Appellate Tribunal Affirms Adjudicating Authority's Jurisdiction Over Lease and License Disputes in Liquidation Context
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has upheld the jurisdiction of the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 (IBC) in a case involving Fivebro Water Services Pvt. Ltd. and others against Bijay Murmuria, the Liquidator. The appeals, which contested the Adjudicating Authority’s directive for possession handover of leased premises and recovery of dues, were dismissed by the NCLAT, confirming the liquidator's rights and responsibilities under the liquidation process.
The appeals arose from the order dated June 21, 2024, by the National Company Law Tribunal (NCLT), Ahmedabad Bench-I, directing Fivebro Water Services and Gondwana Engineers to vacate the premises owned by the Corporate Debtor, M/s Doshion Pvt. Ltd., and pay outstanding rent and license fees. The NCLT had concluded that the unregistered lease and license agreements were invalid, especially in light of the moratorium under IBC.
Fivebro and Gondwana Engineers argued that the disputes were contractual in nature and should fall under the jurisdiction of civil courts or arbitration, as per the agreements. However, the NCLAT, comprising Justice Ashok Bhushan and Barun Mitra, ruled that the Adjudicating Authority held jurisdiction under Section 60(5) of the IBC, as the matters were directly linked to the insolvency and liquidation proceedings of the Corporate Debtor.
The NCLAT found the lease and license agreements to be executed post the initiation of the Corporate Insolvency Resolution Process (CIRP) and during the moratorium period, rendering them unenforceable. The Tribunal emphasized the necessity of bringing the assets, including the leased premises, under the liquidation estate, enabling the liquidator to fulfill his statutory duties effectively.
Referring to the Supreme Court's precedent in Gujarat Urja Vikas Nigam Limited v. Amit Gupta, the NCLAT reiterated the comprehensive jurisdiction of the Adjudicating Authority over matters related to insolvency resolution or liquidation. The Tribunal highlighted that such jurisdiction aims to ensure unified, efficient adjudication within the IBC framework, preventing delays and preserving asset value.
This judgment underscores the primacy of the Adjudicating Authority in insolvency-related matters, emphasizing the IBC's objective to streamline the insolvency process under a singular legal umbrella. The decision reaffirms the liquidator’s authority to take possession of the Corporate Debtor's assets, ensuring their inclusion in the liquidation estate for the benefit of creditors.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Adjudicating Authority has jurisdiction under Section 60(5) of the IBC to decide matters relating to possession, recovery of rent/license fees, and eviction of lessees/licensees from premises belonging to the Corporate Debtor under liquidation if such matters have a nexus to the liquidation process.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 14, 35, 60(5); Section 231; Section 238
