JSA successfully represented Dawat-E-Hadiyah (“DeH”), a Public Charitable Trust before the Hon’ble National Company Law Tribunal, Mumbai (“NCLT”) seeking directions from NCLT for recovering vacant possession of its warehouses i.e. Unit No.2 and Unit No.3 (collectively referred to as “Units”) which were given on leave and license basis to Future Supply Chain Solution Ltd. (“Corporate Debtor”) prior to the commencement of its Corporate Insolvency Resolution Process (“CIRP”) under the Insolvency and Bankruptcy Code, 2016 (“Code”). The Units were in possession of the Corporate Debtor in accordance with the moratorium under section 14(1)(d) of the Code. The RP was neither paying rent for the Units nor willing to handover its possession to DeH.
It was argued on behalf of DeH that the leave and licence agreement with respect to Unit No.3 was terminated prior to the commencement of CIRP and therefore, the Corporate Debtor is in illegal and wrongful possession of Unit No.3. As regards Unit No.2, it was argued that the Corporate Debtor admittedly is not utilising Unit No.2 and therefore the moratorium under Section 14(1)(d) of the Code should not be extended to the said Unit. It was submitted by the Resolution Professional of the Corporate Debtor that due to the moratorium under section 14(1)(d) of the Code, DeH is not entitled to seek possession of the Units during the CIRP of the Corporate Debtor.
The Tribunal was of the view that the Corporate Debtor cannot utilise or retain possession of the Units free of cost under the garb of moratorium under section 14 of the Code.
The Hon’ble NCLT vide its Order dated November 22, 2023 while allowing the application filed by DeH, inter alia, held that:
- The leave and licence agreement with respect to Unit No.3 was terminated prior to the initiation of CIRP, hence the Corporate Debtor was in wrongful possession of Unit No.3
- As regards Unit No.2 is concerned, the Corporate Debtor is not utilising the same and it is lying vacant.
- Accordingly, the Hon’ble NCLT deemed it fit to direct the Resolution Professional of the Corporate Debtor to handover possession of the Units to DeH within a period of 4 weeks.
- There was no order as to payment of CIRP costs as DeH agreed to waive the same if the possession of the Units were handed over within a reasonable period.
The said order in a precedential manner hands over the assets of the Licensor during the CIRP period despite the restrictions of moratorium under section 14 of the Code.
Our Disputes Team Comprised Lead Partner – Varghese Thomas, Partner – Fatema Kachwalla, Associate – Virgil Braganza and Meenakshi.
Fatema’s core practice area is Dispute Resolution. She mainly practices in High Court(s), City Civil Court(s) various benches of the National Company Law Tribunal and the National Company Law Appellate Tribunal.