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Insolvency: Lease premium amount and lease rent are not outside the purview of moratorium

Cause Title : Sunil Kumar Agrawal vs New Okhla Industrial Development Authority, Company Appeal (AT) (Ins.) No. 622 of 2022, National Company Law Appellate Tribunal Principal Bench

Date of Judgment/Order : 12.01.2023

Corum : Justice Rakesh Kumar Jain

Citied: 

Background

NOIDA entered into a lease deed dated 19.08.2011 with M/s GSS Procon Pvt. Ltd. (CD) for the purpose of constructing residential flats on some land. The lease deed was executed for a period of 90 years and the lessee was to pay the lease premium as well as lease rent according to a schedule mentioned therein. The premium was to be paid from 26.02.2014 to 27.07.2021. However, as the Lessee failed in its commitment, an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was filed. The RP being appointed, NOIDA submitted a letter dated 04.06.2021 to the RP highlighting its dues towards lease premium calculated from 11.10.2019 to 30.06.2021 of a sum of Rs. 15,54,52,427/- and lease rent of the year 2020- 21 and 2021-22 of Rs. 60,74,170/-. The Authority had requested the RP to make the payment of the dues which comes to Rs. 16,15,26,597/- within a period of 15 days. When RP did not reply in time, Section 60(5)(c) read with Rule 11 of the NCLT Rules, 2016 which was allowed by the Adjudicating Authority based on the law laid down in Section 14(1) of the Insolvency Code and lead to filling of appeal by the RP.

The Appellant submitted that Section 14(1)(d) of the Code  is not applicable at all since the explanation provided under Section 14(d) permitting license, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority to continue irrespective of the insolvency process does not apply to lease rent and premium while the Respondents said that lease and premium shall fall within the words “similar grant or right” mentioned the said explanation.

Judgment

Section 14: Moratorium.
14. (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:—
.......
(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.
[Explanation.—For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator 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, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period;]

The NCLAT allowing the appeal decided that while during the moratorium period under Section 14 of the Code,  there is prohibition against recovery of any property by a lessor, the explanatory note under Section 14(1)(d) says that a license, permit, registration, quota, concession, clearance or a similar grant or right either given by the Central Govt., State Govt. local authority, sectoral regulator or any other authority constituted under any other law shall not be suspended or terminated on the grounds of insolvency provided that there is no default in payment in dues of such license, permit, registration, quota, concession, clearance or a similar grant or right during the moratorium period. 

The NCLAT held that the similar grant or right has to be read in respect of the licence, permit, registration, quota, concession, clearance but it cannot be read as the premium amount or lease rent.


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