Interim Resolution Professional Is Empowered To Take Possession Of Assets Owned By Corporate Debtor: NCLAT

Brief Facts:

On application filed under Section 7 by M/s. Assets Care and Reconstruction Enterprise Pvt. Ltd., Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor- Rajesh Cityspaces Private Limited commenced on 15.01.2024.

On 31.05.2024, the IRP has sent an e-mail to the Suspended Board of Directors including the Appellant requesting to handover the physical possession of the property admeasuring 20,881 sq. ft. at Nutan Kailash Nivas Co-operative Society, R.B. Mehta Road, Ghatkopar East, Mumbai.

On 12.03.2025 parties were heard and by impugned order dated 22.04.2025, Adjudicating Authority has allowed IA No.4820 of 2024 directing the Appellant to handover the possession of the Flat Nos.601 and 1101 within 10 days from the date of the order.

Aggrieved by this order, this Appeal has been filed by the Appellants.

Contentions:

The Appellants submitted that Appellants who were in possession of the two flats by virtue of the Board Resolution could not have been directed to be evicted by the Adjudicating Authority on the application of the IRP. IRP was free to take normal process of law for evicting the Appellants.

It was further submitted that the Board Resolution contemplated 10 months' notice for vacation of the premises, hence, the Adjudicating Authority could not have directed for vacation of the said premises.

Per contra, the Respondent submitted that the Appellant has no right to remain in possession of the assets which admittedly owned by the Corporate Debtor. Appellant does not claim any right in the assets Flat Nos.601 and 1101 nor they claim any lease or license from the Corporate Debtor.

It was further submitted that the Adjudicating Authority has jurisdiction to entertain the application filed by the IRP for taking possession of the assets of the Corporate Debtor. The IRP was duty bound to take possession of the assets of the Corporate Debtor.

Observations:

The Tribunal observed that section 18 of the Code empowers the IRP to take control and custody of any assets over which the Corporate Debtor has ownership rights. The present is a case where Appellants are not claiming any ownership rights in the assets nor any rights on the basis of lease/license.

The Tribunal noted that the Supreme Court judgment in “Victory Iron Works Limited vs. Jitendra Lohia and Anr.- (2023) does not support the Appellant, who is neither a lessee nor a licensee of the two flats in their possession. As suspended directors, they claim occupancy based on a Board Resolution dated 14.09.2017, which permitted temporary occupation subject to an undertaking to vacate as stated in the Resolution.

The judgment of the Supreme Court in Sumati Suresh Hegde & Ors. vs. Anand Sonbhadra, RP of Champalalji Finance Pvt. Ltd. & Ors. was passed in facts where there was decree in favour of the Appellant not to evict except in accordance with law and suit was filed by the Corporate Debtor for eviction which was not proceeded any further after CIRP and Resolution Professional filed an application for eviction before the Adjudicating Authority which was held to be not maintainable.

Based on the above, the Tribunal held that there is no merit in the Appellant's argument that the IRP's application was not maintainable. The flats are undisputedly owned by the Corporate Debtor, and the IRP is duty-bound to take possession of its assets.

It further added that the Resolution Professional stated that the CIRP is ongoing, a Resolution Plan has been received, but uncertainty over Flats 601 and 1101 is causing Resolution Applicants to withdraw. An email dated 20.01.2025 from one such applicant confirms this intention to withdraw.

The NCLAT in “Jhanvi Rajpal Automotive Pvt. Ltd. vs. R.P. of Rajpal Abhikaran Pvt. Ltd. and Another-2023 held that the IRP is well within his authority under Section 18(1)(f) of the IBC to take possession of assets owned by the Corporate Debtor, and filing an application before the Adjudicating Authority under Section 60(5) for this purpose is permissible. In this case, the lease granted to the Appellant by the RP on 17.09.2021 expired on 31.12.2021 and contained a clear clause allowing eviction upon 15 days' notice.

The Appellate Tribunal in the above further held that the renewal was approved by the CoC, which later resolved to issue a legal notice to the Appellant to vacate. Since the lease is no longer subsisting, the Appellant cannot claim continued possession, and insisting that the RP file a suit under the MP Accommodation Control Act would unduly delay the CIRP, which is a time-bound process under the IBC.

Based on the above it concluded that the Adjudicating Authority rightly directed the Appellant to vacate the premises to implement the approved Resolution Plan, and the appeal was dismissed as meritless.

The Tribunal in the present case further held that the above judgment of the Adjudicating Authority fully supports the case of the Respondent. As noted above, IRP vide e-mail dated 31.05.2024 has already asked for possession of the assets of the Flats and the period for 10 months which according to the Appellant was to be given a notice for vacation is also over.

The Tribunal concluded that the Resolution Professional's intimation to the Appellant after commencement of the CIRP clearly served as notice to vacate the premises, and even assuming, for argument's sake, that the Appellant was entitled to a 10-month notice period, that duration has already lapsed.

Accordingly, the Appellant was directed to vacate the premises within 10 days and the appeal was dismissed.

Case Title: Harish Raghavji Patel & Anr. Versus Ajit Gyanchand Jain, IRP of Rajesh Cityspaces Pvt. Ltd. & Ors.

Case Number: Company Appeal (AT) (Insolvency) No. 682 of 2025

Judgment Date: 15/05/2025

For Appellants: Mr. Abhijeet Sinha Sr. Advocate with Ms. Aakshi Lodha, Advocates.

For Respondent: Mr. Krishnendu Dutta Sr. Advocate, Ms. Kritya Sinha, Mr. Yash Tondon, Advocates for RP/ R1.

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