NCLT Has Exclusive Jurisdiction to Decide Possession and Lease Validity of Corporate Debtor’s Assets Under Section 60(5) IBC
- REEDLAW
- 3 hours ago
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REEDLAW Legal News Network reports: In a significant ruling delineating the jurisdictional contours of insolvency adjudication, the High Court held that disputes relating to possession and the validity of lease or licence arrangements concerning the assets of a corporate debtor fall squarely within the exclusive domain of the National Company Law Tribunal. The Court clarified that such jurisdiction flows directly from Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016, and is not dependent upon or curtailed by prior declarations relating to avoidance transactions under the Code.
The Gujarat High Court Single-Judge Bench of Justice Niral R. Mehta, while adjudicating a Special Civil Application along with a connected application, held that the National Company Law Tribunal has wide and exclusive jurisdiction under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 to adjudicate disputes concerning possession and the validity of lease or licence arrangements forming part of the corporate debtor’s assets during insolvency or liquidation. The Court observed that such jurisdiction subsists irrespective of whether any prior declaration has been made under Sections 43, 45 or 49 of the Code.
The High Court was seized of a writ petition under Articles 226 and 227 of the Constitution challenging an order passed by the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016, whereby the Petitioners, who claimed to be lessee and licensee of certain immovable properties of the Corporate Debtor, were directed to vacate the premises, clear arrears of rent and licence fees, and hand over vacant and peaceful possession to the Liquidator. The properties had been leased and licensed through agreements executed prior to and immediately around the commencement of insolvency proceedings. The Petitioners contended that disputes relating to lease and licence arrangements fell outside the jurisdiction of the Tribunal and that, in the absence of any declaration under Sections 43, 45 or 49 of the Code, the Tribunal lacked authority to pass eviction and possession directions.
The Court examined the statutory scheme of the Code, including Sections 18, 25, 35 and 60(5), and held that the Resolution Professional and Liquidator were under a statutory duty to take control, custody and protection of all assets of the Corporate Debtor. It was held that the jurisdiction of the Tribunal under Section 60(5)(c) was wide and extended to all questions of law or fact arising out of or in relation to insolvency resolution or liquidation proceedings, including disputes concerning possession of assets claimed to form part of the liquidation estate. The Court observed that lease and licence arrangements executed in close proximity to the insolvency commencement date, particularly where collusion and control by the suspended management were alleged, bore a direct nexus to the liquidation process and could not be treated as independent civil disputes beyond the Tribunal’s domain.
The High Court rejected the contention that the Tribunal could exercise jurisdiction only after a formal declaration under the avoidance provisions of the Code. It was held that even if certain provisions, such as Sections 43, 45 or 49, were not expressly invoked or discussed, such omission would not render the order without jurisdiction, but would at best give rise to a challenge on merits before the statutory appellate forum under Section 61. The Court further noted serious factual circumstances indicating collusion between the Petitioners and the suspended management of the Corporate Debtor, including execution and registration of agreements on the very day the moratorium was declared, suppression of material facts, and common control and representation.
In view of the availability of an efficacious statutory appeal, the absence of any fundamental jurisdictional error, and the Petitioners’ failure to approach the Court with clean hands, the High Court declined to exercise its discretionary writ jurisdiction. The writ petition was dismissed, interim relief was vacated, and the request for continuation of interim protection was expressly rejected, leaving the Petitioners to pursue remedies, if any, under the appellate mechanism provided by the Insolvency and Bankruptcy Code, 2016.
Mr. S.N. Soparkar, Senior Advocate, with Mr. Arjun R. Sheth, Advocate, represented the Petitioners
Mr. Kunal P. Vaishnav and Mr. Vyuvraj G. Thakore, Advocates, appeared for the Respondent No. 1.
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