SRA Has Procedural Liberty Only, Not Entitlement, to Seek Lease Renewal Under IBC; Final Approval Lies with the State; NCLAT Rules
- REEDLAW
- Aug 21
- 4 min read
REEDLAW Legal News Network reports: In a notable judgment, the National Company Law Appellate Tribunal (NCLAT) clarified that a Successful Resolution Applicant (SRA) under the Insolvency and Bankruptcy Code, 2016, enjoys only procedural liberty, and not a vested right, to seek renewal of expired leases. The Tribunal emphasised that the authority to grant or refuse such renewal lies exclusively with the State Government, and the approval process cannot be compelled under the guise of IBC proceedings.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka, adjudicated a batch of two appeals and related Interlocutory Applications and held that an SRA cannot claim lease renewal as an enforceable right under a resolution plan. The Tribunal observed that while the SRA may follow the statutory process to seek renewal, the decision ultimately rests with the competent State authority, and the Adjudicating Authority under the IBC has no jurisdiction to mandate such renewal.
The National Company Law Appellate Tribunal (NCLAT) dealt with two appeals challenging the order dated 18.10.2024 passed by the NCLT, Kolkata Bench, which had approved the Resolution Plan submitted by Uniglobal Papers Pvt. Ltd. in the CIRP of Duncans Industries Ltd. The appellants contested specific directions contained in the order that allowed the Successful Resolution Applicant (SRA) to apply for renewal of leases pertaining to Tea Gardens whose lease periods had expired prior to the commencement of CIRP. The background of the case indicated that CIRP commenced on 05.03.2020, and the Resolution Plan was approved by the Committee of Creditors with 99.20% votes. Earlier, the Tribunal, by its judgment dated 02.08.2024, had clarified that only three Tea Gardens—Garganda, Kilcott, and Bagracote-I—were assets of the Corporate Debtor, and the Resolution Professional was deemed to be in possession of those estates during CIRP.
The appellants, including Merico Agro Industries Pvt. Ltd. and Nagri Farm Tea Co. Ltd., argued that the Adjudicating Authority exceeded its jurisdiction by granting SRA liberty to pursue or make fresh applications for renewal of leases that had expired prior to CIRP, which they contended prejudiced their possession rights over certain Tea Gardens. They claimed that such directions, particularly those under paragraph 18 of the order and clause 9.2.1 of the Resolution Plan, were beyond the scope of approval proceedings. The appellants emphasised that renewal of leases was outside the purview of the NCLT and was solely within the domain of the State Government.
The Tribunal noted that the Hon’ble Supreme Court had already dismissed appeals challenging the earlier NCLAT order dated 02.08.2024, wherein it was held that appellants lacked locus standi. Further, NCLAT observed that the directions issued by the Adjudicating Authority did not grant any substantive right to the SRA but merely permitted it to pursue renewal applications already filed by the Corporate Debtor or to make fresh applications, subject to the discretion of the State Government. The Tribunal clarified that the NCLT’s observations could not be construed as expressing any opinion on the merits of renewal, which exclusively lay within the jurisdiction of the State authorities.
In light of these findings, NCLAT dismissed both appeals, affirming that the liberty granted to the SRA was procedural and not determinative of lease renewal rights. The directions were restricted to enabling the SRA to pursue existing or pending applications without conferring any entitlement to renewal. The Tribunal also clarified that no opinion was expressed regarding the grant or non-grant of such renewals, and the matter remained within the domain of the State Government. Consequently, the appeals were dismissed without any order as to costs.
Mr. Jishnu Saha, Sr. Advocate with Mr. Ushanath Banerjee, Mr. Avishek Guha, Mr. Ishaan Saha and Mr. Soumya Dutta, Advocates, represented the Appellant.
Mr. S.N. Mukherjee & Mr. Ratnanko Benerji, Sr. Advocates with Mr. Kanishk Kejriwal, Ms. Ashika Dega, Mr. Rahul Ahuja, Mr. Aayush Lakhotia, Ms. Sanchali Bhowmik and Mr. Sampurna Mukherjee, Advocates, represented the Appellant.
Mr. Joy Saha, Sr. Advocate, with Mr. Amit Kasera, Ms. Kriti Gera and Ms. Urmila, Advocates, appeared for the Respondent No. 1.
Mr. Amar Dave, Sr. Advocate, with Mr. Ashok Krumar Jain, Advocates, appeared for the Respondent No. 2.
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