Whether explanation of Section 14(1) (d) of the Insolvency and Bankruptcy Code, 2016 is applicable on lease rent and lease premium amount?

The question of law came in an appeal before the Hon’ble National Company Law Appellate Tribunal (“NCLAT”) wherein an Application filed by the New Okhla Industrial Development Authority (“NOIDA”) under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (“The Code”) was allowed by the Hon’ble National Company Law Tribunal (“NCLT”) vide Order dated 12.04.2022 (“Impugned Order”). In the said Application, NOIDA prayed that the directions should be issued to the Mr. Sunil Kumar Agrawal, Resolution Professional (“Appellant”) of the M/s GSS Procon Private Limited (“Corporate Debtor”) to make the payment of the amount outstanding and payable towards the lease rent and premium, which have become due during the Corporate Insolvency Resolution Process (“CIRP”) of the Corporate Debtor.

Thereafter, in the Appeal before the NCLAT, titled Sunil Kumar Agrawal RP Vs. New Okhla Industrial Development Authority, it was argued by the Appellant that the NCLT erred in applying the explanation of Section 14(1) (d) of the Code, which states that after the declaration of moratorium, the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor is prohibited. However, it is maintained that the lease rent and premium are conspicuously absent from the explanation and the same cannot be assumed in it.

Decision of the NCLAT

The NCLAT held that the Impugned Order was erroneous and deserves to be set aside. Consequently, the appeal was allowed and the impugned order was set aside.

The Hon’ble NCLAT noted that Section 14 of the Code, which talks about the moratorium, prohibits the recovery of any property by an owner or lessor if the Corporate Debtor is occupying or is in possession of the property. However, explanation of Section 14(1) (d) states that there is a prohibition on recovery of any property by an owner or lessor, a licence, permit, registration, quota, concession, clearance, or similar grant or right granted by the Central Govt., State Govt., local authority, or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency.

However, the same grant or right must be interpreted with respect to the license, permit, registration, quota, concession, or clearance, but it cannot be read as the premium amount or lease rent that has been ordered to be paid by the Appellant to the Respondent by the NCLT.

Appeal before the Hon’ble Supreme Court

Aggrieved by the aforementioned decision of the Hon’ble NCLAT, the NOIDA preferred an appeal before the Hon’ble Supreme Court titled New Okhla Industrial Development Authority Vs Sunil Kumar Agrawal; However, vide order dated 12.02.2023, the Hon’ble Supreme Court did not grant a stay on the Order passed by the Hon’ble NCLAT.

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