NCLAT Upholds NCLT's Decision Declaring Lease Deed Void in Jupiter Spun Pipes Case
Appellate Tribunal Confirms No Asset Transfer to Corporate Debtor Amidst Allegations of Forgery
In a significant judgment, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has dismissed appeals filed by the Committee of Creditors (CoC) of Jupiter Spun Pipes & Casting Pvt. Ltd. and its Resolution Professional, challenging an order by the National Company Law Tribunal (NCLT), Kolkata. The order, dated March 14, 2024, declared the lease deed dated September 24, 2007, purportedly transferring leasehold rights to Jupiter Spun Pipes, as void and unenforceable.
The case revolved around a disputed lease deed involving a land parcel of 344.915 acres in Kodarma, Jharkhand, along with associated plant and machinery. The lease was claimed to have been executed by Bihar State Industrial Development Corporation Ltd. (BSIDC) and Magadh Spun Pipe Ltd. (Magadh) in favor of the corporate debtor, Jupiter Spun Pipes. However, both BSIDC and Magadh denied executing the lease deed and alleged forgery and fabrication.
The NCLAT, led by Justice Ashok Bhushan and Barun Mitra, upheld the NCLT's findings that the lease deed was void due to lack of authorization and absence of proof of consideration. The Tribunal observed that the document was not executed by authorized personnel from BSIDC and Magadh and that the claimed consideration of Rs. 16 crores was not substantiated by evidence.
The judgment highlights the jurisdictional limits of the adjudicating authority in insolvency proceedings, emphasizing that issues of fraud and forgery require thorough investigation and are beyond the summary jurisdiction of NCLT. Despite the fraudulent claims, the adjudicating authority correctly excluded the disputed asset from the Information Memorandum and refrained from approving the resolution plan based on such dubious claims.
The NCLAT's decision is pivotal as it reinforces legal protocols in handling allegations of document forgery within insolvency processes. It also serves as a reminder for financial institutions like SBI, which had extended credit facilities based on the contested lease, to exercise due diligence in verifying security documents.
This judgment marks a decisive step in maintaining the integrity of insolvency proceedings, ensuring that only legitimate claims are entertained, and fraudulent activities are scrutinized and rejected. The Tribunal's clear stance on the issue sets a precedent for future cases involving similar disputes.
Bottom Line:
Insolvency and Bankruptcy Code - Lease Deed validity - Adjudicating Authority's jurisdiction in deciding asset ownership without delving into fraud/forgery.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 - Section 7, Section 17 of SARFAESI Act
