights that the Corporate Debtor has over the

property in question would constitute “asset” within the meaning

of Section 18(f) and Section 25(2)(a) of IBC.

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36.In Sushil Kumar Agarwal (supra), this Court brought out

the distinction between different types of Development

Agreements, with particular reference to Section 14(3)(c) of the

Specific Relief Act, 1963. After summarizing the different types of

Development Agreements in paragraph 17 of the decision, this

Court held in paragraph 19 as follows:-

“19. …An essential incident of ownership of land is

the right to exploit the development potential to

construct and to deal with the constructed area. In

some situations, under a development agreement, an

owner may part with such rights to a developer. This

in essence is a parting of some of the incidents of

ownership of the immovable property…”

37.Therefore, it is not very difficult to conclude, that a bundle

of rights and interests were created in favour of the Corporate

Debtor, by a series of documents such as (i) the MoU dated

24.01.2008; (ii) the shareholders agreement dated 24.01.2008;

(iii) the flow of the consideration from the Corporate Debtor to

the UCO Bank and to Energy Properties; (iv) the Development

Agreement dated 16.06.2008; (v) the Memorandum Recording

Possession dated 02.03.2010 executed by the original

shareholders of Energy Properties; (vi) the Memorandum

Recording Possession dated 24.06.2010 executed by Energy

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Properties in favour of the Corporate Debtor; and (vii) the Leave

and License Agreement primarily executed by the Corporate

Debtor in favour of Victory, which was merely confirmed by

Energy Properties as a confirming party. Some of these bundle of

rights and interests, partake the character and shade of

ownership rights. Therefore, these rights and interests in the

immovable property are definitely liable to be included by the

Resolution Professional in the Information Memorandum and the

Resolution Professional is duty bound under Section 25(2)(a) to

take custody and control of the same.

Issue No. 2

38.The main ground of attack of the appellants to the

impugned orders of the NCLT and NCLAT is that by virtue of the

Explanation under Section 18 of the Code and also by virtue of

the judicial pronouncements, the disputes between the Corporate

Debtor and the third-party lessee/licensee are not amenable to

the jurisdiction of the authorities under the Code.

39.But as rightly pointed out by the learned counsel for the

Resolution Professional, the Explanation under Section 18 begins

with a caveat namely “for the purposes of this Section”. Therefore,

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the exclusion of assets owned by a third-party, but in the

possession of the Corporate Debtor held under contractual

arrangements, from the definition of the expression “assets”, is

limited to Section 18. In other words, the Explanation under

Section 18 does not extend to Section 25.

40.It must be mentioned here that the Explanation was

originally limited to “the sub-section” but by Act 26 of 2018, the

word “sub-section” was substituted by the word “ section”.

Therefore, the Explanation under Section 18 will not provide an

escape route for the appellants. In any case, the bundle of rights

and interests created in favour of the Corporate Debtor may even

tantamount to creation of an implied agency under Chapter-X of

the Indian Contract Act, 1872 and such agency may not even be

amenable to termination in view of Section 202 of the said Act,

since the creation of the same in favour of the Corporate Debtor

was coupled with flow of consideration.

41.Having dealt with the objections raised on the strength of

statutory provisions, let us now see the decisions on which heavy

reliance is placed by the appellants.

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42.Embassy Property Developments Private Limited (supra)

arose out of a case where, under the guise of preserving and

protecting the interests of the Corporate Debtor, NCLT issued a

direction to the Government of Karnataka to grant renewal of a

mining lease, in terms of the deeming provision in Section 8A(6)

of the Mines and Minerals (Development and Regulation) Act,

1957. Raising the question of jurisdiction of the NCLT to issue

such a direction, the Government of Karnataka approached the

High Court by way of a writ petition, instead of filing a statutory

appeal to NCLAT. The jurisdiction of the High Court to entertain

the said writ petition and also grant interim stay, was what was

questioned before this Court in the said decision. The right to

have a mining lease granted by the Government, was neither a

statutory right nor a contractual right. A person applying for a

mining lease may at the most be entitled to have his application

considered along with the applications of others and to a fair

treatment. Once a mining lease is granted, the terms and

conditions of such grant may be subject to the covenants

contained in the grant as well as the statutory provisions.

Therefore, the ratio laid down in Embassy Property

Developments Private Limited (supra) may not go to the rescue

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of the appellants in a case of this nature where Energy Properties

became the owner only on account of the money paid by the

Corporate Debtor and a bundle of very valuable rights and

interests in immovable property was created thereafter in favour

of the Corporate Debtor.

43.The decision of this Court in Gujarat Urja Vikas Nigam

Limited (supra) may not also go to the rescue of the appellants,

since the same arose out of a termination of Power Purchase

Agreement

13

. In fact, this Court made a distinction in the said

case, between (i) a dispute that arose out of the termination of

PPA solely on account of insolvency on the one hand; and (ii) the

other disputes relating to the PPA on the other hand.

44.The decision in Tata Consultancy, rather than helping the

appellants, actually supports the case of the Corporate Debtor. In

fact, the decision in Gujarat Urja Vikas Nigam Limited was

distinguished in Tata Consultancy (by the very same author),

on the ground that if the termination was on an ipso facto clause

i.e., the fact of insolvency itself, then NCLT will have jurisdiction,

but that there was no residuary jurisdiction for NCLT, if the

13 For short, “PPA”

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termination of a contract is based on grounds unrelated to the

insolvency.

45.Thus, none of the decisions relied upon by the appellants

revolve around the rights and interests that a Corporate Debtor

has in an immovable property.

46.As a matter of fact, the only decision of this Court which

may probably come close to the facts of the present case, is the

one in Rajendra K. Bhutta vs. Maharashtra Housing and

Area Development Authority & Anr.

14

. In the said case, there

was a tripartite joint development agreement entered into

between (i) a Society representing a large number of persons

occupying 672 tenements in the property; (ii) Maharashtra

Housing and Area Development Authority

15

, which was the owner

of the land; and (iii) the corporate debtor. After initiation of CIRP

against the corporate debtor, MHADA issued a notice for the

termination of the joint development agreement. NCLAT refused

to treat the property as the asset of the corporate debtor. But this

Court reversed the said decision, by holding that Section 14(1)(d)

stood attracted in the facts and circumstances of the said case

14 (2020) 13 SCC 208

15 For short, the “MHADA”

32

and that even a reference to Sections 18 and 25 may not be

necessary. Though the said case arose out of a fact situation

where the termination of the joint development agreement was hit

by Section 14, the said decision clinches the issue on what

constitute a property and the distinction between occupation and

possession of a property.

47.Having seen the legal position, let us now come back to the

facts of the case to see whether NCLT and NCLAT addressed the

issue correctly or not.

48.As we have seen earlier, two applications were filed before

NCLT. One was by the Resolution Professional and the other was

by Victory. A careful look at the application filed by Victory in

C.A. (IB) No.146 of 2020 would show that there was no whisper

about Victory occupying any land in excess of what they were

permitted to occupy under the Leave and License Agreement.

Under the Leave and License Agreement, Victory was allowed to

occupy only 10000 sq. ft. of land, upon payment of a monthly

license fee of Rs.5,000/-. If at all, a vague averment was made in

paragraph VII (c) of their application to the effect that inasmuch

as the Corporate Debtor was unable to commence any

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development activity in the subject land, the owner and the

developer, with their full consent, had decided to allow the

applicant to run its business in the usual course from the subject

land, because the subject land could not have been left vacant for

any substantial period of time.

49.The fact that there were security guards posted in the

property is borne out by records. This is why NCLT as well as

NCLAT have done a delicate act of balancing, by protecting the

interests of Victory to the extent of the land permitted to be

occupied. In fact, Victory does not even have the status of a

lessee, but is only a licensee. A license does not create any

interest in the immovable property.

50.Therefore, NCLT as well as NCLAT were right in holding that

the possession of the Corporate Debtor, of the property needs to

be protected. This is why a direction under Regulation 30 had

been issued to the local district administration.

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Conclusion

51.In the light of the above, we are of the considered view that

the impugned orders do not call for any interference. Hence, the

appeals are dismissed. No costs.

Pending application(s), if any, stands disposed of

accordingly.

……………………………….. J.

(V. RAMASUBRAMANIAN)

……………………………….. J.

(PANKAJ MITHAL)

New Delhi;

March 14, 2023

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