Dismissed

In the matter of Duncans Industries Limited I.A. (Ib) No. 665-KB-2021 in C.P. (Ib) No. 184-KB-2018

NCLT9 May 2022

Case brief

AI extract

What is this about?

The NCLT dismissed an application by a Resolution Professional seeking possession of tea gardens leased to a Corporate Debtor. The bench held that since the lease had expired after the commencement of CIRP, the Debtor held no ownership or legal title, barring the Resolution Professional from claiming control under the IBC.

What did the court decide?

The application for possession of the Tea Gardens is dismissed (without costs); liberty granted to apply if the lease is renewed by the Government.

In the matter of Duncans Industries Limited I.A. (Ib)… — Insolvency and Bankruptcy | NCLT (2022)

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IN THE NATIONAL COMPANY LAW TRIBUNAL KOLKATA BENCH KOLKATA

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I.A. (IB) No. 665/KB/2021 in

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C.P. (IB) No. 184/KB/2018

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In the matter of:

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Under section 7 of the Insolvency and Bankruptcy Code, 2016.

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In the matter of:

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Sangita Fiscal Services Private Limited and Others

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... Financial Creditor

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-Versus-

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Duncans Industries Limited

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... Corporate Debtor

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I.A. (IB) No. 665/KB/2021

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An application under section 25(1), section 25(2)(a) of the Insolvency and Bankruptcy Code, 2016 read with regulation 30 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

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In the matter of:

Ram Ratan Modi

… Applicant

Versus

1. Sammelan Tea and Beverages Private Limited

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2. Cha Bagan Trinamool Congress Mazdoor Union

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3. District Magistrate, Alipurduar

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… Respondents

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Date of Hearing: 29.04.2022 Date of pronouncing the order: 09.05.2022

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IN THE NATIONAL COMPANY LAW TRIBUNAL KOLKATA BENCH Ram Ratan Modi v. Sammelan Tea and BeveragesPvt. Ltd. I.A. (IB) No. 665/KB/2021 in C.P. (IB) No. 184/KB/2018

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Coram:

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Shri Rohit Kapoor, Member (Judicial) Shri Harish Chander Suri, Member (Technical)

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Appearances (via video conferencing):

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For the Resolution Professional	: 1.	Mr. Joy Saha, Senior Advocate
	2.	Mr. Dipankar Das, Advocate
	3.	Ms. Sajana Nandi, Advocate
For Respondent No. 1	: 1.	Mr. JishnuSaha, Senior Advocate
	2.	Mr. Usha Nath Banerjee, Advocate
	3.	Mr. Avishek Guha, Advocate
	4.	Mr. Chitresh Saraogi, Advocate

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ORDER

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Per :Harish Chander Suri, Member (Technical) :

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The present I.A. has been filed by the Resolution Professional seeking direction upon Respondent No. 1 to hand over the possession of Bagracote Tea Gardens (“Tea Gardens”) to the Resolution Professional.

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Submissions of the Learned Senior Counsel appearing for the Applicant

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The Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor vide an order of this Adjudicating Authority dated 05.03.2020 and the Applicant herein was appointed as Interim Resolution Professional (IRP) and later confirmed as the Resolution Professional (RP) by the Committee of Creditors (CoC) of the Corporate Debtor.

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The Tea Garden was leased in favour of the Corporate Debtor by the State of West Bengal for a period of thirty years commencing from 22.05.1998 vide an Indenture of Lease dated 19.06.1998, hence the lease is valid till 21.05.2028.

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Page 2 of 7

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IN THE NATIONAL COMPANY LAW TRIBUNAL KOLKATA BENCH Ram Ratan Modi v. Sammelan Tea and BeveragesPvt. Ltd. I.A. (IB) No. 665/KB/2021 in C.P. (IB) No. 184/KB/2018

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The Resolution Professional visited the Tea Estate on 121.10.2020 and 15.12.2020 and requested the workers to extend their co-operation. Through a newspaper publication on 28.06.2021, it came to the knowledge of the Applicant that the Respondent Nos. 1 and 2 were going to manage the operations of the tea garden with effect from 01.07.2021.

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A meeting was held on 27.06.2021 between Respondent Nos. 1 and 2 wherein it was resolved to run the Tea Garden.

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The Applicant has received a claim of Rs.220,86,12,736/- from 5631 workmen of the Tea Garden, hence, the workmen are aware that the Corporate Debtor is undergoing CIRP.

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The Applicant wrote to the District Magistrate on 03.07.2021 seeking intervention to the situation that had transpired between the Respondent Nos. 1 and 2.

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The Respondent No. 1 is fully aware of the CIRP process but has still acted in violation of the Code.

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Submissions of the learned Senior Counsel appearing on behalf of Respondent No. 1

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The learned Senior Counsel submitted that the crux of the I.A. is whether the Tea Gardenis an “asset” of the Corporate Debtor over which the Applicant can seek to exercise any control under Section 18(f) of the Code of 2016.

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Section 18(1)(f) of the Code provides that the Applicant shall take control and custody of any ‘asset’ over which the Corporate Debtor has “ownership rights” but the‘Explanation’ to section 18 of the Code, expressly provides that the term ‘assets’ shall not include, inter alia , assets owned by a third party in possession of the Corporate Debtor or held under trust or under contractual arrangements including bailment.

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The Government of West Bengal is the “owner” of all Tea Estates in the State of West Bengal and the Corporate Debtor was provided with 3 fixed term (30 Years) Leases, all of which terminated on 22.5.1998,

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Page 3 of 7

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IN THE NATIONAL COMPANY LAW TRIBUNAL KOLKATA BENCH Ram Ratan Modi v. Sammelan Tea and BeveragesPvt. Ltd. I.A. (IB) No. 665/KB/2021 in C.P. (IB) No. 184/KB/2018

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4.8 2002 & 24.2.2006 respectively and not renewed as per law. The learned Counsel then led us through section 111(a) of the Transfer of Property Act, 1882, which envisages that a lease of immovable property determines by efflux of the time limited thereby. In such circumstance neither the Corporate Debtor nor the Resolution Professional could claim any legal right, far less any “ownership” rights over any part of the Tea Estate.

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The lease of Tea Garden in favour of the Corporate Debtor, was cancelled owing to the Corporate Debtor’s failure to pay ‘ Salami ’ in terms of rule 4 of the West Bengal Estate Acquisition Rules, 1954, despite opportunities being provided by the State Authority.

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The Respondent No. 1 has applied for grant of leases of the entire Tea Garden in its favour as per law and such application is under due consideration by the State Authority after being recommended by the District Collector & District Magistrate. The Respondent occupies the said Tea Estates as a “licensee” of the State of West Bengal.

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The Corporate Debtor abandoned the Tea Garden in the year 2015 and at the invitation of the State Government, all recognised registered Trade Unions, Political Leaders, the Respondent No. 1 took possession of the Tea Garden and has been running the Tea Garden since 01.07.2021.

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The lease of the Tea Garden granted to the Corporate Debtor stood terminated by efflux of time and the Corporate Debtor abandoned the Tea Garden in 2015, long before admission of CIRP against the Corporate Debtor, and expiry of such lease bears no nexus to the insolvency of the Corporate Debtor, hence, this Adjudicating Authority does not have the jurisdiction to determine whether the Corporate Debtor has any residual right under the said lease agreements. Reliance in this regard is placed on the decision of the Hon’ble Supreme Court in Tata Consultancy Services v. Vishal Ghisulal Jain, (2021 SCC OnLine SC 1113) .

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Page 4 of 7

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IN THE NATIONAL COMPANY LAW TRIBUNAL KOLKATA BENCH Ram Ratan Modi v. Sammelan Tea and BeveragesPvt. Ltd. I.A. (IB) No. 665/KB/2021 in C.P. (IB) No. 184/KB/2018

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The Learned Counsel placed reliance on the decision of the Hon’ble Supreme Court in Embassy Properties Pvt. Ltd. v. State of Karnataka &Ors, (2020)13 SCC 308 , and Gujrat Urja Vikas Nigam Ltd. v. Amit Gupta &Ors, (2021) 7 SCC 209, in support of his contention that CD cannot seek to exercise a right which falls out of the purview of the Code, and that for enforcement of such purported right the Resolution Professional cannot attempt to bypass the CIRP process by approaching this Adjudicating Authority.

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With respect to the issue as to whether Tea Gardens, whereof the lease have expired, constitute assets of a Corporate Debtor and can be possessed by the Resolution Professional have been conclusively decided by this Adjudicating Authority in two successive solemn decisions, firstly on 28.05.2021 passed in IA(IB) No. 1256/KB/2020 concerning the Hantapara, Garganda, Tulsipara and Dumchipara Tea Estates and thereafter on 21.04.2022 passed in IA(IB) No. 1111/KB/2021 in respect of Kilcott&Nagaisuree Tea Estates . The instant I.A., is as such, barred by the principles of res judicata, constructive res judicata and by issue of estoppel.

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Reliance in this regard is placed on the following decisions: -

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a. Bhanu Kumar Jain v. Archana Kumar and Another , (2005) 1 SCC 787 (paras 29 to 32); Ishwar Dutt v. Land Acquisition Collector and Anr., (2005) 7 SCC 190 (paras 18 to 24), with regard to the issue of estoppel and cause of action;

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b. Shiromani Gurudwara Parbandhak Committee v. Mahant Harnam Singh and Others , (2003) 11 SCC 377 (paras 17, 19); K.S. Varghese and Others v. Saint Peter’s and Saint Paul ‘s Syrian Orthodox Church and Others , (2017) 15 SCC 333, in respect to Constructive Res Judicata.

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The Resolution Professional cannot interfere with the management of the said Tea Garden by the Respondent No. 1. The Respondent No. 1

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Page 5 of 7

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IN THE NATIONAL COMPANY LAW TRIBUNAL KOLKATA BENCH Ram Ratan Modi v. Sammelan Tea and BeveragesPvt. Ltd. I.A. (IB) No. 665/KB/2021 in C.P. (IB) No. 184/KB/2018

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was never handed over nor is in possession or control of any statutory financial records of the Corporate Debtor, the question of the Respondent being required to make over the same to the Applicant also does not arise. The books and records maintained by the Respondent in the course of managing the said Tea Garden are books and records of the Respondent and not of the Corporate Debtor, hence the Respondent is under no obligation to hand over the books and financial statements to the Applicant.

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Analysis and Findings

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During the course of hearing it was noticed that, in this application also, the question of law is similar to the one in I.A.(IB) No. 1256/KB/2020 and I.A.(IB) No. 1111/KB/2021. These two applications have already been decided after hearing exhaustive arguments of the learned Senior Counsel. Since the arguments are common and issue involved is conclusively covered by the order passed by this Bench earlier, there is no need to once again give more and more time for hearing the same arguments on behalf of the Resolution Professional and the Respondent No. 1.

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We have thus breifly heard the learned Senior Counsel for the Applicant and the learned Senior Counsel for Respondent No. 1 and perused the record.

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Similar applications have been filed by the Resolution Professional for possession of Tea Estates. The only concern is that the Corporate Debtor is in financial stress and whether the Resolution Professional would be able to run these Tea Estates.

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The lease given to the Corporate Debtor has not been renewed in favour of the Corporate Debtor hence, it is out of question that the Resolution Professional can take possession of the Tea Gardens to which the Corporate Debtor has no ownership.

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In this view of the matter, the prayers asked for in the present IA cannot be granted. I.A. (IB) No. 665/KB/2021 is, therefore, dismissed,

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Page 6 of 7

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IN THE NATIONAL COMPANY LAW TRIBUNAL KOLKATA BENCH Ram Ratan Modi v. Sammelan Tea and BeveragesPvt. Ltd. I.A. (IB) No. 665/KB/2021 in C.P. (IB) No. 184/KB/2018

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but in the facts of the case, without costs. Liberty to apply is granted if and when the Government of West Bengal takes a decision on the renewal of the lease.

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The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Counsel for information and for taking necessary steps.

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