Termination of Leave & Licence Agreements with One-Month Notice by Resolution Professional Valid Under IBC Section 60(5)
- REEDLAW
- Sep 25
- 3 min read
REEDLAW Legal News Network reports: In a decisive ruling, the National Company Law Appellate Tribunal, Principal Bench, affirmed that a Resolution Professional may validly terminate leave and licence agreements with a one-month contractual notice under Section 60(5) of the Insolvency and Bankruptcy Code (IBC). The Tribunal clarified that the Adjudicating Authority is empowered to order the eviction of occupants and recover outstanding licence fees during the Corporate Insolvency Resolution Process (CIRP), notwithstanding objections raised under the Maharashtra Rent Control Act.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), while adjudicating a batch of three Company Appeals, held that termination of leave and licence agreements by a Resolution Professional with a one-month contractual notice is valid under Section 60(5) of the IBC. The Tribunal further ruled that the Adjudicating Authority may direct eviction of the occupants and recovery of unpaid licence fees, rejecting arguments based on the Maharashtra Rent Control Act during the CIRP..
The appellants challenged orders directing them to vacate premises that had been licensed to them by the Corporate Debtor under various leave and licence agreements. The Corporate Insolvency Resolution Process commenced against the Corporate Debtor by order dated 4 June 2024, and the Resolution Professional was appointed. The Resolution Professional initially accepted licence fees but later issued notices dated 28 October 2024 terminating the agreements and requiring the appellants to vacate within one month. The appellants refused to vacate, leading the Resolution Professional to file three separate applications under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking possession of the licensed premises.
The Adjudicating Authority examined the agreements and held that the Resolution Professional had validly terminated the leave and licence arrangements by giving the contractually stipulated one-month notice. It rejected the appellants’ argument that the Tribunal’s jurisdiction was excluded under the Maharashtra Rent Control Act, 1999, and directed each appellant to vacate the premises within thirty days while also making them liable to pay the outstanding licence fees for the period of continued occupation.
On appeal, the appellants contended that the directions to pay arrears of licence fees were beyond the scope of the applications and that they were entitled to remain in possession for the full term of their agreements, having invested in the premises and being willing to pay licence fees. They also argued that no authority, including the RERA, had initiated action regarding any alleged violation of the sanctioned building plan, and hence, the Resolution Professional could not rely on such grounds to terminate the agreements.
The Appellate Tribunal considered the terms of the agreements, which explicitly allowed either party to terminate upon one-month notice, and observed that only the first and second floors of the building were approved for commercial use. The Tribunal concluded that the Resolution Professional acted within the contractual and statutory framework in terminating the agreements and seeking possession. It upheld the Adjudicating Authority’s orders directing the appellants to vacate the premises and to pay any unpaid licence fees for their period of occupation.
Mr. Amit R. Agrawal, Advocate, represented the Appellant.
Mr. Utsav Mukherjee, Mr. Saksham Ahuja and Mr. Mayukh Roy, Advocates, appeared for the Resolution Professional (RP).
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