Termination of leave and license agreements - Resolution Professional entitled to terminate agreements during CRIP NCLAT Upholds Termination of Lease Agreements During CIRP
NCLAT Upholds Termination of Lease Agreements During CIRP, Resolution Professional Validly Terminates Agreements; Appellants Directed to Vacate Premises
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) has upheld the termination of leave and license agreements by the Resolution Professional (RP) during the Corporate Insolvency Resolution Process (CIRP) of Gigeo Construction Company Pvt. Ltd. The judgment, delivered by Justice Ashok Bhushan and Barun Mitra, affirms the RP's authority under the Insolvency and Bankruptcy Code, 2016 to terminate agreements that violate sanctioned plans and directs the appellants to vacate the premises and pay any unpaid license fees.
The appeals were filed by Mr. Shanod Sameer Das and others against the orders of the National Company Law Tribunal (NCLT), Mumbai Bench, which directed them to vacate commercial premises they occupied under leave and license agreements with the Corporate Debtor. The RP, CA. Pankaj Bhattad, had terminated these agreements citing that the premises were not sanctioned for commercial use as per the Real Estate (Regulation and Development) Act, 2016 (RERA) approved plans. The termination was upheld by the NCLAT based on clauses within the agreements allowing termination with one-month notice.
The appellants contested the termination and the subsequent demand for unpaid license fees, arguing that the relief sought by the RP was beyond the scope of the applications filed. However, the NCLAT held that the relief was consequential and justified given the appellants' continued occupation post-termination notice. The tribunal noted that the RP acted within his rights under Section 60(5) of the Insolvency and Bankruptcy Code, 2016.
This decision underscores the RP's power to enforce agreements in line with statutory regulations and sanctioned plans, even if no action is initiated by RERA or other authorities. The appellants have been granted time until September 30, 2025, to vacate the premises and settle any outstanding license fees.
Bottom Line:
Termination of leave and license agreements during Corporate Insolvency Resolution Process (CIRP) - Resolution Professional (RP) entitled to terminate agreements based on sanctioned plans or other valid reasons under the terms of the agreement.
