VICTORY IRON WORKS LTD. versus JITENDRA LOHIA & ANR on 14 March 2023

VICTORY IRON WORKS LTD.

v.

JITENDRA LOHIA & ANR.

(Civil Appeal No. 1743 of 2021)

MARCH 14, 2023

[V. RAMASUBRAMANIAN AND PANKAJ MITHAL, JJ.]

Insolvency and Bankruptcy Code, 2016 – s.25(2)(a) – IBBI(Insolvency Resolution Process for Corporate Persons) Regulations,2016 – Regulation 30 – Corporate Debtor and one ‘EP’ (appellantin CA No.1782 of 2021) entered into an MoU – Corporate Debtorfinanced the purchase of the property in question by ‘EP’ for 40%of the share capital in ‘EP’ and a Joint Development Agreementwith it in respect of the property – Actual physical possession of theproperty was also handed over to the Corporate Debtor whichfactum was confirmed in two subsequent MoUs – Later, CorporateDebtor also executed a Leave and License Agreement grantinglicense to ‘V’ (appellant in CA No.1743 of 2021), for the permissiveuse of a portion of the property, however, ‘V’ now claims to be inpossession of the entire property – ‘EP’ joined this Agreement as aconfirming party – CIRP was initiated against Corporate Debtorby a third-party financial creditor – Resolution Professional (RP)filed application u/s.25 r/w Regulation 30 of 2016 Regulations forcertain directions – NCLT directed ‘V’ and ‘EP’ not to obstructpossession and activities of RP however, it also held that the orderwould not prevent ‘V’ from carrying on its business in the portion ofland licensed to it – Appeals filed by ‘V’ and ‘EP’ were dismissed byNCLAT, RP was directed to disclose in the Information Memorandumthat the Corporate Debtor has development rights over the property– On appeal, held: A bundle of rights and interests created in favourof the Corporate Debtor over the immovable property in questionby a series of documents, partake the character and shade ofownership rights – Therefore, these rights and interests in theimmovable property are definitely liable to be included by the RP inthe Information Memorandum – Resolution Professional is dutybound u/s.25(2)(a) to take custody and control of the same – NCLTand NCLAT have done a delicate act of balancing, by protectingthe interests of ‘V’ to the extent of the land permitted to be occupied

A

B

CD

EFGH

A– In fact, ‘V’ does not even have the status of a lessee, but is only alicensee and a license does not create any interest in the immovableproperty – NCLT as well as NCLAT rightly held that the possessionof the Corporate Debtor, of the property needs to be protected andthus, a direction u/Regulation 30 was issued to the local districtadministration to give assistance to the RP for completion of CIRPBof the Corporate Debtor effectively.

Insolvency and Bankruptcy Code, 2016 – s.3(37) – IncomeTax Act, 1961 – s.102(2) – “asset” – Held: The word “asset” is notdefined, either in IBC or in any of the seven enactments referred toin s.3(37) of the Code – But the word “asset” is defined in s.102(2)Cof the 1961 Act to include “property or right of any kind” – Thoughs.102 applies as such to Chapter X-A of the Income Tax Act, thedefinition throws light on the fact that property or right of any kindis considered to be an asset.

Insolvency and Bankruptcy Code, 2016 – ss.3(27), 18(f),D25(2)(a) – “property”, “asset” – CIRP was initiated against theCorporate Debtor – Interim Resolution Professional claimed thatthe development rights held by the Corporate Debtor formed partof its intangible assets and therefore, must be included in theInformation Bulletin and protected – Held: Definition of theEexpression “property” u/s.3(27) includes “every description ofinterest, including present or future or vested or contingent interestarising out of or incidental to property” – Since the expression“asset” in common parlance denotes “property of any kind”, thebundle of rights that the Corporate Debtor has over the property inquestion would constitute “asset” within the meaning of s.18(f) andFs.25(2)(a), IBC – Income Tax Act, 1961 – s.102(2).

Conclusion

Indian Bankruptcy Code, 2016 – Explanation u/s.18; s.25 –Appellants challenging the impugned orders of the NCLT and NCLATargued that by virtue of the Explanation u/s.18, the disputes betweenthe Corporate Debtor and the third-party lessee/licensee are notGamenable to the jurisdiction of the authorities under the Code –Held: Explanation u/s.18 begins with a caveat “for the purposes ofthis Section” – Therefore, the exclusion of assets owned by a third-party, but in the possession of the Corporate Debtor held undercontractual arrangements, from the definition of the expressionH“assets”, is limited to s.18 – The Explanation u/s.18 does not extendto s.25.

Dismissing the appeals, the Court

HELD: 1.1 Section 3(27) of the IBC defines the word“property”. But the word “asset” is not defined either in Section3 or in Section 5 or in Section 79 of the Code, though Section79(14) defines the expression “excluded assets”. HoweverSection 3(37) of the Code states that words and expressions usedbut not defined in this Code but defined in the Indian ContractAct, 1872 (9 of 1872), the Indian Partnership Act, 1932 (9 of 1932),the Securities Contract (Regulation) Act, 1956 (42 of 1956), theSecurities Exchange Board of India Act, 1992 (15 of 1992), theRecovery 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 havethe meanings respectively assigned to them in those Acts. Theword “asset” is not defined, either in IBC or in any of the sevenenactments referred to in Section 3(37) of the Code. But theword “asset” is defined in Section 102(2) of the Income Tax Act,1961 to include “property or right of any kind”. Though Section102 applies as such to Chapter X-A of the Income Tax Act, thedefinition throws light on the fact that property or right of anykind is considered to be an asset. [Paras 19, 20 and 26][1033-E,G-H; 1034-A-B; 1038-B-C]

1.2 A bundle of rights and interests were created in favourof the Corporate Debtor, over the immovable property inquestion. The creation of these bundle of rights and interestswas actually for a valid consideration. But for the payment of suchconsideration, Energy Properties would not even have becomethe owner of the property in dispute. Therefore, the developmentrights created in favour of the Corporate Debtor constitute“property” within the meaning of the expression under Section3(27) of IBC. The definition of the expression “property” underSection 3(27) includes “every description of interest, includingpresent or future or vested or contingent interest arising out ofor incidental to property”. Since the expression “asset” incommon parlance denotes “property of any kind”, the bundle ofrights that the Corporate Debtor has over the property inquestion would constitute “asset” within the meaning of Section18(f) and Section 25(2)(a) of IBC. A bundle of rights and interests A

BCD

EF

GH

A

BCD

EF

GH

Awere created in favour of the Corporate Debtor, by a series ofdocuments such as (i) the MoU dated 24.01.2008; (ii) theshareholders agreement dated 24.01.2008; (iii) the flow of theconsideration from the Corporate Debtor to the UCO Bank andto Energy Properties; (iv) the Development Agreement dated16.06.2008; (v) the Memorandum Recording Possession datedB02.03.2010 executed by the original shareholders of EnergyProperties; (vi) the Memorandum Recording Possession dated24.06.2010 executed by Energy Properties in favour of theCorporate Debtor; and (vii) the Leave and License Agreementprimarily executed by the Corporate Debtor in favour of Victory,Cwhich was merely confirmed by Energy Properties as a confirmingparty. Some of these bundle of rights and interests, partake thecharacter and shade of ownership rights. Therefore, these rightsand interests in the immovable property are definitely liable tobe included by the Resolution Professional in the InformationMemorandum and the Resolution Professional is duty boundDunder Section 25(2)(a) to take custody and control of the same.[Paras 35, 37][104-B-E; 1042-A-C]

Sushil Kumar Agarwal v. Meenakshi Sadhu & Others(2019) 2 SCC 241 : [2018] 12 SCR 756 – relied on.

E1.3 Two applications were filed before NCLT. One was bythe Resolution Professional and the other was by Victory. A carefullook at the application filed by Victory would show that there wasno whisper about Victory occupying any land in excess of whatthey were permitted to occupy under the Leave and LicenseAgreement. Under the Leave and License Agreement, VictoryFwas allowed to occupy only 10000 sq. ft. of land, upon payment ofa monthly license fee of Rs.5,000/-. If at all, a vague avermentwas made in paragraph VII (c) of their application to the effectthat inasmuch as the Corporate Debtor was unable to commenceany development activity in the subject land, the owner and theGdeveloper, with their full consent, had decided to allow theapplicant to run its business in the usual course from the subjectland, because the subject land could not have been left vacant forany substantial period of time. The fact that there were securityguards posted in the property is borne out by records. This iswhy NCLT as well as NCLAT have done a delicate act of balancing,H

A

by protecting the interests of Victory to the extent of the landpermitted to be occupied. In fact, Victory does not even have thestatus of a lessee, but is only a licensee. A license does not createany interest in the immovable property. Therefore, NCLT as wellas NCLAT were right in holding that the possession of theCorporate Debtor, of the property needs to be protected. This iswhy a direction under Regulation 30 had been issued to the localdistrict administration. [Paras 48 - 50][1044-G; 1045-A-E]

B

Embassy Property Developments Private Limited v. Stateof Karnataka and Others (2020) 13 SCC 308 : [2019]17 SCR 559; Gujarat Urja Vikas Nigam Limited v. AmitGupta and Others (2021) 7 SCC 209; Tata ConsultancyServices Limited v. SK Wheels Private Limited ResolutionProfessional, Vishal Ghisulal Jain (2022) 2 SCC 583 –distinguished.

C

Rajendra K. Bhutta v. Maharashtra Housing and AreaDevelopment Authority & Anr. (2020) 13 SCC 208 :[2020] 4 SCR 305 – relied on.

D

Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1743of 2021.

From the Judgment and Order dated 08.04.2021 of the NationalCompany Law Appellate Tribunal, New Delhi in Company Appeal (AT)(Insolvency) No. 508 of 2020.

F

With

Civil Appeal No. 1782 of 2021

G

Rohit Amit Sthalekar, Alok Dhir, Ms. Varsha Banerjee, KaranGrover, Karan Batura, Jayant Mehta, Kumarjit Banerjee, AshishChoudhury, Anand Kamal, Akash Agarwal, Rohit, Advs. for the Appellant.

Abhijeet Sinha, Saikat Sarkar, Siddharth Naidu, Ms. Manju Jetley,M/s. Ksn & Co., Advs. for the Respondents.

H

AThe Judgment of the Court was delivered by

V. RAMASUBRAMANIAN, J.

1. These appeals arise out of a common Order passed by theNational Company Law Appellate Tribunal[1]Principal Bench dismissingtwo independent appeals filed by the appellants herein, against an OrderBof the National Company Law Tribunal[2], thereby confirming an order ofthe Adjudicating Authority, in two applications, in the course of theCorporate Insolvency Resolution Process[3].

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

CParties to the Litigation

3. The subject matter of controversy in these appeals is the landof an extent of about 10.19 acres at Ramrajatala Station Road, Howrah,West Bengal. M/s Energy Properties Private Limited[4]which is theappellant in CA No.1782 of 2021 is the ostensible owner of the saidDproperty, in whose name the title stands. Avani Towers Private Limited,which is the Corporate Debtor in respect of whom CIRP has beeninitiated, not only provided finance to Energy Properties, for the purchaseof the said property, but also holds 40% of the share capital in EnergyProperties, apart from holding a Joint Development Agreement withEnergy Properties in respect of the property in question.

E

4. M/s Victory Iron Works Ltd.[5]which is the appellant in CANo.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 virtueof an oral understanding.

Brief facts leading to the above appealsF

5. A financial creditor by name M/s Sesa International Limitedfiled an application under Section 7 of the Insolvency and BankruptcyCode, 2016[6], against Avani Towers Private Limited which is the CorporateDebtor herein. The company petition was admitted by the AdjudicatingAuthority on 15.10.2019.

G

1 For short, “NCLAT”

2 For short, “NCLT”

3 For short, “CIRP”

4 For short, “Energy Properties”

5 For short, “Victory”

H6 For short, “IBC” or “the Code”, as the case may be.

6. The first meeting of the Committee of Creditors was held on14.11.2019. Thereafter, the suspended Board of Directors of theCorporate Debtor informed the Resolution Professional that EnergyProperties 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 Authorityunder Section 25 of IBC read with Regulation 30 of IBBI (InsolvencyResolution Process for Corporate Persons) Regulations, 2016[7], praying(i) for a direction to Energy Properties & Others (including Victory) notto obstruct the sole and exclusive possession of the property; and (ii)also for the issuance of direction to the local district administration togive proper assistance to the Resolution Professional in taking possessionof the property so as to discharge his duties under the Code.

7. The said application was hotly contested both by EnergyProperties (ostensible owner) and Victory (licensee) on the groundthat an Order of eviction cannot be passed by the Adjudicating Authorityunder the Code and that the relationship was not amenable to thejurisdiction of the Adjudicating Authority.

8. Curiously, even while questioning the jurisdiction of NCLT toentertain an application of the nature described above, Victory also filedan independent application in CA (IB) No.146/KB/2020, seeking aninjunction restraining the Resolution Professional from interfering ordisturbing or intermeddling in the day-to-day business of Victory. We donot know how such an application was maintainable at the instance ofVictory, when they had questioned the jurisdiction of NCLT to adjudicatethe dispute between the Licensor and Licensee.

9. By an Order dated 12.02.2020, the Adjudicating Authoritydirected Victory and Energy Properties not to obstruct the possessionand activities of the Resolution Professional and also holding at the sametime that the order will not prevent Victory from carrying on their activitiesin the portion of the land given to them under the Leave and LicenseAgreement. The operative portion of the order of the AdjudicatingAuthority reads as follows:- “The respondents (or any other person acting through themin CA(IB) No. 1807/KB/2019) shall not obstruct RP’spossession and his activities relating to CIRP of the corporate 7 For short, “the Regulations”

AB

CD

E

F

G

H

Adebtor, until further orders, failing which the local police aredirected to give every assistance to the RP for completion ofCIRP of the corporate debtor effectively.

ii) Our order dated 09.01.2020 shall not affect the activitiesof Victory Iron Works Ltd. in piece of land in their possessionBon the basis of leave and licence agreement dated 11.08.2011untill the original owner of the property decides further courseof action as far as leave and licence agreement is concerned.Hence, this application, i.e. CA(IB) 146/KB/2020 standsdisposed off.”

C10. Aggrieved by the said order of the Adjudicating Authority, twoindependent appeals were filed, one by Victory and one by EnergyProperties, before the NCLAT. The appeals were dismissed by NCLATby an Order dated 08.04.2021. But at the same time, it was confirmedby NCLAT that the land of the extent of 10000 sq. ft. covered by theLeave and License Agreement dated 11.08.2021 shall continue to beDenjoyed by Victory without any interference by the ResolutionProfessional. The Appellate Authority also directed the ResolutionProfessional to disclose in the Information Memorandum and also in thedocuments as required by the Regulations that what is held by theCorporate Debtor is only the development rights over the said property.EIt is against the said order of the NCLAT that both Victory and EnergyProperties 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, whoFpurchased the property from the Authorized Officer of UCO Bank underthe Securitisation and Reconstruction of Financial Assets andEnforcement of Security Interest Act, 2002[8], under a Sale Certificatedated 29.01.2008, on the one hand; (ii) the Corporate Debtor representedby the Resolution Professional, who actually financed the purchase ofGthe said property by Energy Properties, under a Memorandum ofUnderstanding dated 24.01.2008 and who also entered into an agreementon 16.06.2008 with Energy Properties for the joint development of thesaid property; and (iii) Victory, to whom a portion of the land measuringan extent of 10000 sq.ft. (out of the total extent of land of 10.19 acres), H8 For short, “SARFAESI Act”

was given under a Leave and License Agreement dated 19.08.2011, butwhich Licensee now claims to be in possession of the entire land of theextent of 10.19 acres.

12. The dispute on hand can be better understood by taking noteof a few essential facts, which are not disputed. These facts are:

(i) on 24.01.2008, Energy Properties and the Corporate Debtorentered into a MoU, by which, the Corporate Debtor agreedto provide financial assistance to the extent of Rs.2.70 croresto Energy Properties, towards the purchase of the land inquestion, that was being brought to sale by UCO Bank inexercise of the powers conferred by the SARFAESI Act.This amount of Rs.2.70 crores agreed to be provided bythe Corporate Debtor, was in addition to another amount ofRs.9.30 crores agreed to be provided by the CorporateDebtor to Energy Properties, for enabling them to tide overa crisis. The consideration for the Corporate Debtorproviding financial assistance to Energy Properties, bothfor the purchase of the aforesaid property and forovercoming a crisis, was actually two-fold, namely, (i) that40% of shareholding in Energy Properties should betransferred to the Corporate Debtor; and (ii) the CorporateDebtor was to be given the exclusive right of developmentof the property.

(ii) Simultaneously with the execution of the aforesaid MoU,40% of the total shares of Energy Properties was transferredto the Corporate Debtor.

(iii) With the funds so provided by the Corporate Debtor, EnergyProperties purchased the land in question from UCO Bank,under a Sale Certificate dated 29.01.2008. The total s a l econsideration indicated in the Sale Certificate wasRs.2,97,03,484/- (Rupees Two Crore Ninety-seven LakhsThree Thousand Four Hundred and Eighty-four only).

(iv) On 16.06.2008, Energy Properties entered into anagreement with the Corporate Debtor, whereby theCorporate Debtor was conferred exclusive rights ofdevelopment of the property. The actual physical possessionof the property was also handed over under this agreement A

B

C

D

E

F

G

H

Ato the Corporate Debtor. The factum of handing over ofpossession of the property in entirety to the CorporateDebtor was also confirmed in two subsequent MoUs dated02.03.2010 and 24.06.2010, executed respectively by (a)the Shareholders of Energy Properties as well as by (b)Energy Properties themselves.B

(v) Thereafter, the Corporate Debtor executed a Leave andLicense Agreement on 19.08.2011, granting a license toVictory, for the permissive use of 10000 sq.ft. of land outof the total extent of 10.19 acres. Energy Properties joinedthis Leave and License Agreement as a confirming party.CThis agreement was to be for a period of 11 monthscommencing from August-2011. The license fee fixed underthe said Agreement, was Rs.5,000/- per month.

(vi) However, Victory (the licensee) now claims that theysubsequently got permission to use the whole of the land,Dof the total extent of Rs.10.19 acres by paying an additionallicense fee of Rs.5,000/- per month.

(vii) Once a CIRP was initiated against the Corporate Debtorat the instance of a third-party financial creditor, the InterimResolution Professional started claiming that theEdevelopment rights held by the Corporate Debtor formedpart of the intangible assets of the Corporate Debtor andthat, therefore, the same must be included in the InformationBulletin and protected.

(viii) Energy Properties is objecting to the proposal of ResolutionFProfessional on the ground that the property, namely, theland does not belong to the Corporate Debtor and thattherefore the said property should not be included in theassets of the Corporate Debtor, especially when there aredisputes arising out of the Joint Development Agreement.

G(ix)Victory is opposing the claim of the Resolution Professionalon the ground that they are in possession of the entire landand that the Adjudicating Authority under the IBC does nothave the power to evict a tenant/lessee/licensee inpossession of the property.

H

(x) Both NCLT and NCLAT agreed with the claim of the EnergyProperties and Victory to the limited extent that theAuthorities constituted under the IBC have no jurisdictionto order the eviction of a third-party licensee/lessee.Therefore, by their orders impugned in these appeals, boththe Adjudicating Authority (NCLT) and the AppellateAuthority (NCLAT) have protected the interest of Victoryto the extent of land of 10000 sq.ft. covered by the Leaveand License Agreement. But at the same time both NCLTand NCLAT refused to acknowledge that Victory is inpossession of the entire extent of land of 10.19 acres.Therefore, NCLT and NCLAT thought that the developmentrights that the Corporate Debtor has over the remainingextent of land is to be preserved and included in theInformation Bulletin. This is what both Energy Propertiesand 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 EnergyProperties and not by the Corporate Debtor; (ii) that under Section25(2)(a) of IBC, the Resolution Professional is entitled to take custodyand control only of the assets of the Corporate Debtor and not the assetsof a third party; (iii) that under Regulation 30 of the Regulations, theResolution Professional is entitled to seek the assistance of the localdistrict administration only for discharging his duties under the Code andhence the very application moved by the Resolution Professional underRegulation 30 was misconceived, in the light of the circumspectionindicated in Section 25(2)(a) of IBC; and (iv) that even as per the verycomplaint lodged by the Resolution Professional, Victory is in possessionof the entire extent of land and that, therefore, in the light of the law laiddown by this Court in Embassy Property Developments PrivateLimited vs. State of Karnataka and Others[9]; Gujarat Urja VikasNigam Limited vs. Amit Gupta and Others[10]; and Tata ConsultancyServices Limited vs. SK Wheels Private Limited ResolutionProfessional, Vishal Ghisulal Jain[11], the Adjudicating Authority didnot have the jurisdiction to enter into this arena.

9 (2020) 13 SCC 308

10 (2021) 7 SCC 209

11 (2022) 2 SCC 583

A

BC

D

E

F

G

H

A14. Energy Properties is also assailing the impugned orders onalmost identical grounds. More particularly, it is contended on behalf ofthe Energy Properties, (i) that when the Corporate Debtor is not inpossession of the property, he is not entitled to use the mechanismprovided in IBC to recover possession; (ii) that though Section 18(f) ofthe Code enables Interim Resolution Professional to take control andBcustody of any asset over which the Corporate Debtor has ownershiprights, the Explanation under Section 18 excludes the assets owned by athird party in the possession of the Corporate Debtor, held undercontractual arrangements, from the purview of the definition of the term“assets” within the meaning of Section 18; and (iii) that the decisions ofCthis 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 ofthe Resolution Professional and also on behalf of the Committee ofDCreditors, (i) that the impugned orders have not hampered the rights ofVictory under the Leave and License Agreement in any manner; (ii)that under the Development Agreement as well as the two MoUs whichfollowed, the possession of the entire extent of land has been handedover to the Corporate Debtor; (iii) that what is sought to be included inthe Information Memorandum are the development rights that theECorporate Debtor has over the property in question; (iv) that thosedevelopment rights constitute intangible assets of the Corporate Debtor;(v) that it is settled by the decision of this Court in Sushil Kumar Agarwalvs. Meenakshi Sadhu & Others[12]that the right of development of aproperty is an intangible asset of the developer and it is especially soFwhen this development project was shown in the balance sheets of theCorporate Debtor year after year; and (vi) that, therefore, the impugnedorders do not warrant any interference.

Discussion and Analysis

16. From the rival contentions, it appears that two issues arise forGour consideration. They are, (i) what is the nature of the right or interestthat the Corporate Debtor has over the property in question, for thepurpose of deciding the inclusion of the same in the InformationMemorandum prepared by the Resolution Professional under Regulation36 of the Regulations?; and (ii) whether NCLT and NCLAT haveH12 (2019) 2 SCC 241

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 thepreliminaries, Part-II containing provisions dealing with InsolvencyResolution and Liquidation for Corporate Persons, Part-III dealing withInsolvency Resolution and Bankruptcy for Individuals and PartnershipFirms, Part-IV dealing with Regulation of Insolvency Professionals,Agencies and Information Utilities and Part-V containing miscellaneousprovisions.

18. Interestingly, the Code contains provisions for the definition ofwords, at three different places, namely Sections 3, 5 and 79. Section 3which is in Part-I contains the definitions of words and phrases, andthese definitions are applicable throughout the Code, unless the contextotherwise requires. Section 5 contains definitions, applicable to wordsand phrases used in Part-II alone. Similarly, Section 79 contains definitionsof words and phrases, appearing in Part-III. In other words, the definitionsin Sections 5 and 79 have limited application to the respective Parts inwhich they appear, but the definitions in Section 3 apply to the Code inentirety.

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

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

xxx xxx xxx

(27) “property” includes money, goods, actionable claims, landand every description of property situated in India or outsideIndia and every description of interest including present orfuture or vested or contingent interest arising out of, orincidental to, property.”

But the word “asset” is not defined either in Section 3 or inSection 5 or in Section 79 of the Code, though Section 79(14) defines theexpression “excluded assets”.

20. However Section 3(37) of the Code states that words andexpressions used but not defined in this Code but defined in the Indian A

B

C

D

E

F

G

H

AContract Act, 1872 (9 of 1872), the Indian Partnership Act, 1932 (9 of1932), the Securities Contract (Regulation) Act, 1956 (42 of 1956), theSecurities Exchange Board of India Act, 1992 (15 of 1992), the Recoveryof Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993),the Limited Liability Partnership Act, 2008 (6 of 2009) and the CompaniesAct, 2013 (18 of 2013), shall have the meanings respectively assigned toBthem in those Acts.

21. Keeping in mind the provisions of Sections 3, 5 and 79, nowlet us come to Section 18 which deals with the duties of Interim ResolutionProfessional and Section 25 which deals with the duties of ResolutionProfessional. Section 18 reads as follows:C

“18. Duties of interim resolution professional. - The interimresolution professional shall perform the following duties,namely: —

(a) collect all information relating to the assets, financesDand operations of the corporate debtor for determiningthe financial position of the corporate debtor, includinginformation relating to—

(i) business operations for the previous two years;

(ii) financial and operational payments for theEprevious two years;

(iii) list of assets and liabilities as on the initiationdate; and

(iv) such other matters as may be specified; F(b)receive and collate all the claims submitted by creditorsto him, pursuant to the public announcement made undersections 13 and 15;

(c) constitute a committee of creditors;

(d) monitor the assets of the corporate debtor and manageGits operations until a resolution professional is appointedby the committee of creditors; (e)file information collected with the information utility, ifnecessary; and (f)take control and custody of any asset over which theH

corporate debtor has ownership rights as recorded inthe balance sheet of the corporate debtor, or withinformation utility or the depository of securities or anyother registry that records the ownership of assetsincluding—

A

(i) assets over which the corporate debtor hasownership rights which may be located in aforeign country; B

(ii) assets that may or may not be in possession ofthe corporate debtor; C

(iii) tangible assets, whether movable or immovable;

(iv) intangible assets including intellectual property;

(v) securities including shares held in any subsidiaryof the corporate debtor, financial instruments,insurance policies; Duties of interim resolutionprofessional.

D

(vi) assets subject to the determination of ownershipby a court or authority;(g)to perform such other duties as may be specified by theBoard.

E

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 ofthe corporate debtor held under trust or underFcontractual arrangements including bailment; (b)assets of any Indian or foreign subsidiary of thecorporate debtor; and

(c) such other assets as may be notified by the CentralGovernment in consultation with any financialGsector regulator.”

Section 25 reads as follows:

“25. Duties of resolution professional. – (1) It shall be theduty of the resolution professional to preserve and protect

[2023] 7 S.C.R.

Athe assets of the corporate debtor, including the continuedbusiness operations of the corporate debtor.

(2) For the purposes of sub-section (1), the resolutionprofessional shall undertake the following actions, namely:—

(a) take immediate custody and control of all the assets ofBthe corporate debtor, including the business records ofthe corporate debtor; (b)represent and act on behalf of the corporate debtorwith third parties, exercise rights for the benefit of thecorporate debtor in judicial, quasi-judicial orCarbitration proceedings;

(c) raise interim finances subject to the approval of thecommittee of creditors under section 28; d)appoint accountants, legal or other professionals in themanner as specified by Board; D

(e) maintain an updated list of claims;

(f) convene and attend all meetings of the committee ofcreditors; (g)prepare the information memorandum in accordanceEwith section 29; (h)invite prospective resolution applicants, who fulfils suchcriterion as may be laid down by him with the approvalof the committee of creditors, having regard to thecomplexity and scale of operations of the business ofFthe corporate debtor and such other conditions as maybe specified by the Board, to submit a resolution planor plans.

(i) present all resolution plans at the meetings of thecommittee of creditors; G

(j) file application for avoidance of transactions inaccordance 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 wordH“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 saidword “asset” used in Sections 18 and 25 is not defined in the IBC. Wehave seen from Section 3(37) that it makes a reference to seven differentenactments, to which one can take recourse, for finding the definition ofwords and expressions used but not defined in the Code. Therefore, letus find out whether those seven enactments will be of any assistance tofind out the meaning of the word “asset” used, but not defined in IBC.

AB

23. The Indian Contract Act, 1872 does not define either of theexpressions “asset” or “property”. The Indian Partnership Act, 1932also does not define either of these two expressions. The Recovery ofDebts and Bankruptcy Act, 1993 does not define the word “asset” butdefines the word “property” in Section 2(jb) as follows:

C

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

xxx xxx xxx

D

(jb) “property” means—

(a) immovable property;

(b) movable property;

(c) any debt or any right to receive payment of money,whether secured or unsecured;E

(d) receivables, whether existing or future; (e)intangible assets, being know-how, patent,copyright, trade mark, licence, franchise or anyother business or commercial right of similarnature, as may be prescribed by the CentralGovernment in consultation with Reserve Bank;”

F

24. The Securities Contracts (Regulation) Act, 1956, the Securitiesand Exchange Board of India Act, 1992 and the Limited LiabilityPartnership Act, 2008 also do not define these two expressions. Eventhe 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 journeyfrom the known to the unknown.

G

25. Before we proceed further, we may have to take note of themanner in which the word “property” is defined in The Recovery of H

ADebts and Bankruptcy Act,1993 and the manner in which it is defined inIBC. While the definition of the word in the 1993 Act appears to beexhaustive, the definition in IBC is only inclusive (we have extractedboth definitions elsewhere).

26. As we have pointed out earlier, the word “asset” is not defined,Beither in IBC or in any of the seven enactments referred to in Section3(37) of the Code. But the word “asset” is defined in Section 102(2) ofthe 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 TaxAct, the definition throws light on the fact that property or right of anykind is considered to be an asset.C

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 nowappropriate for us to return to the facts of this case and to find out thenature of the rights that the Corporate Debtor admittedly has in theimmovable property namely land of the extent of acres 10.19. This canDbe done by making a reference to certain documents and the chain ofevents 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 dated24.01.2008; (iii) Sale Certificate dated 29.01.2008; (iv) DevelopmentEAgreement dated 16.06.2008; (v) Memorandum Recording Possessiondated 02.03.2010 executed by the shareholders of Energy Properties;(vi) Memorandum Recording Possession dated 24.06.2010 executed byEnergy Properties; and (vii) Leave and License Agreement dated19.08.2011. Let us now see the story as revealed by each of thesedocuments.F

29. The first of these documents is the Memorandum ofUnderstanding dated 24.01.2008, entered into between three partiesnamely, (i) Energy Properties; (ii) the Corporate Debtor; and (iii) theshareholders of Energy Properties. By this MoU, the Corporate DebtorGagreed to provide financial accommodation to the total extent of Rs.12crores to Energy Properties, for the purpose of enabling them to purchasethe land in question (by utilizing a sum of Rs. 2.70 crores) and for thepurpose of tiding over a crisis (by utilizing the balance of Rs.9.30 crores).The covenants contained in the MoU indicate- [V. RAMASUBRAMANIAN, J.]

That the Corporate Debtor was required to pay the amountof Rs.2.70 crores directly to UCO Bank and the SaleCertificate issued by the Bank along with the original titledeeds (parent documents) held by the Bank were to behanded over by the Bank to a named solicitor and advocate; That a Definitive Agreement was to be entered intobetween Energy Properties and the Corporate Debtor, toenable the Corporate Debtor exclusively to undertake thedevelopment of the property; That if no Definitive Agreement was entered into, then theCorporate Debtor shall be entitled to create a charge overthe said property, for securing the repayment of theaccommodation amount; That the quid pro quo for the Corporate Debtor providingfinancial accommodation to Energy Properties, was two-fold, namely, (i) that the shareholders of Energy Propertiesshould transfer 40% of the total shareholding in EnergyProperties to the Corporate Debtor and 20% shareholdingto the named Solicitor and Advocate; and (ii) that theCorporate Debtor should be given the exclusive right todevelop the property; That after the Corporate Debtor developed the property,60% of the total constructed area with the proportionateundivided share of land will go to the Corporate Debtor andthe remaining 40% of the constructed area shall go to EnergyProperties.

30. The second document is the Shareholders Agreement executedsimultaneously with the MoU on 24.01.2008. This agreement was enteredinto, for the purpose of transferring 40% of shareholding in EnergyProperties to the Corporate Debtor and 20% shareholding to the namedSolicitor and Advocate.

31. Towards fulfilment of their obligation under the MoU dated24.01.2008, the Corporate Debtor paid necessary amounts to the UCOBank/Energy Properties/the shareholders of Energy Properties.Therefore, a Sale Certificate was executed by the Authorized Officerof the UCO Bank on 29.01.2008 in exercise of the powers conferred bySection 13(12) of the SARFAESI Act read with Rule 8 of the Security A

B

C

D

E

F

G

H

AInterest (Enforcement) Rules, 2002. The sale price indicated in the saidsale certificate was Rs.2,97,03,484/- out of which, a sum of Rs. 2.70crores was admittedly paid by the Corporate Debtor.

32. The fourth document to be considered is the DevelopmentAgreement dated 16.06.2008 entered between Energy Properties andBthe Corporate Debtor. This Development Agreement contains a referenceto both the MoU and the Shareholders Agreement dated 24.01.2008. Italso affirms the fact that the Development Agreement was what wascontemplated under the MoU, to be a definitive agreement. TheDevelopment Agreement contemplated the handing over of khas andvacant possession of the entire property to the Corporate Debtor. TheCCorporate Debtor was imposed with the obligation to develop a housingcomplex in the said property as per the specifications provided in theFifth Schedule to the Agreement, at their own cost. One of the covenantscontained in the Development Agreement is that Energy Properties willnot let-out, lease, mortgage and/or charge the said property without theDconsent in writing of the Corporate Debtor.

33. After the execution of the Development Agreement, twomemorandums (titled as Memorandums Recording Possession) werealso executed respectively on 02.03.2010 and 24.06.2010, the first oneby the shareholders of Energy Properties and the second by EnergyEProperties themselves. Under these two memorandums, the shareholdersof Energy Properties, as well as the Company Energy Properties, handedover possession of the property to the Corporate Debtor. These twomemorandums contained specific clauses to the effect that the CorporateDebtor shall be in exclusive possession of the property.

F34. After more than a year of such handing over of possession,Energy Properties as well as the Corporate Debtor jointly executed aLeave and License Agreement on 19.08.2011 in favour of Victory. As amatter of fact, the Corporate Debtor was defined in the said Agreementas the Licensor and Energy Properties were described only as aconfirming party. Admittedly, this Agreement was confined to land ofGthe extent of 10000 sq. ft. out of the total extent of acres 10.19. TheAgreement was to be for a period of 11 months and the license feeagreed therein was Rs.5,000/- per month. Clause 7 of the said Leaveand License Agreement is important to be taken note of and hence it isreproduced as follows:

“7. GENERAL

This Agreement is personal to AVANI

Nothing contained herein intended to be nor be construednor VICTORY shall ever claim any right or exclusivepossession or tenancy in respect to the licensed area.”

35. From the sequence of events narrated above and the termsand conditions contained in the Agreements entered into by the parties,it is more clear than a crystal that a bundle of rights and interests werecreated in favour of the Corporate Debtor, over the immovable propertyin question. The creation of these bundle of rights and interests wasactually for a valid consideration. But for the payment of suchconsideration, Energy Properties would not even have become the ownerof the property in dispute. Therefore, the development rights created infavour of the Corporate Debtor constitute “property” within the meaningof 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 ofinterest, including present or future or vested or contingent interestarising out of or incidental to property”. Since the expression “asset”in common parlance denotes “property of any kind”, the bundle ofrights that the Corporate Debtor has over the property in question wouldconstitute “asset” within the meaning of Section 18(f) and Section25(2)(a) of IBC.

36. In Sushil Kumar Agarwal (supra), this Court brought out thedistinction between different types of Development Agreements, withparticular reference to Section 14(3)(c) of the Specific Relief Act, 1963.After summarizing the different types of Development Agreements inparagraph 17 of the decision, this Court held in paragraph 19 as follows:- “19. …An essential incident of ownership of land is the rightto exploit the development potential to construct and to dealwith the constructed area. In some situations, under adevelopment agreement, an owner may part with such rightsto a developer. This in essence is a parting of some of theincidents of ownership of the immovable property…”

37. Therefore, it is not very difficult to conclude, that a bundle ofrights and interests were created in favour of the Corporate Debtor, bya series of documents such as (i) the MoU dated 24.01.2008; (ii) the A

B

CDEF

GH

Ashareholders agreement dated 24.01.2008; (iii)the flow of theconsideration from the Corporate Debtor to the UCO Bank and to EnergyProperties; (iv) the Development Agreement dated 16.06.2008; (v) theMemorandum Recording Possession dated 02.03.2010 executed by theoriginal shareholders of Energy Properties; (vi) the MemorandumRecording Possession dated 24.06.2010 executed by Energy PropertiesBin favour of the Corporate Debtor; and (vii) the Leave and LicenseAgreement primarily executed by the Corporate Debtor in favour ofVictory, which was merely confirmed by Energy Properties as aconfirming party. Some of these bundle of rights and interests, partakethe character and shade of ownership rights. Therefore, these rightsCand interests in the immovable property are definitely liable to be includedby the Resolution Professional in the Information Memorandum and theResolution Professional is duty bound under Section 25(2)(a) to takecustody and control of the same.

Issue No. 2D

38. The main ground of attack of the appellants to the impugnedorders of the NCLT and NCLAT is that by virtue of the Explanationunder Section 18 of the Code and also by virtue of the judicialpronouncements, the disputes between the Corporate Debtor and thethird-party lessee/licensee are not amenable to the jurisdiction of theEauthorities under the Code.

Issues

39. But as rightly pointed out by the learned counsel for theResolution Professional, the Explanation under Section 18 begins with acaveat namely “for the purposes of this Section”. Therefore, theexclusion of assets owned by a third-party, but in the possession of theFCorporate Debtor held under contractual arrangements, from thedefinition of the expression “assets”, is limited to Section 18. In otherwords, the Explanation under Section 18 does not extend to Section 25.

40. It must be mentioned here that the Explanation was originallylimited to “the sub-section” but by Act 26 of 2018, the word “sub-Gsection” was substituted by the word “section”. Therefore, theExplanation under Section 18 will not provide an escape route for theappellants. In any case, the bundle of rights and interests created infavour of the Corporate Debtor may even tantamount to creation of animplied agency under Chapter-X of the Indian Contract Act, 1872 andsuch agency may not even be amenable to termination in view of Section H

202 of the said Act, since the creation of the same in favour of theCorporate Debtor was coupled with flow of consideration.

41. Having dealt with the objections raised on the strength ofstatutory provisions, let us now see the decisions on which heavy relianceis placed by the appellants.

42. Embassy Property Developments Private Limited (supra)arose out of a case where, under the guise of preserving and protectingthe interests of the Corporate Debtor, NCLT issued a direction to theGovernment of Karnataka to grant renewal of a mining lease, in termsof the deeming provision in Section 8A(6) of the Mines and Minerals(Development and Regulation) Act, 1957. Raising the question ofjurisdiction of the NCLT to issue such a direction, the Government ofKarnataka approached the High Court by way of a writ petition, insteadof filing a statutory appeal to NCLAT. The jurisdiction of the High Courtto entertain the said writ petition and also grant interim stay, was whatwas questioned before this Court in the said decision. The right to havea mining lease granted by the Government, was neither a statutory rightnor a contractual right. A person applying for a mining lease may at themost be entitled to have his application considered along with theapplications of others and to a fair treatment. Once a mining lease isgranted, the terms and conditions of such grant may be subject to thecovenants contained in the grant as well as the statutory provisions.Therefore, the ratio laid down in Embassy Property DevelopmentsPrivate Limited (supra) may not go to the rescue of the appellants in acase of this nature where Energy Properties became the owner only onaccount of the money paid by the Corporate Debtor and a bundle ofvery valuable rights and interests in immovable property was createdthereafter in favour of the Corporate Debtor.

43. The decision of this Court in Gujarat Urja Vikas NigamLimited (supra) may not also go to the rescue of the appellants, sincethe same arose out of a termination of Power Purchase Agreement[13].In fact, this Court made a distinction in the said case, between (i) adispute that arose out of the termination of PPA solely on account ofinsolvency on the one hand; and (ii) the other disputes relating to thePPA on the other hand.

A

B

C

D

E

F

G

A

A44. The decision in Tata Consultancy, rather than helping theappellants, actually supports the case of the Corporate Debtor. In fact,the decision in Gujarat Urja Vikas Nigam Limited was distinguishedin Tata Consultancy (by the very same author), on the ground that ifthe termination was on an ipso facto clause i.e., the fact of insolvencyitself, then NCLT will have jurisdiction, but that there was no residuaryBjurisdiction for NCLT, if the termination of a contract is based on groundsunrelated to the insolvency.

45. Thus, none of the decisions relied upon by the appellants revolvearound the rights and interests that a Corporate Debtor has in animmovable property.C

46. As a matter of fact, the only decision of this Court which mayprobably come close to the facts of the present case, is the one inRajendra K. Bhutta vs. Maharashtra Housing and AreaDevelopment Authority & Anr.[14]. In the said case, there was a tripartitejoint development agreement entered into between (i) a SocietyDrepresenting a large number of persons occupying 672 tenements in theproperty; (ii) Maharashtra Housing and Area Development Authority[15],which was the owner of the land; and (iii) the corporate debtor. Afterinitiation of CIRP against the corporate debtor, MHADA issued a noticefor the termination of the joint development agreement. NCLAT refusedEto treat the property as the asset of the corporate debtor. But this Courtreversed the said decision, by holding that Section 14(1)(d) stood attractedin the facts and circumstances of the said case and that even a referenceto Sections 18 and 25 may not be necessary. Though the said case aroseout of a fact situation where the termination of the joint developmentagreement was hit by Section 14, the said decision clinches the issue onFwhat constitute a property and the distinction between occupation andpossession of a property.

47. Having seen the legal position, let us now come back to thefacts of the case to see whether NCLT and NCLAT addressed theissue correctly or not.G

48. As we have seen earlier, two applications were filed beforeNCLT. One was by the Resolution Professional and the other was byVictory. A careful look at the application filed by Victory in C.A. (IB)

14 (2020) 13 SCC 208H15 For short, the “MHADA”

No.146 of 2020 would show that there was no whisper about Victoryoccupying any land in excess of what they were permitted to occupyunder the Leave and License Agreement. Under the Leave and LicenseAgreement, 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 vagueaverment was made in paragraph VII (c) of their application to theeffect that inasmuch as the Corporate Debtor was unable to commenceany development activity in the subject land, the owner and the developer,with their full consent, had decided to allow the applicant to run its businessin the usual course from the subject land, because the subject land couldnot have been left vacant for any substantial period of time.

49. The fact that there were security guards posted in the propertyis borne out by records. This is why NCLT as well as NCLAT havedone a delicate act of balancing, by protecting the interests of Victory tothe extent of the land permitted to be occupied. In fact, Victory does noteven have the status of a lessee, but is only a licensee. A license doesnot create any interest in the immovable property.

50. Therefore, NCLT as well as NCLAT were right in holdingthat the possession of the Corporate Debtor, of the property needs to beprotected. This is why a direction under Regulation 30 had been issuedto the local district administration.

Conclusion

51. In the light of the above, we are of the considered view thatthe impugned orders do not call for any interference. Hence, the appealsare dismissed. No costs.

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

Divya Pandey(Assisted by : Anjanaa Aravinda and Roopanshi Virang, LCRAs)

Appeals dismissed.

A

B

C

D

E

F

G

H