VICTORY IRON WORKS LTD. versus JITENDRA LOHIA & ANR

Citation: [2023] 7 S.C.R. 1021 · Decided: 14-03-2023 · Supreme Court of India · Bench: V. RAMASUBRAMANIAN, PANKAJ MITHAL · Disposal: Dismissed

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Judgment (excerpt)

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1021
VICTORY IRON WORKS LTD.
v.
JITENDRA LOHIA & ANR.
(Civil Appeal No. 1743 of 2021)
MARCH 14, 2023
[V. RAMASUBRAMANIAN AND PANKAJ MITHAL, JJ.]
Insolvency and Bankruptcy Code, 2016 – s.25(2)(a) – IBBI
(Insolvency Resolution Process for Corporate Persons) Regulations,
2016 – Regulation 30 – Corporate Debtor and one ‘EP’ (appellant
in CA No.1782 of 2021) entered into an MoU – Corporate Debtor
financed the purchase of the property in question by ‘EP’ for 40%
of the share capital in ‘EP’ and a Joint Development Agreement
with it in respect of the property – Actual physical possession of the
property was also handed over to the Corporate Debtor which
factum was confirmed in two subsequent MoUs – Later, Corporate
Debtor also executed a Leave and License Agreement granting
license to ‘V’ (appellant in CA No.1743 of 2021), for the permissive
use of a portion of the property, however, ‘V’ now claims to be in
possession of the entire property – ‘EP’ joined this Agreement as a
confirming party – CIRP was initiated against Corporate Debtor
by a third-party financial creditor – Resolution Professional (RP)
filed application u/s.25 r/w Regulation 30 of 2016 Regulations for
certain directions – NCLT directed ‘V’ and ‘EP’ not to obstruct
possession and activities of RP however, it also held that the order
would not prevent ‘V’ from carrying on its business in the portion of
land licensed to it – Appeals filed by ‘V’ and ‘EP’ were dismissed by
NCLAT, RP was directed to disclose in the Information Memorandum
that the Corporate Debtor has development rights over the property
– On appeal, held: A bundle of rights and interests created in favour
of the Corporate Debtor over the immovable property in question
by a series of documents, partake the character and shade of
ownership rights – Therefore, these rights and interests in the
immovable property are definitely liable to be included by the RP in
the Information Memorandum – Resolution Professional is duty
bound u/s.25(2)(a) to take custody and control of the same – NCLT
and NCLAT have done a delicate act of balancing, by protecting
the interests of ‘V’ to the extent of the land permitted to be occupied
[2023] 7 S.C.R. 1021
1021
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1022
SUPREME COURT REPORTS
[2023] 7 S.C.R.
– In fact, ‘V’ does not even have the status of a lessee, but is only a
licensee and a license does not create any interest in the immovable
property – NCLT as well as NCLAT rightly held that the possession
of the Corporate Debtor, of the property needs to be protected and
thus, a direction u/Regulation 30 was issued to the local district
administration to give assistance to the RP for completion of CIRP
of the Corporate Debtor effectively.
Insolvency and Bankruptcy Code, 2016 – s.3(37) – Income
Tax Act, 1961 – s.102(2) – “asset” – Held: The word “asset” is not
defined, either in IBC or in any of the seven enactments referred to
in s.3(37) of the Code – But the word “asset” is defined in s.102(2)
of the 1961 Act to include “property or right of any kind” – Though
s.102 applies as such to Chapter X-A of the Income Tax Act, the
definition throws light on the fact that property or right of any kind
is considered to be an asset.
Insolvency and Bankruptcy Code, 2016 – ss.3(27), 18(f),
25(2)(a) – “property”, “asset” – CIRP was initiated against the
Corporate Debtor – Interim Resolution Professional claimed that
the development rights held by the Corporate Debtor formed part
of its intangible assets and therefore, must be included in the
Information Bulletin and protected – Held: Definition of the
expression “property” u/s.3(27) includes “every description of
interest, including present or future or vested or contingent interest
arising out of or incidental to property” – Since the expression
“asset” in common parlance denotes “property of any kind”, the
bundle of rights that the Corporate Debtor has over the property in
question would constitute “asset” within the meaning of s.18(f) and
s.25(2)(a), IBC – Income Tax Act, 1961 – s.102(2).
Indian Bankruptcy Code, 2016 – Explanation u/s.18; s.25 –
Appellants challenging the impugned orders of the NCLT and NCLAT
argued that by virtue of the Explanation u/s.18, the disputes between
the Corporate Debtor and the third-party lessee/licensee are not
amenable to the jurisdiction of the authorities under the Code –
Held: Explanation u/s.18 begins with a caveat “for the purposes of
this Section” – Therefore, the exclusion of assets owned by a third-
party

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