Urshila Ajit Kerkar V/s. Office of the Court Receiver, High Court, Bombay & Anr
Writ Petition 11156 of 2023
Facts:
1.On 29th March 2004, Liz Investment Private Limited executed the agreement as an agent of receiver subject to payment of an initial royalty of Rs.1,10,000/- which was subsequently increased to Rs.5,26,000/- from 25th September 2008.
2.Petitioner is the suspended director of Liz Traders and Agent Private Limited, the reconstituted name of Liz Investment Private Limited. According to the petitioner, on 25th February 2022, NCLT admitted Company Petition No.(IB)-2941 (MB) of 2019 and ordered initiation of CIRP against Liz Traders, pending before NCLT.
3.On 18th September 2021, the Court Receiver filed a Court Receiver Report No.17 of 2022 seeking deposit of arrears of compensation/royalty with effect from 1st July 2019 till August 2021 aggregating Rs.1,36,76,000/-. By order dated 23rd August 2022, the Court appointing receiver granted the report.
4.On 28th August 2023 the Hon’ble court allowed the receiver report. Petitioner has filed the petition challenging the order.
Issue: Whether the petition can be admitted?
Arguments:
Petitioner:
1.Counsel submitted that petitioner’s right as a suspended director of a corporate debtor is protected by section 14 of the Insolvency and Bankruptcy Code, 2016 (hereafter, IBC Code, for short). Clause (d) of Sub-Section (1) of Section 14 of the IBC prohibits all persons from seeking recovery of property either as an owner or lessor when the property is occupied by or in the possession of the corporate debtor.
2.Counsel submitted that petitioner is entitled to protection of Section 14 of the IBC. According to her, provisions of section 14 of IBC need to be interpreted on plain reading as there is no ambiguity in the statute. The only exception to Section 14 is carved out under Sub-Sections (2) and (3) of Section 14 of the IBC. The present case is not covered under Sub-Section (2) and (3) of Section 14 of the IBC.
Respondent:
1.Counsel submitted that once the receiver is put in possession of the property, his status is that of the custodian of the property and the agent of the receiver has no enforceable rights in the property. Therefore, provisions of section 14 of the IBC do not.
2.It is also submitted that the suspended director has no right to contest the order of delivery of possession as only a corporate debtor can challenge such an order apply to the petitioner’s claim.
Decision: Hon’ble Court dismissed the petition.
Rationale:
1.Hon’ble court noted that The receiver appointed in a particular suit is nothing more than the hand of the Court, so to speak, to hold the property of the litigants whenever it must be kept in the grasp of the Court in order to preserve the subject matter of the suit pendente lite and the possession of the receiver is simply the possession of the Court.
2.On meaningful reading of Section 14(1)(d), it is clear that recovery of property by owner/lessor where such property is “occupied by” corporate debtor is not permissible when a moratorium under IBC is declared. It held that Section 14(1)(d) does not deal with any of the assets or legal right or beneficial interest in such assets of the corporate debtor, but what is referred to therein is the “recovery of any property”. Moreover, the bar under clause (d) is attracted only when the owner or lessee is seeking recovery of property.
3.The court held that While the receiver himself is acting as a custodian of property for and on behalf of the parties to the suit, it would be unjust to interpret the creation of rights in favour of the agent of the receiver to claim the independent right to continue with possession, particularly in default of payment of compensation/royalty.
4.The court noted that position of an agent of the receiver cannot be termed as possession or occupation contemplated by Clause 2 of Sub-Section (1) of Section 14 of the IBC.
Order Copy:
