MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM) versus ABHILASH LAL & ORS. on 15 November 2019

MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)

v.

ABHILASH LAL & ORS.

(Civil Appeal No. 6350 of 2019)

NOVEMBER 15, 2019

[ARUN MISHRA, VINEET SARAN ANDS. RAVINDRA BHAT, JJ.]

Mumbai Municipal Corporation Act, 1888 – ss.92 and 92A– Appellant owns inter alia, the lands in question – By contract dated20.12.2005, one ‘SHCL’ agreed to develop these lands (to beleased to it) and construct 1500 bed hospital – Construction wasto be completed in 60 months (excluding monsoons) which endedon 24.04.2013 – Lease deed was to be executed after thecompletion of the project – Project not completed within the period– ‘SHCL’ had to pay lease rent at the annual rate of` 10,41,04,000/- –Appellant alleged defaults in the payments –Issued show cause notice on 23.01.2018, proposing contracttermination – Insolvency proceedings initiated by Axis Bank alsoas ‘SHCL’ was unable to repay its debts – Before the period givenby appellant’s show-cause notice ended, the Petition was admittedby the National Company Law Tribunal (NCLT), Hyderabad Bench– 1[st] respondent was appointed as the Resolution Professional (RP),approved by Committee of Creditors (CoC)– Terms of the Requestfor Proposal (RFP), criteria for evaluation (of RFPs received)approved – Resolution plan submitted by one ‘SNMC’ – RevisedRFP submitted by RP – Revised resolution plan approved by CoC– Appellant opposed the resolution plan – Plan approved by NCLTand the Appellate Tribunal, NCLAT – Held: Resolution plancontemplated infusion of capital and one of the modes for securingcapital was mortgaging the land – In view of the clear conditionsstipulated in the contract, the appellant reserved all its rights andthus, its properties could not have been, in any manner, affectedby the resolution plan – Adjudicating authority could not haveapproved the plan which implicates the assets of the appellantespecially when ‘SHCL’ had not fulfilled its obligations under thecontract – Further, the resolution plan was never approved by thecorporation – Also, s.238, IBC cannot be read as overriding the

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Aappellant’s right- indeed its public duty to control and regulate howits properties are to be dealt with– That exists in ss.92, 92A – s.238,IBC could be of importance when the properties and assets are ofa debtor and not when a third party like the appellant is involved– Therefore, in the absence of approval in terms of ss.92 & 92A,the adjudicating authority could not have overridden appellant’sBobjections and enabled the creation of fresh interest in respect ofits properties and lands – Authorities under the Code could nothave precluded the control that the appellant has, under law, todeal with its properties and the land in question, which undeniablyare public properties – Resolution plan therefore, would be seriousCimpediment to appellant’s independent plans to ensure that publichealth amenities are developed in the manner it chooses, and forwhich fresh approval under the MMC Act may be forthcoming fora separate scheme formulated by it – Impugned order and the orderof NCLT, set aside – Insolvency and Bankruptcy Code, 2016 –s.238 and ss.14(1)(d), 22, 30(2), 31, 62 – Interpretation of StatutesD– IBBI (CIRP) Regulations, 2016 – Regulations 37, 38, 38(IA) &39(4).

Insolvency and Bankruptcy Code, 2016 – Aim of; insolvencyprocess under– Discussed.

EInsolvency and Bankruptcy Code, 2016 – s.238 – Scope of– Discussed.

Allowing the appeal, the Court

Conclusion

HELD: 1. In the present case, Section 92 of the MumbaiMunicipal Corporation Act, 1888 (MMC Act) has no bearing onFthe validity of the resolution plan, the approval order or theimpugned order. Section 92 of the MMC Act mandates andprescribes the manner in which disposal of land belonging to theappellant would take place. However, the resolution plan doesnot contemplate any disposal of the said land or creation of anyGadditional rights and obligations of appellant or the CorporateDebtor in relation to the lands. It is merely the shareholding ofthe Corporate Debtor which undergoes a change pursuant to theresolution plan. Appellant cannot place any embargo on suchshareholding changes by resorting to proceeding under theCode. On admission of an insolvency application preferred by aHfinancial creditor/operational creditor, a moratorium is declared MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)v. ABHILASH LAL & ORS.

on the continuation and initiation of all legal proceedings againstthe debtor. The NCLT appoints an interim resolutionprofessional (“IRP”). The moratorium operates till thecompletion of the insolvency resolution process which, by lawshould be completed within a mandated time frame. During themoratorium period, the debtor cannot transfer, encumber or sellany asset. Upon appointment of an IRP, the board of directorsstands suspended and management vests with the IRP. Theseprofessionals (IRPs) have to conduct the insolvency resolutionprocess, take over the assets and management of the company,assist creditors in collecting information and manage theinsolvency resolution process. The term of the IRP continuesuntil an RP is appointed under Section 22. The IRP has to firstdetermine the debtor’s financial position through informationcollection regarding assets, finances and operations. Informationmay include data relating to operations, payments, list of assetsand liabilities. The IRP further has to receive and collate claimssubmitted by creditors. The RP selected by the NCLT has toconstitute a committee of creditors (CoC) comprising all thefinancial creditors of the corporate debtor. This provision isaimed at creditors adopting a collective approach towardsinsolvency resolution instead of proceeding individually. Keydecisions of the process, and the plan to be eventually finalizedare to be approved by the CoC upon its satisfaction that theprovisions of the most acceptable plan would ensure that theirdues are cleared. [Para 24, 26 and 27] [674-A-C-E-H; 675-A-B]

2. The Insolvency and Bankruptcy Code, 2016 isprincipally aimed at aiding a corporate debtor in the resolutionof its insolvency condition without approaching liquidation. Thekey to this process is the finalization of an insolvency resolutionplan. A suitably structured plan would provide for repayment ofthe debtor’s outstanding liabilities after evaluating its financialworth, at the same time ensuring its survival as a going concern.The resolution plan must necessarily provision for repaymentof the debt of operational creditors in a manner such that it shallnot be lesser than the amounts that would be due, should thedebtor be liquidated per Section 30(2) of the Code. Also, theplan should identify the manner of repayment of insolvency AB

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Aresolution costs, the implementation and supervision of thestrategy, and should be in compliance with the law. If the terms(including the terms of repayment) under the resolution plan areapproved by the committee of creditors, it has to be furtherapproved by the NCLT, which is the adjudicating authority. [Para28] [675-B-D]B

3.1 The show cause notice in this case preceded admissionof the insolvency resolution process. In view of the clearconditions stipulated in the contract, appellant reserved all itsrights and its properties could not have therefore, in any manner,been affected by the resolution plan. Equally in the opinion ofCthis Court, the adjudicating authority could not have approvedthe plan which implicates the assets of MCGM especially whenSevenHills had not fulfilled its obligations under the contract.[Para 33] [683-D-E]

3.2 SNMC’s proposed insolvency plan on the one hand noDdoubt provided for the liquidation of MCGM’s liabilities initiallyto the tune of ` 102 crores (later revised to over ` 140 crores).However, the provisions of the resolution plan clearlycontemplated infusion of capital to achieve its objectives. Oneof the modes spelt out in the plan for securing capital wasEmortgaging the land. Initially, no doubt, SNMC stepped into theshoes of SevenHills and assumed its control. The corporaterestructuring was a way of taking over of the company’sliquidation by SNMC as it was not only Seven Hills’ project withshares and liquidation of debts, but also the restructuring of thecompany’s liabilities if necessary, by creating fresh debts andFmortgage of the land which directly affected MCGM. Section 92unequivocally prescribes the method whereby MCGM’sproperties can be dealt with through lease or by way of creationof any other interest. The only mode permitted is through priorpermission of the corporation. The resolution plan was neverGapproved by the corporation and that it was put to vote. Thecontesting parties, including the RP and CoC were unable topoint out to anything on the record to establish that a validpermission contemplated by Section 92 was ever obtained withregard to the proposal in the resolution plan. The proposal wasapproved by the NCLT and MCGM’s appeal was rejected byHNCLAT. The proposal could be approved only to the extent it

did not result in encumbering the land belonging to MCGM. Itis evident from a plain reading of Section 92(c), that theCommissioner (of MCGM) is empowered to, with the sanctionof the corporation,“lease, sell or otherwise convey anyimmovable property belonging to the corporation.” It is not indispute that the original contract entered into on 20-12-2005contemplated the fulfilment of some important conditions,including firstly, the completion of the hospital project within atime frame; and secondly, timely payment of annual lease rentals.It is a matter of record that the hospital project was scheduledto be completed by 24th April, 2013. MCGM cites Clause 15(g)of the contract to urge that within a month of this event, i.e.completion of the hospital, a lease deed had to be executed. Thisevent never took place. Therefore, the terms of the contractremained, in the opinion of the court, an agreement to enter intoa lease; it did not per se confer any right or interest, except thatin the event of MCGM’s failure or omission to register the lease(in the event SevenHills had complied with its obligations underthe contract), it could be sued for specific performance of theagreement, and compelled to execute a lease deed. That eventdid not occur; SevenHills did not complete construction of the1600 bed hospital. Apparently, it did not even fulfill itscommitment, or pay annual lease rentals. In these circumstances,MCGM was constrained to issue a show cause notice before theinsolvency resolution process began, and before the moratoriumwas declared by NCLT on 13th March, 2018. According toMCGM, in terms of Clause 26 (of the contract), even theagreement stood terminated due to default by SevenHills. Thiscourt does not propose to comment on that issue, as that iscontentious and no finding has been recorded by either theadjudicating authority or the NCLAT. The principle that if astatute requires a thing to be done in a particular manner, itshould be done in that manner or not at all, articulated in NazirAhmad v. Emperor, AIR 1936 PC 253, has found widespreadacceptance. In the context of this case, it means that if alienationor creation of any interest in respect of MCGM’s properties iscontemplated in the statute through a particular manner, that endcan be achieved only through the prescribed mode, or not at all.[Paras 34-36, 39] [683-F-H; 684-A-H; 688-F-G]

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664SUPREME COURT REPORTS

[2019] 14 S.C.R.

ARam Singh Vijay Pal Singh & Ors. v. State of U.P. &Ors (2007) 6 SCC 44 : [2007] 5 SCR 1060 ; EssarBulk Terminal Limited & Anr. v. State of Gujarat & Ors.(2018) 3 SCC 750 – relied on.

Saroj Screens Pvt. Ltd. v Ghanshyam & Ors. (2012)B11 SCC 434 : [2012] 5 SCR 141 – referred to.Nazir Ahmad v. Emperor, AIR 1936 PC 253 – referredto.

3.3 The material placed on record by MCGM before thisCourt also reveals that the meeting held by the Corporation onC14[th] December, 2018, referred back to the resolution proposalgiven by SNMC. The minutes of the meeting records that threemembers were unanimous in their view that since SevenHillshad not complied with the terms and had even sought toencumber the property by mortgage, SNMC, a UAE basedDcompany, ought not be granted approval to take over the plotand proceed with its project. [Para 41] [689-H; 690-A]

Jaipur Metals & Electricals Employees Organizationv. Jaipur Metals & Electricals Ltd. (2019) 4 SCC227 : [2018] 14 SCR 926 ; Duncans Industries v. A.J.Agrochem (2019) SCC Online (SC) 1319 ; MacquaireEBank Ltd. v. Shilipi Cable Techologies Ltd. (2018) 2SCC 674 : [2017] 13 SCR 751 ; Dharani Sugars &Chemicals Ltd. v. Union of India & Ors. (2019) 5 SCC480 – relied on.

4. Section 238, cannot be read as overriding the MCGM’sFright – indeed its public duty - to control and regulate how itsproperties are to be dealt with. That exists in Sections 92 and92A of the MMC Act. This court is of opinion that Section 238could be of importance when the properties and assets are of adebtor and not when a third party like the MCGM is involved.GTherefore, in the absence of approval in terms of Section 92 and92A of the MMC Act, the adjudicating authority could not haveoverridden MCGM’s objections and enabled the creation of afresh interest in respect of its properties and lands. No doubt,the resolution plans talk of seeking MCGM’s approval; they alsoacknowledge the liabilities of the corporate debtor; equally,Hhowever, there are proposals which envision the creation of MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)v. ABHILASH LAL & ORS.

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charge or securities in respect of MCGM’s properties.Nevertheless, the authorities under the Code could not haveprecluded the control that MCGM undoubtedly has, under law,to deal with its properties and the land in question- whichundeniably are public properties. The resolution plan therefore,would be a serious impediment to MCGM’s independent plansto ensure that public health amenities are developed in themanner it chooses, and for which fresh approval under the MMCAct may be forthcoming for a separate scheme formulated bythat corporation (MCGM). There is no approval for the plan, inaccordance with law; in such circumstances, the written pleaaccepting the plan, by a counsel or other representative who isnot demonstrated to possess the power to bind MCGM, isinconclusive. In this regard, the court notices the well-knownprinciple that there can be no estoppel against the expressprovisions of law. The impugned order and the order of theNCLT cannot stand; they are set aside. [Para 47-49] [693-H; 694-E-H]

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Kasinka Trading v. Union of India (1995) 1 SCC274 : [1994] 4 Suppl. SCR 448 ; Darshan Oils (P) Ltd.v. Union of India (1995) 1 SCC 345 : [1994] 5 Suppl.SCR 278 ; Shrijee Sales Corporation v. Union of India(1997) 3 SCC 398 : [1996] 10 Suppl. SCR 888 ; ShreeSidhbali Steels Ltd. v. State of U.P. (2011) 3 SCC193 : [2011] 3 SCR 134; Pappu Sweets and Biscuitsv. Commr. of Trade Tax, U.P. (1998) 7 SCC 228: [1998]2 Suppl. SCR 119 ; Commr. of Customs v. Dilip Kumar& Co. (2018) 9 SCC 1 : [2018] 7 SCR 1191 – referredto.

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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6350of 2019.CFrom the Judgment and Order dated 07.08.2019 of the NationalCompany Law Appellate Tribunal, New Delhi in Company Appeal (AT)Insolvency No. 808 of 2019.

Neeraj Kishan Kaul, Huzefa Ahmadi, Siddharth Bhatnagar, C.A.DSundaram, P.S. Narsimha, Ramji Srinivasan, Maninder Singh, K.V.Vishwanathan, Sr.Advs., Pralhad Paranjpe, Ms. Sneha Prabhu,Ms. Pallavi Pratap, Varun Mathur, Ms. Neema, Ms. Divyya Kapur,Divyanshu Srivastava, (for M/s. Pratap and Co.,) Siddharth Ranade,Ms. Prerna Priyadarshini, Ms. Shivani Rawat, Ms. Priyashree SharmaPh, Supriyo Ranjan Mohapatra, Rahul G. Tanwani, Ms. Sindoora VNL.,EMs. Aditi Tripathi, Shubhabra Chakraborti, Kamlendra Singh, VrindaBagaria, Prabhash Bajaj, Ms. Sylona (for M/s. Juris Corp.),Ms. Rachana Jain, Samiron Borkataky, Ms. Nitya Chadha, Ms. KrithikaAngirish, Apoorv Singhal, Gagan Gupta, Advs. for the appearingparties.

FThe Judgment of the Court was delivered by

S. RAVINDRA BHAT, J.

FThe Judgment of the Court was delivered by

S. RAVINDRA BHAT, J.

1. The Municipal Corporation of Greater Mumbai (hereafter“MCGM”) appeals under Section 62 of the Insolvency and BankruptcyCode, 2016 (hereafter “IBC” or “the Code”) against the order of theGNational Company Law Appellate Tribunal (hereafter variously“NCLAT” and “the Appellate Tribunal”), rejecting its plea with respectto a resolution plan approved by the National Company Law Tribunal(“NCLT”) under the provisions of that Code.

2. MCGM owns inter alia, Plot Nos. 155-156, 162 and 168 (allHplots hereafter called “the lands”) in village Marol, Andheri (East)

Mumbai. By a contract (dated 20[th] December, 2005) SevenHillsHealthcare (P.) Ltd. (the company facing insolvency proceedings,hereafter “SevenHills”) agreed to develop these lands (which were tobe leased to it for 30 years) and construct a 1500 bed hospital. MCGMstipulated several conditions, including that 20% of the beds had to bereserved for use by the economically deprived, and that SevenHills hadto complete the construction in 60 months (excluding monsoons). Thesixty-month period ended on 24[th] April, 2013; the project however, wasnot completed. In terms of Clause 15(g), the lease deed had to beexecuted within a month after completion. However, the deed was notexecuted as the project was not completed. Further, SevenHills had topay lease rent at the annual rate of 10,41,04,000. MGCM alleges thatthere were defaults in these payments. In these circumstances, MCGMissued a show cause notice on 23[rd] January, 2018, proposing terminationof the contract/agreement. It is submitted that SevenHills owed MCGMan amount of ` 76,05,07,780.

3. On the strength of the contract, SevenHills had borrowed frombanks and financial institutions. It had created security by way ofmortgage of the said lands, citing Clause 5, which enabled the creationof such encumbrances. SevenHills’ inability to repay its debts led tothe initiation of insolvency proceedings by Axis Bank. On 13[th] March,2018, before the period given by MCGM’s show-cause notice ended,the Petition (CP (IB) No. 282/7/HBD/2017) was admitted by theHyderabad Bench of the NCLT. The first respondent was appointedas the Resolution Professional (hereafter “RP”); this was approved bythe Committee of Creditors (“CoC”) as required by the Code, on 12April, 2018. A publication for expression of interest (“EOP”) was issuedon 14 May, 2018; later, on 25[th] June, 2018 and 16[th] July, 2018, the termsof the Request for Proposal (RFP) and criteria for evaluation (of RFPsreceived) were approved. As a result of the RFP published, a resolutionplan was submitted by Dr. Shetty’s New Medical Centre (“SNMC”).After discussion with the CoC, a revised RFP was submitted by theRP. The revised resolution plan was approved by the CoC on 4thSeptember, 2018.

4. The resolution plan projected infusion of over ` 1000 croresby SNMC. That amount was to be borrowed; for this purpose,SevenHills’ properties - movable and immovable, were proposed to besecured by hypothecation and mortgage respectively. Operational AB

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Acreditors were to be paid off to the extent of 75%. Further, the planproposed payout to the tune of ` 102.3 crores to MCGM as against itstotal claim of ` 140.88 crores, and also committed to honouring theterms of the agreement entered into by SevenHills and providing 20%of the beds (of the hospital to be constructed) to the poor and weakersections of society. The net-worth certificate furnished by SNMCBindicated that it possessed sufficient funds.

5. MCGM filed an application (I.A. No. 207/ 2018) claiming thatit ought to be declared as a Financial Creditor and a Member of theCommittee of Creditors. It made several submissions, which indicatedthat subject to stipulations with respect to completion of the hospitalCproject in a timebound manner, and subject to SNMC providing 20%beds in the completed hospital, for use by the economically weakersections (and at the disposal of MCGM) and, lastly subject to clearingits (MCGM’s) claims to the tune of ` 140.88 crores, it was agreeableto the resolution plan. However, later during the proceedings, it opposedDthe resolution plan, arguing that being a public body as well as a planningauthority, it had to comply with the provisions of the Mumbai MunicipalCorporation Act, 1888 (“MMC Act”), which meant that all action andapproval had to be taken by the Improvement Committee of theCorporation. It was also stated that the show cause notice (“SCN”)dated 23[rd] January, 2018 had been already issued by MCGM proposingEto terminate the contract (with SevenHills) to which there was noresponse and that in the absence of a lease, the provisions of Section14(1)(d) of the Code could not prevent the MCGM from terminatingthe agreement. Another argument made was that the period of CIRPin the case began on 13[th] March, 2018 when the petition was admittedand the period of 270 days expired on 8[th] September, 2018; an extensionFof 90 days provided in Section 12(3) was granted by the AdjudicatingAuthority on 4[th] September, 2018 and the extended period came to anend on 7[th] December, 2018; thus the CIRP has lapsed by efflux of time.

6. The NCLT, after considering the views of the RP, MCGM,the creditors and SNMC, held that:G

“29. It may be relevant to note here that the Application forapproval of the resolution plan was filed on 07.09.2018. TheMCGM at a belated stage has come up with its objectionsto the Resolution Plan with the contention that it isundisputed owner of the plot on which one of the hospitalsHof the Corporate Debtor in Mumbai is built. The various

objections raised by MCGM as enumerated hereinabove ata belated stage are neither tenable nor acceptable. It is clearfrom the record that MCGM is taking a stand which is totallycontrary to its own decisions and factual submissions. Thefinal prayer of MCGM is to reject the ‘resolution plan’ andorder for liquidation of the Corporate Debtor. The RP in hissubmissions has clearly pointed out as to why the avermentsof MCGM are erroneous and incorrect. For the sake ofbriefness, the submissions made by RP as stated supra arenot discussed in detail once again. This AdjudicatingAuthority is of the view that the contentions raised by MCGMcannot be accepted due to the conflicting and contradictorystands taken by it in the course of hearings. Further, thecontention of MCGM relating to expiry of the period of 270days is untenable and unacceptable for the reason that theApplication by the Resolution Professional for the approvalof the Resolution Plan has been made well before the expiryof the period of CIRP and the same is in accordance withthe provisions of the Code. Therefore, the objections raisedby the MCGM are hereby rejected.”

7. The NCLT also held that the plan filed along with the applicationmet the requirements of Section 30(2) of the Code, and Regulations37, 38, 38(IA) and 39(4) of IBBI (CIRP) Regulations, 2016. It alsoheld that the resolution plan did not contravene any of the provisionsof Section 29A and was unanimously approved by that CoC; it providedfor 78.07% of payment to financial creditors and 75% of payment tooperational creditors including doctors, irrespective of claims in incorrectforms. Further, the resolution applicant is also addressing the duespayable to MCGM as stated in the resolution plan. Further, that NCLTobserved that on comparison of the amount offered in the resolutionplan with Form-H submitted by the RP, it was seen that the amountproposed in the plan was more than that of the value of liquidation ofthe Corporate Debtor. It accordingly approved the plan.

8. Aggrieved by NCLT’s order, MCGM approached theAppellate Tribunal, before which several grounds were urged, includingthat since the conditions stipulated in the contract (with SevenHillsHealthcare) had not been complied with, there was no lease deed andconsequently no interest inured in the land, in favour of the CorporateDebtor. It was also urged that the resolution applicant was aware that A

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Athe property belonged to MCGM, and had not vested in the CorporateDebtor. Despite these circumstances, the proposal and revised proposalincorporating encumbrances of the lands were made contrary to law.It was also specifically urged that mandatory provisions of the MMCAct requiring express authorization by the corporation for transfer orcreation of any interest in land had not been complied with andBresultantly, the proposal and revised proposal approved by the NCLT,so far as they dealt with the property and lands, were not enforceableagainst MCGM.

9. The NCLAT in its impugned order, took note of a memo filedon behalf of the MCGM on 20th April, 2019 (before the NCLT), thatCthe revised resolution plan had been accepted and all terms specifiedin its written submissions, were to be incorporated. As a result, theNCLAT was of the opinion that there was no scope for interferencewith the order of the Adjudicating Authority/NCLT.

10. It is argued on behalf of MCGM by its learned senior counsel,DMr. Neeraj Kaul, that no lease deed was executed in favour ofSevenHills, the Corporate Debtor. MCGM was the undeniable ownerof the land; as there were no assets of the Corporate Debtor, it statedthat a duly registered lease deed would be executed. The proposal andrevised proposal seeking direction with regard to the lease deed, hadEto be necessarily dealt with in accordance with law. This meant thatunless MCGM, expressly approved the revised plan, whereby a leasedeed could be executed in favour of the SevenHills Healthcare Pvt.Ltd. (or in favour of the resolution applicant SNFC), neither theadjudicating authority nor the NCLAT could issue any direction seekingto bind MCGM with respect to the manner it had to deal with propertiesFthat belonged to it.

11. It was emphasised that the effect of the impugned order isto prevent MCGM from violating the law. The direction which washighlighted was in violation of Section 92 of the MMC Act. Learnedsenior counsel underlined that the written submissions filed on behalfGof MCGM could not be construed as an admission, or that MCGM wasbound to agree to the revised proposal. It was alternatively argued thatat best, these submissions could be considered as concessions of lawwhich were never binding on MCGM.

12. It was argued that there was no question of incorporatingHany direction or approving the revised plan, which in any manner affected

MCGM’s properties. In this context, Mr. Neeraj Kaul, learned SeniorCounsel, urged that the terms of the original contract (dated 20[th]December, 2005) had been violated; the 1500 bed hospital had not beencompleted by the stipulated date. Furthermore, arrears of lease rentalshad mounted together every attendant liability. In these circumstances,even before the insolvency proceedings were initiated, MCGM issueda show cause notice proposing to terminate the contract. It was furtheremphasised that since the terms of the contract were infringed, in fact,there was no subsisting lease which could have been dealt with by therevised proposal and later by the Adjudicating Authority. It wassubmitted that the impugned order has completely noted these salientaspects.

13. On behalf of the RP (who has been arrayed as the firstrespondent) it is argued by Mr. C.A. Sundaram, learned senior counselthat MCGM had categorically consented to the resolution plan in writingbefore the NCLT and the Appellate Tribunal. He points out that in thewritten submissions dated 28[th] November, 2018, 29[th] April, 2019 and14[th] May, 2019 MCGM categorically stated that the resolution plan beapproved and its application before the NCLT ought to be disposed ofin terms of the commitment given by the resolution applicant/SNMC.It is pointed out that the Appellate Tribunal, after hearing thesubmissions of MCGM that it had no objections to the resolution plan,affirmed it. MCGM, counsel submitted, has not refuted that such astatement was made before the NCLAT. It is therefore the undisputedposition that MCGM had no objections to the resolution plan. That beingthe case, counsel argues that the appeal is not maintainable.

14. Mr. Sundaram argued that MCGM’s contentions that nointerest or leasehold rights in the land were created in favour of theCorporate Debtor, flies in the face of its letters and also its applicationto the NCLT, which in para 4, admitted that the lands were leased tothe Corporate Debtor. In fact, MCGM filed the application claiming thatthe lease was a capital or finance lease and the unpaid lease rentalswere a financial debt within the meaning of the Code. Unlike the writtensubmissions, MCGM did not even explain on what basis it had filedthe application to the NCLT regarding its position that no leasehold rightssubsisted.

15. Learned senior counsel submitted that MCGM was invitedto attend and participate in CoC meetings due to its position as owner AB

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Aof the land on which the Mumbai hospital of the Corporate Debtor islocated. The issue of whether or not the corporate debtor has anyleasehold rights under the contract (of 2005) is a disputed question offact which can only be adjudicated upon in civil proceedings afterconducting a civil trial.B16. It is also argued alternatively, that assuming for the purposeof argument that no leasehold rights were created in favour of theCorporate Debtor, the resolution plan does not create any leaseholdrights in favour of the respondent applicant/SNMC. Learned seniorcounsel argued that the resolution plan merely envisages a change inthe shareholding of the Corporate Debtor but does not transfer any ofCMCGM’s assets to SNMC. Therefore, it is false to suggest that theresolution plan transfers MCGM’s assets to SNMC. It was arguedfurthermore that though MCGM was not entitled to, nor treated as afinancial creditor, it was nevertheless invited to participate in CoCmeetings, interact as well as negotiate favourable terms with potentialDresolution applicants. To further safeguard MCGM’s interests, the RFPalso required all prospective resolution applicants to submit their plansto resolve the dispute with MCGM.

17. Mr. Sundaram also submitted that SNMC’s revised proposalto MCGM assured repayment of its entire dues. In light of a proposalEof this nature, MCGM’s stand seeking liquidation of the CorporateDebtor appears not only arbitrary but also prima facie vindictive.

18. It is also submitted that the resolution plan is absolutelyunconditional in nature and in no manner contingent on the resolutionof the dispute with MCGM. It is submitted that such unconditionality isFthe most fundamental aspect of the resolution plan. This unconditionalnature is recorded in the minutes of meetings of the 8th meeting of theCoC held on 20[th] August 2018. MCGM participated in the meetings ofthe CoC, including the 8th CoC meeting, and was provided a copy ofthe minutes contemporaneously. These minutes record SNMC’scategorical statement that the negotiations with MCGM are in progressGand that the resolution plan is unconditional and in no manner dependenton the outcome of such negotiations. Further, there is no provision inthe resolution plan (and none has been cited by MCGM) which suggeststhat the plan is conditional on settlement with it (i.e. MCGM).

19. It is also submitted that any dispute with MCGM in relationHto the lease of the underlying land has no bearing on the validity of the resolution plan, under Section 31 of the Code. Having been approvedby the CoC and the NCLT on merits, the plan attained finality and bindsMCGM as a stakeholder in the Corporate Debtor. MCGM therefore,cannot hold the entire CIRP of the Corporate Debtor to ransom despitenot even having raised a single objection on the validity of any specificterm in the resolution plan under Section 30(2) of the Code.

20. Mr. Ramji Srinivasan, appearing on behalf of the CoC, arguedthat the financial creditors were interested in ensuring that their dueswere paid, preferably in full. SNFC’s resolution plan held out the bestassurance toward that end. He also argued that the question of obtainingany approval under Section 92A either for creation of charge, or forany other purpose did not arise, because the terms of the contract,which in fact amounted to a lease (as it was a registered instrumentand MCGM had received over 10 crores as initial lease consideration).Therefore, the resolution plan approved by the NCLT, and later, NCLAT,were sound and did not call for interference.

21. It was argued, furthermore, that the reliance on Section 92of the MMC Act is misguided as it seeks to superimpose provisions ofthe MMC Act on the provisions of the Code. This is clearlyimpermissible in terms of the non-obstante provision contained in Section238 of the Code.

22. Mr. K.V. Vishwanathan, learned senior counsel for SNFC,argued that the plan approved provided the best solution for the financialwoes of the Corporate Debtor. It was argued that SNFC neverrepresented that it would mortgage or obtain any loan on the strengthof the lease. Nor did it ever urge that MCGM’s permission was notnecessary. He pointed to the terms of the resolution plan and submittedthat they were subject to MCGM’s obligations to follow the law.

23. It was submitted that the proposed plan contemplatescompliance with the various conditions of the contract agreementincluding without limitation, 20% reservation of beds for MCGM’semployees and settlement of MCGM’s claimed dues. The resolutionplan proposed payment to MCGM (which was enhanced to 100% bya later proposal) at clause 2.2.2(b). Further, clause 2.2.3(f) of theresolution plan again records the proposed payment to MCGM by statingthat while the resolution professional has not admitted the claimssubmitted by MCGM, SNMC recognizes such dues payable to it andshall pay ` 102 crores in terms of the offer made to MCGM asrecorded.

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A24. In the present case, Section 92 of the MMC Act has nobearing on the validity of the resolution plan, the approval order or theimpugned order. Section 92 of the MMC Act mandates and prescribesthe manner in which disposal of land belonging to the appellant wouldtake place. However, the resolution plan does not contemplate anydisposal of the said land or creation of any additional rights andBobligations of MCGM or the Corporate Debtor in relation to the lands.It is merely the shareholding of the Corporate Debtor which undergoesa change pursuant to the resolution plan. MCGM cannot place anyembargo on such shareholding changes by resorting to proceeding underthe Code.C

25. It was urged that SNMC does not acquire any interest inthe said land and only acquires managerial control over the CorporateDebtor by way of holding equity shares in the Corporate Debtor.Therefore, there arises no question of Section 92 of the MMC Act beingviolated through the resolution plan.DDiscussion regarding the insolvency process and relevantprovisions of the MMC Act

26. On admission of an insolvency application preferred by afinancial creditor/operational creditor, a moratorium is declared on thecontinuation and initiation of all legal proceedings against the debtor.EThe NCLT appoints an interim resolution professional (“IRP”). Themoratorium operates till the completion of the insolvency resolutionprocess which, by law should be completed within a mandated timeframe. During the moratorium period, the debtor cannot transfer,encumber or sell any asset. Upon appointment of an IRP, the board ofFdirectors stands suspended and management vests with the IRP. Theseprofessionals (IRPs) have to conduct the insolvency resolution process,take over the assets and management of the company, assist creditorsin collecting information and manage the insolvency resolution process.The term of the IRP continues until an RP is appointed under Section22. The IRP has to first determine the debtor’s financial position throughGinformation collection regarding assets, finances and operations.Information may include data relating to operations, payments, list ofassets and liabilities. The IRP further has to receive and collate claimssubmitted by creditors.

27. The RP selected by the NCLT has to constitute a committeeHof creditors (CoC) comprising all the financial creditors of the corporate

debtor. This provision is aimed at creditors adopting a collectiveapproach towards insolvency resolution instead of proceedingindividually. Key decisions of the process, and the plan to be eventuallyfinalized are to be approved by the CoC upon its satisfaction that theprovisions of the most acceptable plan would ensure that their dues arecleared.

28. The Code is principally aimed at aiding a corporate debtor inthe resolution of its insolvency condition without approaching liquidation.The key to this process is the finalization of an insolvency resolutionplan. A suitably structured plan would provide for repayment of thedebtor’s outstanding liabilities after evaluating its financial worth, at thesame time ensuring its survival as a going concern. The resolution planmust necessarily provision for repayment of the debt of operationalcreditors in a manner such that it shall not be lesser than the amountsthat would be due, should the debtor be liquidated per Section 30(2) ofthe Code. Also, the plan should identify the manner of repayment ofinsolvency resolution costs, the implementation and supervision of thestrategy, and should be in compliance with the law. If the terms(including the terms of repayment) under the resolution plan areapproved by the committee of creditors, it has to be further approvedby the NCLT, which is the adjudicating authority.

29. In this case, it is not the provisions of the IBC which thiscourt has to primarily deal with; it is rather whether the process andprocedure adopted by the NCLT and later the NCLAT, in overrulingMCGM’s concerns and objections with regard to the treatment of itsproperty (i.e. the lands) is in accordance with law. The relevantprovisions of the Municipal Corporation of Greater Mumbai Act, 1888are extracted below:

Provisions governing the disposal of municipal property:

Section 92. With respect to the disposal of propertybelonging to the corporation other than property vesting inthe corporation for the purposes of the Brihan MumbaiElectric Supply and Transport Undertaking, the followingprovisions shall have effect, namely: —

(a) the Commissioner may, subject to the regulations madein this behalf, dispose of, by sale or otherwise, any movableproperty belonging to the corporation not exceeding in value, A

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in each instance, five lakh rupees, of grant a lease of anyimmovable property belonging to the corporation, includingany right of fishing or of gathering and taking fruit and thelike, for any period not exceeding twelve months at a time :

Provided that every lease of immoveable property grantedby the Commissioner (other than a contract for a monthlytenancy) the annual rent where of at a rack rent exceeds 6[fifty thousand rupees] shall be reported by him, withinfifteen days after the same has been granted, to theImprovements Committee; B

(b) the Commissioner may, —

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(i) with the sanction of the concerned Committee,dispose off, by sale of otherwise any movableproperty held by the Corporation, the value of whichexceeds rupees five lakhs ;

(ii) with the sanction of the 9[Standing Committee],dispose off any moveable property held by theCorporation, the value of which exceeds rupees twocrores ; D

(iii) with the sanction of the concerned Committee, granta lease (other than a lease in perpetuity) of anyimmovable property belonging to the Corporation,including any such right as aforesaid; or sell, orgrant a lease in perpetuity of any immovableproperty, the value of which does not exceed 50,000rupees or the annual rent of which does not exceed3,000 rupees ; E

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(c) with the sanction of the corporation, the Commissionermay lease, sell or otherwise convey any immovable propertybelonging to the corporation

(cc) the consideration for which any immovable property orGany right belonging to the corporation may be sold, leasedor otherwise transferred shall not be less than market valueof such premium, rent or other consideration; (d) sanction of the corporation under clauses (b) and (c) maybe given either generally for any class of cases or speciallyHin any particular case ;

(dd) notwithstanding anything contained in this section, theCommissioner may, with the sanction of the Corporation, andwith the approval of the State Government, grant a lease ofimmovable property belonging to the Corporation to a Co-operative Housing Society formed exclusively by the officersand servants of the Corporation, or to a public trustexclusively for medical and educational purposes registeredunder the Bombay Public Trust Act, 1950 or to a societyregistered under the Societies Registration Act, 1860 or theMaharashtra Co-operative Societies Act, 1960, a public trustregistered under the Bombay Public Trust Act, 1950, or acompany registered under the Companies Act, 1956 3[or anyperson for the purposes of provision of public latrines,urinals and similar conveniences or construction of a plantfor processing excrementitious and other filthy matters ofgarbages] or to a person who is dishoused as a result ofthe implementation of any Development Scheme of theCorporation or to a Co-operative Housing Society formedexclusively by the persons who are dishoused as a result ofthe implementation of any Development Scheme of theCorporation, at such rent, which may be less than the marketvalue of the premium, rent, or other consideration, for thegrant of such lease, and subject to such conditions, as maybe provided by the bye-laws made under section 461; (ddd) notwithstanding anything contained in this section, theCommissioner may, with the sanction of the Corporation, andwith the approval of the State Government, grant a lease fora period not exceeding 60 years, of municipal land whichis declared as a slum area under the provisions of theMaharashtra Slum Areas (Improvement, Clearance and Re-development) Act, 1971 to a co-operative society of slumdwellers occupying such land, at such rent, which may beless than the market value of the premium, rent, or otherconsideration, for grant of such lease, and subject to suchconditions, as the Corporation may impose. The approval ofthe State Government under this clause may be given eithergenerally for any class of cases of such lands or specificallyin any particular case of such land : Provided that, theCommissioner may in like manner renew, from time to time ; ABCDEF

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Athe lease for such period and subject to such conditions asthe Corporation may determine and impose ; (dddd) All leases granted by the corporation of theimmovable properties belonging to the corporation forwhatever term shall be subject to the following conditionsBin addition to the conditions stipulated in the Lease-deed orLease-agreement executed by the corporation, namely: —

(i) Leasehold rights in respect of the properties belongingto the corporation and given on lease may be furtherassigned or transferred only with the prior permissionof the Commissioner, on payment of such premium onaccount of unearned income and transfer fees orcharges at such rates as may be specified by thecorporation, from time to time.

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(ii) In the case of any contravention of the provisions ofsub-clause (i), the lessee or transferor of suchleasehold rights, shall be liable to pay penalty inaddition to such premium and transfer fees or charges,at such rates as may be specified by the corporation,from time to time.

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E(e) the aforesaid provisions of this section shall apply,respectively, to every disposal of property belonging to theCorporation made under or for any purpose of this Act;

Provided that nothing in this section shall apply Dr. BhauDaji Lad Museum or to the site thereof referred to in sectionF89C except with the previous sanction of 5[the 6[State]Government].

Section 92A. Where—

(1) the Commissioner has transferred by way of sale orexchange any immovable property belonging to theGCorporation and the terms of such transfer direct that theproperty shall be applied or enjoyed in a particular manneror the use or enjoyment thereof shall be restricted in aparticular manner, or

(2) the owner of any immovable property has entered intoHan agreement with the Corporation concerning the

application, enjoyment or use of the property in a particularmanner, such term, condition or obligation shall be held tobe annexed to the property which is the subject-matter of thetransfer or agreement and shall be enforced against thetransferee or owner and all persons deriving title or interestunder or through him, notwithstanding—

(a) any law for the time being in force, and (b) that the Corporation are not in possession of orinterested in any immovable property for the benefit ofwhich, the term, condition or obligation was agreed to,entered into or imposed.”

30. At this stage, it would be relevant to notice certain conditionsin the contract. Clause 2(i) stipulates the minimum lease rent as 10.40crores for which SHCL agreed to pay 0.1% over and above theminimum lease rent. Clause 5 of the agreement permitted SevenHillsto mortgage and/or create charge of the schedule property. Theconditions read as follows:

“5. The Owner hereby agrees to permit and allow the SHCLon the terms and conditions to be approved by the Ownerwhich permission/approval shall not be unreasonablywithheld, to mortgage and/or create charge on the ScheduleProperty and/or SHCL’s leasehold right thereon with orwithout the Buildings on the Schedule property during thelease period or prior thereto i.e. during the project period)in any manner whatsoever either in whole or in part as SHCLmay require from time to time to the satisfaction of thelenders, for the purpose of raising financial assistance fromthe Financial Institutions/Banks/NBFOs/Co-operativeSocieties/ Trust/ UF/ Partnership/Proprietary Firm and anyother lending individuals/institutions, whether incorporatedor not, for any purpose for and in connection with the saidProject including for the purpose of commencing, carryingout and completing the construction of the Buildings, settingup of hospital, Medical Educational institutions commercialand other establishments within the Frame work ofDevelopment Control Regulations in force, in such Buildings,their running, maintenance, renovation, reconstruction etc.For this purpose, the SHCL shall have to apply for AB

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Apermission not mortgage and/or create charge to MunicipalCommissioner two months in advance and if the approval isnot received within two months from the date of receipt ofsuch a request by the Commissioner, it will be deemed asapproved and SHCL shall be at liberty to create themortgage of the Schedule Property in favour of the LendersBwithout any recourse to the Owner.”31. Clause 15(a) which stated that the lease deed had to beentered into upon on completion of the project and contained otherconditions, pertinently, reads as follows:

C“15. LEASE OF PLOT:

a) Lease period:

C“15. LEASE OF PLOT:

a) Lease period:

i) The SHCL shall enter into a Lease Deed on completionof project period for leasing the plot to SHCL for theDperiod of 60 years. After 60 years, the lease periodwill be extended with the mutual consent of Owner andSHCL on the terms that may be mutually agreed uponby both the parties for further period.

ii) The lease period of 60 years shall commence from theEdateof completion of the Project period.

iii) On completion of the said Project the Owner shall issueto SHCL ‘Project Completion Certificate’. Till thecompletion and commissioning of the project andrunning of the Project facilities, till the end of leaseFperiod, this Contract Agreement is to be read, inconjunction with the said Lease Deed which bothParties will enter into on completion of the projectperiod.

iv) The SHCL shall complete the construction of theGhospital building within the project period of 60 monthsexcluding monsoon. the MCGM shall be liable to issuethe Project Completion Certificate on writtenapplication by SHCL to that effect after completion ofthe project.

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e) Penalty for delay:

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i) SHCL shall complete the entire Project and open thefacility to public use within the approved time limit.SHCL shall submit the work programme with definedmilestones.the progress of the work shall be strictly asper the programme of construction submitted by SHCLBand approved by the Commissioner.

In case SHCL fails to complete the Project as aforesaidwithin the said Project Period of 60 (sixty) monthsexcluding monsoon from issuance of CommencementCertificate, and unless such failure is due to forceCMajeure conditions, penalty for delay shall be chargedfor the period of delay which will be equivalent to 25%of Lease Rent which SHCL would have paid to theOwner for that period, had the Project been completedwithin the Project Period and this shall be in additionto lease rent.D

ii) SHCL shall have to separately pay the compensationfor delay to the Owner at the end of notice period.

iii) However, in case any delay occurs because ofcircumstances beyond the control of SHCL onlyEsuitable extension in the period of the Project withoutimposing penalty or demand for compensation fordelay shall be granted for completing the Project. Noother claim or compensation of whatsoever nature shallbe entertained.

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g) Lease Deed:

A Lease Deed shall be executed as per draft annexed to thisContract Agreement as Annexure-’II’within one month fromthe expiry of the Project period or on intimation from theowner whichever is earlier.

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17. MORTGAGE OF PLOT AND BUILDINGS

a) The SHCL is hereby allowed to sublease; mortgage andcreate a charge on the said plot and buildings either in partor in total to the satisfaction of lenders for the purpose of H

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raising financial assistance to commence, progress, complete,commission and run the hospital complex and othercommercial activities during the Pendency of the leaseperiod, from the financial institutions/ FIIS/Banks/MutualFunds/Co-operative Societies, Trusts/individuals/HUFs/Partnership Firms, other lending institutions and lenders ofany constitution for the said Project with the prior permissionof the Commissioner, which permission shall not beunreasonably withheld, during the Project period and/orduring the subsistence of the lease and the Owner shall bekept informed of such deals after permission by theCommissioner and SHCL shall file relevant documentaryevidence to that effect for record of the owner.

The permission which shall be granted by the Owner to SHCLto mortgage the Schedule Property in favour of the lender(s) for raising finance will remain irrevocable and irreversibleduring the tenure of the Project period and lease periodexcept when the contact is terminated. In case the contractis terminated for valid reason, the Owner shall not bear anycost and consequences of resultant termination of mortgageby SHCL to any Financial Institution. While the right ofownership will remain with the Owner, the leasehold rightsto the property will remain free from encumbrances anddedicated to the lenders during the currency of loan or thelease period whichever is earlier and the lenders shallcontinue to enjoy the same rights and privileges as that ofSHCL.

SHCL is also hereby allowed, with prior written permissionfrom Commissioner to sublet the whole or part thereof and/or the buildings on the Schedule Property. The SHCL shallbe entitled to sublet the Schedule Property and the Building/s thereon from time to time in whole or in part for anyduration (not beyond the lease period) to any other Party/ies (sub-lessee/s) on such terms and conditions, as may beagreeable to SHCL within the frame work of the tender andthis Agreement and for the same or similar purposes forwhich agreement is intended, by means of duly registeredDeed/s. SHCL shall have to apply for permission to Municipal Commissioner two months in advance and if theapproval is not received within two months from the date ofreceipt of such a request by the Commissioner, it shall bedeemed as approved.”

32. A cumulative reading of the stipulations reveals that thecontract/agreement contemplates that the lease deed was to be executedafter the completion of the project. The contract reveals that (a) theproject period was for 60 months starting from the date excluding themonsoon period; (b) by Clauses 5 and 17, SevenHills could mortgagethe property for securing advances from financial institutions for theconstruction of the project and thereafter towards its working. Suchmortgage/charge or interest was subject to approval by MCGM. In theevent the contract was to be terminated, it was agreed that MCGMwould not in any manner be liable towards the mortgaged amount andall its rights and ownership would continue to vest in it free fromencumbrances (Clause 17).

33. The show cause notice in this case preceded admission ofthe insolvency resolution process. In view of the clear conditionsstipulated in the contract, MCGM reserved all its rights and its propertiescould not have therefore, in any manner, been affected by the resolutionplan. Equally in the opinion of this Court, the adjudicating authority couldnot have approved the plan which implicates the assets of MCGMespecially when SevenHills had not fulfilled its obligations under thecontract.

34. The argument of the RP, the financial institutions (CoC), andthe SNMC with regard to MCGM’s interest not being affected, in thiscourt’s opinion is insubstantial. SNMC’s proposed insolvency plan onthe one hand no doubt provided for the liquidation of MCGM’s liabilitiesinitially to the tune of ` 102 crores (later revised to over ` 140 crores).However, the provisions of the resolution plan clearly contemplatedinfusion of capital to achieve its objectives. One of the modes spelt outin the plan for securing capital was mortgaging the land. Initially, nodoubt, SNMC stepped into the shoes of SevenHills and assumed itscontrol. What is important to notice is that the corporate restructuringwas a way of taking over of the company’s liquidation by SNMC as itwas not only Seven Hills’ project with shares and liquidation of debts,but also the restructuring of the company’s liabilities if necessary, bycreating fresh debts and mortgage of the land which directly affectedMCGM.

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A35. Section 92 unequivocally prescribes the method wherebyMCGM’s properties can be dealt with through lease or by way ofcreation of any other interest. The only mode permitted is through priorpermission of the corporation. It is a matter of record that in the presentcase, the resolution plan was never approved by the corporation andthat it was put to vote. The contesting parties, including the RP andBCoC were unable to point out to anything on the record to establishthat a valid permission contemplated by Section 92 was ever obtainedwith regard to the proposal in the resolution plan. The proposal wasapproved by the NCLT and MCGM’s appeal was rejected by NCLAT.The proposal could be approved only to the extent it did not result inCencumbering the land belonging to MCGM.

36. It is evident from a plain reading of Section 92(c), that theCommissioner (of MCGM) is empowered to, with the sanction of thecorporation,“lease, sell or otherwise convey any immovable propertybelonging to the corporation.” It is not in dispute that the originalDcontract entered into on 20-12-2005 contemplated the fulfilment of someimportant conditions, including firstly, the completion of the hospitalproject within a time frame; and secondly, timely payment of annuallease rentals. It is a matter of record that the hospital project wasscheduled to be completed by 24[th] April, 2013. MCGM cites Clause15(g) of the contract to urge that within a month of this event, i.e.Ecompletion of the hospital, a lease deed had to be executed. This eventnever took place. Therefore, the terms of the contract remained, in theopinion of the court, an agreement to enter into a lease; it did not perse confer any right or interest, except that in the event of MCGM’sfailure or omission to register the lease (in the event SevenHills had Fcomplied with its obligations under the contract), it could be sued forspecific performance of the agreement, and compelled to execute alease deed. That event did not occur; SevenHills did not completeconstruction of the 1600 bed hospital. Apparently, it did not even fulfillits commitment, or pay annual lease rentals. In these circumstances,MCGM was constrained to issue a show cause notice before theGinsolvency resolution process began, and before the moratoriumthwas declared by NCLT on 13March, 2018. According to MCGM,in terms of Clause 26 (of the contract), even the agreement stoodterminated due to default by SevenHills. This court does not proposeto comment on that issue, as that is contentious and no finding has beenHrecorded by either the adjudicating authority or the NCLAT.

37. In Ram Singh Vijay Pal Singh & Ors. v. State of U.P. &Ors (2007) 6 SCC 44, this court dealt with a similar provision, requiringprior approval of the statutory authority without which the property couldnot be disposed of. The court held that:

“The proviso to Sub-section (1) of Section 12 of the Actwould show that the Mandi Samiti (Committee) is notempowered to transfer any immovable property without theprevious approval in writing of the State Agricultural ProduceMarkets Board (Mandi Parishad). Section 26-L of the Actdeals with the powers and functions of the Board. TheDirector of Mandi Parishad (Board) has not been conferredany power whereunder he may issue a general direction thatthe shops, godowns and sheds of the Mandi Parishad shallbe transferred or sold to the traders on hire-purchase basis.Therefore, the appellants can derive no benefit from the letterof the Director dated 4.11.1995, wherein it was mentionedthat a decision had been taken to give the shops on hire-purchase basis. In the counter affidavit the respondents havespecifically asserted that the Board never took any suchdecision to sell the property of the Mandi Samiti to thetraders either on hire-purchase basis or otherwise. Nodocument has been filed to show that the Board ever tookany such decision. It is the case of the respondents that theletter sent by the Director was his own action which hadnever been authorized by the Board. At any rate the proposalmade by the Director never fructified as no such decisionwas taken by the Board and the Board never authorized theMandi Samities (Committees) of various districts in the Stateto transfer the property of the Samiti in favour of the tradersof agricultural produce who had been allotted the shops,godowns and sheds by the Mandi Parishad. In this view ofthe matter, the appellants have no legal right to claim thatthe property be given to them on hire-purchase basis.”

38. In Essar Bulk Terminal Limited & Anr. v. State of Gujarat& Ors. (2018) 3 SCC 750, again, this court held as follows:

“16. Despite this, what is clear from the record is that theAppellants appear to have actually dredged the channel toa depth of 14 meters and appear to have reclaimed an area

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of 164 hectares plus 170 hectares to the south of themangroves, without any permission at all. When this waspointed out to Shri Mihir Joshi, the answer given was thatwhen permission is granted Under Section 35(1) of theGujarat Maritime Board Act, a letter granting suchpermission specifically says that it is permission that isgranted Under Section 35(1) and for this purpose, a letterdated 2nd August, 2008 was referred to. According to him,therefore, the letter dated 14th June, 2007, which referredonly to an NOC for reclamation, could not be given the statusof permission Under Section 35(1). According to the learnedCounsel, therefore, if Section 35(1) were to be read withSection 35(2), it would be clear that permission forreclamation would only be necessary if a private asset wereto be created in the hands of a private person. However, itis clear that the asset to be created belonged only to theGovernment of Gujarat and it was for the GMB to grantpermission to the Appellants to use the same. We are afraidthat it is difficult for us to accept this line of argument.Section 35(1) is couched in negative language and does notrefer to private rights being created. Section 35(2) cannotbe read so as to throw light on Section 35(1), as UnderSection 35(2), the GMB is only given a discretionary powerto require a person, who has acted in contravention ofSection 35(1), to remove the illegal erection. The widelanguage of Section 35(1) cannot be whittled down bySection 35(2) in the manner argued by Shri Joshi, as theGMB may or may not utilise the discretionary power grantedto it Under Section 35(2). The plain language of Section35(1) cannot be curtailed by reading by inference, into Sub-section (2), the fact that the GMB may, by notice, require aperson to remove an erection, only when it has been madewithout previous permission, so as to create a private assetin the hands of a private person. The wide language ofSection 35(1) makes it clear that any reclamation within thelimits of the GMB cannot be carried out except with theprevious permission in writing of the GMB. It is clear,therefore, that dredging to a depth of below 8 meters andreclamation of any area to the south of the mangroves was

done by the Appellants in the teeth of Section 35(1) of theGujarat Maritime Board Act.

17. Mr. Sibal laid great stress on the letter dated 15thNovember, 2012 to show that, in point of fact, what theAppellants were really angling for was to conduct commercialoperations beyond the captive requirements of the Essar Steelplant at Hazira. This letter, while asking for an addition of3700 meters in addition to the existing 1100 meterswaterfront, also went on to speak of developing a 700 metersberth, along with the GMB, for handling commercial cargo.Apart from this, Essar planned to build a world classcontainer terminal and a dry dock, which would serve theshipping industry generally. It also proposed to reclaim afurther 334 hectares land on the southern side with theadditional dredged material. A perusal of this letter wouldleave no doubt about the fact that despite Essar Steel’sproduction being at much less than what was projected, theAppellants’ continued demands would show that the realmotive was to go beyond a captive jetty and to develop acommercial port which, as we have seen, cannot be donewithout a global tender under the Gujarat InfrastructureDevelopment Act.

18. As stated hereinabove, as many as three MOUs wereexecuted between the Appellants, the GMB and the StateGovernment, which MOUs were valid only for a period of12 months and were stated not to have granted any right tothe Appellants, who would incur all the expenditure for thesame. This being the case, it is a little difficult to appreciateShri Joshi’s contention that any legitimate expectation couldbe based on any of the aforesaid expired MOUs. The HighCourt is correct in its conclusion that no such expectationcould possibly have arisen out of the aforesaid MOUs or thecorrespondence between the Appellants and the GMBreferred to.

19. It is also important to note from the correspondencebetween the Appellants and the GMB, that the Appellantswere clearly told that the land to be reclaimed by the AB

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AAppellants would not only belong to the Government ofGujarat, but also that the GMB could utilize the aforesaidland for any purpose. What seems to emerge on a readingof the letters between the parties is that the Appellantswished to dredge the canal, at their own cost, which was nextBto their captive jetty, for their own purposes, for which theyobtained the necessary permission. However, since dumpingof earth, which would emerge as a consequence of dredging,into the open sea would be extremely expensive, it was statedthat instead this earth could be dumped to create reclaimedland next to the captive jetty, which would then benefit bothCthe Appellants and the GMB. In point of fact, 140 hectaresout of 195 hectares that is reclaimed by the Appellants isallocated to the Appellants for their own purposes, thebalance to be given as and when a jetty of 1100 meters plus3700 meters of waterfront is constructed. The argument thatDhuge amounts had been spent to reclaim land is whollyfallacious-huge amounts were spent to dredge a canal whichwas permitted as the Appellants alone were to bear the cost,and as an increased draft would benefit all, as the canal wasopen to all to use. Therefore, any plea as to a legitimateEexpectation of reclaimed land being allocated for theAppellants’ own use, thanks to large amounts being spent,is contrary to the correspondence by the Appellantsthemselves.”

An identical approach was adopted in Saroj Screens Pvt. Ltd.Fv Ghanshyam & Ors., (2012) 11 SCC 434.

39. The principle that if a statute requires a thing to be done ina particular manner, it should be done in that manner or not at all,articulated in Nazir Ahmad v. Emperor, AIR 1936 PC 253, has foundwidespread acceptance. In the context of this case, it means that ifGalienation or creation of any interest in respect of MCGM’s propertiesis contemplated in the statute through a particular manner, that end canbe achieved only through the prescribed mode, or not at all.

40. This Court also notices that an initial No Objection Certificatewas issued by MCGM voluntarily, for creation of interest in respect ofHits properties. Upon its refusal to grant approval, SevenHills filed

proceedings under Article 226 before the Bombay High court (W.P.No 1728 of 2011), in which the Court directed to grant issuance ofcertificate. At the same time, the High Court observed as follows:

Procedure

“11. ...... It is, however, required to be noted here that theCorporation is nor borrowing any amount for its purpose....Ifthe petitioners want financial assistance from the Bank,naturally, it cannot mortgage only the superstructure but theentire property is required to be mortgaged. Aprart from thateven if there is a defect in the title in the matter of creatingmortgage, the Corporation is not going to suffer in anymanner and it is for the concerned Bank to consider the samewhile giving financial assistance. The Corporation is notgoing to get any financial assistance from the Bank and,therefore, whatever documents which the petitioners mayexecute in favour of the Bank, the Corporation is not boundby the same....The said NOC can be granted by theCorporation without prejudice to its rights and contentionsthat the land in question belongs to them and, therefore, nomortgage could have been created for the same. It is alwaysopen to the Corporation to ascertains right to the extent thatthey are not bound by execution of such documents with theBank....However, such grant of NOC, would be withoutprejudice to the rights and contentions of the Corporation.The Corporation may also mention such aspect while givingNOC to the petitioners that such NOC is given withoutprejudice to the rights and contentions that their land couldnot have been mortgaged by the petitioners with the Bank.(emphasis supplied)

12. ......Apart from the same, by granting NOC it cannot beconstrued that the Corporation has also mortgaged its propertyin favour of Axis Bank in any manner....

15. ....It is clarified that this order is passed without prejudice tothe rights and contentions of both the sides and it will have noeffect so far as deciding the matter on merit is concerned.....”

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41. The material placed on record by MCGM before this Courtalso reveals that the meeting held by the Corporation on 14[th] December,2018, referred back to the resolution proposal given by SNMC. The ABC

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Aminutes of the meeting records that three members were unanimousin their view that since SevenHills had not complied with the terms andhad even sought to encumber the property by mortgage, SNMC, a UAEbased company, ought not be granted approval to take over the plotand proceed with its project.

B42. Now, this court proposes to deal with the contention that theprovisions of the Code override all other laws and hence, that theresolution plan approved by the NCLT acquires primacy over all otherlegal provisions. Facially, this argument appears merited. Section 238enacts that:

C“238. Provisions of this Code to override other laws. — Theprovisions of this Code shall have effect, notwithstandinganything inconsistent therewith contained in any other lawfor the time being in force or any instrument having effectby virtue of any such law.”

43. The scope of this provision has been the subject matter ofDdebate in several judgments of this court. In Jaipur Metals &Electricals Employees Organization v. Jaipur Metals & ElectricalsLtd. (2019) 4 SCC 227, the correctness of a High Court’s view whichrefused to transfer winding up proceedings pending before it and setaside the NCLT’s order admitting an insolvency resolution applicationEat the behest of a financial creditor, was in issue. This court held asfollows, setting aside the judgment impugned in that case:

“It is clear that Respondent No. 3 has filed a Section 7application under the Code on 11.01.2018, on which anorder has been passed admitting such application by theFNCLT on 13.04.2018. This proceeding is an independentproceeding which has nothing to do with the transfer ofpending winding up proceedings before the High Court. Itwas open for Respondent No. 3 at any time before a windingup order is passed to apply under Section 7 of the Code.This is clear from a reading of Section 7 together with SectionG238 of the Code which reads as follows:

“238. Provisions of this Code to override other laws. —The provisions of this Code shall have effect,notwithstanding anything inconsistent therewith containedin any other law for the time being in force or anyHinstrument having effect by virtue of any such law.”

18. Shri Dave’s ingenious argument that since Section 434of the Companies Act, 2013 is amended by the EleventhSchedule of the Code, the amended Section 434 must be readas being part of the Code and not the Companies Act 2013,must be rejected for the reason that though Section 434 ofthe Companies Act, 2013 is substituted by the EleventhSchedule of the Code, yet Section 434, as substituted,appears only in the Companies Act, 2013 and is part andparcel of that Act. This being so, if there is any inconsistencybetween Section 434 as substituted and the provisions of theCode, the latter must prevail. We are of the view that theNCLT was absolutely correct in applying Section 238 of theCode to an independent proceeding instituted by a securedfinancial creditor, namely, the Alchemist Asset ReconstructionCompany Ltd. This being the case, it is difficult tocomprehend how the High Court could have held that theproceedings before the NCLT were without jurisdiction. Onthis score, therefore, the High Court judgment has to be setaside.”

44. In the recent judgment in Duncans Industries v. A.J.Agrochem 2019 SCC Online (SC) 1319, the issue was that action underSection 16D(4) of the Tea Act, which provides that the CentralGovernment could take such steps as may be necessary for the purposeof efficiently managing the business of the undertaking, had been taken.It was urged that any notification under Section 16D has effect for fiveyears, which could only be extended if the Central Government wasof the opinion that it is expedient to do so in public interest, for suchperiod not exceeding one year at a time, and for total period notexceeding six years. It was submitted that Section 16E refers to thepower of the Central Government to restart the tea undertaking if it isfound necessary in the interest of the general public. The argument wasthat an insolvency process is also meant to culminate in liquidation, ifthere is no revival, and that since the Tea Act permits the CentralGovernment to take over the management of a tea estate which is notrun properly, prior permission under Section 16G is applicable to suchan estate, the management of which has been taken over by theGovernment. This contention was negatived, by this court, which reliedon Section 238 of the Code.

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A45. In Macquaire Bank Ltd. v. Shilipi Cable Techologies Ltd.(2018) 2 SCC 674, one of the issues was the interplay between Section9 of the Code and provisions of the Advocates Act. It was argued thata demand notice issued through an advocate was not permissible andthat the provisions of the Code overrode all other laws. This courtnegative the contention, holding that it is only in the case of inconsistency,Bthat by reason of Section 238 of the Code would its provisions prevail.On a harmonious construction of the seemingly inconsistent provisions,if the court could give effect to both, it would do so.

46. Dharani Sugars & Chemicals Ltd. v. Union of India &Ors. (2019) 5 SCC 480 is a relevant recent decision of this court. TheCquestion which arose in that case was the legality and constitutionalityof directions issued by the Reserve Bank of India, through a circularof 12[th] February, 2018 regulating resolution of stressed assets of debtors.This court elaborately dealt with provisions of the Banking RegulationAct, 1949 and the Reserve Bank of India Act, 1934 and held that theDpower to issue directions regarding initiation of insolvency proceedingsvested in the RBI, subject to the approval of the Central Government.The court significantly held that the power was contained “within thefour corners” of Section 35AA and observed as follows:

“A conspectus of all these provisions shows that the BankingERegulation Act specifies that the Central Government is eitherto exercise powers along with the RBI or by itself. The roleassigned, therefore, by Section 35AA, when it comes toinitiating the insolvency resolution process under theInsolvency Code, is thus, important. Without authorisationof the Central Government, obviously, no such directions canFbe issued.

30. The corollary of this is that prior to the enactment ofSection 35AA, it may have been possible to say that when itcomes to the RBI issuing directions to a banking companyto initiate insolvency resolution process under the InsolvencyGCode, it could have issued such directions Under Sections21 and 35A. But after Section 35AA, it may do so only withinthe four corners of Section 35AA.

31. The matter can be looked at from a slightly differentangle. If a statute confers power to do a particular act andHhas laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in anymanner other than that which has been prescribed. This isthe well-known Rule in Taylor v. Taylor, [1875] 1 Ch. D. 426,which has been repeatedly followed by this Court. Thus, inState of U.P. v. Singhara Singh, (1964) 4 SCR 485, this Courtheld:

‘The Rule adopted in Taylor v. Taylor [(1875) 1 Ch D426, 431] is well recognised and is founded on soundprinciple. Its result is that if a statute has conferred apower to do an act and has laid down the method in whichthat power has to be exercised, it necessarily prohibits thedoing of the act in any other manner than that which hasbeen prescribed. The principle behind the Rule is that ifthis were not so, the statutory provision might as well nothave been enacted. A Magistrate, therefore, cannot in thecourse of investigation record a confession except in themanner laid down in Section 164. The power to recordthe confession had obviously been given so that theconfession might be proved by the record of it made inthe manner laid down. If proof of the confession by othermeans was permissible, the whole provision of Section164 including the safeguards contained in it for theprotection of Accused persons would be renderednugatory. The section, therefore, by conferring onMagistrates the power to record statements or confessions,by necessary implication, prohibited a Magistrate fromgiving oral evidence of the statements or confessions madeto him. (at pp. 490-491)

Following this principle, therefore, it is clear that the RBIcan only direct banking institutions to move under theInsolvency Code if two conditions precedent are specified,namely, (i) that there is a Central Government authorisationto do so; and (ii) that it should be in respect of specificdefaults. The Section, therefore, by necessary implication,prohibits this power from being exercised in any mannerother than the manner set out in Section 35AA.”

47. In the opinion of this court, Section 238 cannot be read asoverriding the MCGM’s right – indeed its public duty - to control andregulate how its properties are to be dealt with. That exists in Sections A

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A92 and 92A of the MMC Act. This court is of opinion that Section 238could be of importance when the properties and assets are of a debtorand not when a third party like the MCGM is involved. Therefore, inthe absence of approval in terms of Section 92 and 92A of the MMCAct, the adjudicating authority could not have overridden MCGM’sobjections and enabled the creation of a fresh interest in respect of itsBproperties and lands. No doubt, the resolution plans talk of seekingMCGM’s approval; they also acknowledge the liabilities of the corporatedebtor; equally, however, there are proposals which envision the creationof charge or securities in respect of MCGM’s properties. Nevertheless,the authorities under the Code could not have precluded the control that CMCGM undoubtedly has, under law, to deal with its properties and theland in question- which undeniably are public properties. The resolutionplan therefore, would be a serious impediment to MCGM’s independentplans to ensure that public health amenities are developed in the mannerit chooses, and for which fresh approval under the MMC Act may beforthcoming for a separate scheme formulated by that corporationD(MCGM).

48. The last contention of the respondents, that MCGM wasbound by the statement made by its counsel, in the opinion of this court,cannot prevail. As held earlier, there is no approval for the plan, inaccordance with law; in such circumstances, the written plea acceptingEthe plan, by a counsel or other representative who is not demonstratedto possess the power to bind MCGM, is inconclusive. In this regard,the court notices the well-known principle that there can be no estoppelagainst the express provisions of law. (Ref. Kasinka Trading v. Unionof India (1995) 1 SCC 274, Darshan Oils (P) Ltd. v. Union of India(1995) 1 SCC 345, Shrijee Sales Corporation v. Union of IndiaF(1997) 3 SCC 398, Shree Sidhbali Steels Ltd. v. State of U.P. (2011)3 SCC 193, Pappu Sweets and Biscuits v. Commr. of Trade Tax, U.P.(1998) 7 SCC 228 and Commr. of Customs v. Dilip Kumar & Co.(2018) 9 SCC 1.)

49. In view of the foregoing reasons, this court holds that theGimpugned order and the order of the NCLT cannot stand; they arehereby set aside. The appeal is accordingly allowed, without orders oncosts.

Divya PandeyH