NCLAT Upholds Eviction Of Suspended Directors' Family From Insolvent Company-Owned Hotel, Says MoU, Award Collusive

The National Company Law Appellate Tribunal (NCLAT) at Delhi has upheld the eviction of occupants from a five-star hotel owned by an insolvent company, holding that an unregistered Memorandum of Understanding (MoU) and a subsequent arbitral award could not confer occupancy rights over the property and appeared to have been created only for the purposes of the case.

The ruling came in appeals filed by Raman Khangura and her father-in-law Jagpal Singh Khangura against an order directing them to vacate the ninth floor of Hotel Majestic Park Plaza, Ludhiana, owned by Majestic Hotels Limited, which is undergoing insolvency proceedings.

A bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra ruled,

“Adjudicating Authority is also right in its observation that MoU and Arbitral Award appear to be collusive. When MoU itself cannot give any right to Mrs. Raman Khangura, on the immovable property, Arbitral Award could not have granted any higher right to Mrs. Raman Khangura. Entire facts or sequence of the events and circumstances of the case indicate that no reliance can be placed on MoU as well as the Arbitral Award which were prepared only for the purpose of the case and do not find mention in any of the records of the Corporate Debtor nor in any annual report or the financial statement. "

Majestic Hotels Limited owns Hotel Majestic Park Plaza, a five-star hotel in Ludhiana.

Majestic Hotels Limited, which owns Hotel Majestic Park Plaza in Ludhiana, entered insolvency proceedings in July 2024 on a petition filed by UV Asset Reconstruction Company Ltd. Navneet Gupta was appointed to run the process.

After taking charge of the hotel, Gupta reported that parts of the eighth and ninth floors remained occupied by suspended directors and their family members. When notices asking them to vacate did not yield results, he approached the Chandigarh NCLT seeking their eviction.

The NCLT allowed the plea in March 2026 and directed the occupants to hand over possession, prompting the present appeals.

Raman Khangura, however, claimed she was entitled to continue occupying the ninth floor under a Memorandum of Understanding dated November 5, 2015, and an arbitral award passed on March 19, 2019.

According to her case, her residential property in Chandigarh had been mortgaged as security for loans availed by the corporate debtor and was auctioned by Punjab & Sind Bank in September 2015. She claimed that the company subsequently agreed to compensate her to the extent of Rs 49.98 crore. Under the terms relied upon by her, if the compensation remained unpaid, up to Rs 10 crore would be treated as an advance against continued occupation of the ninth floor.

She further contended that disputes arising out of the arrangement were referred to arbitration and culminated in an award recognising her right to continue occupying the premises. It was argued that the arbitral award could only be challenged in proceedings under the Arbitration and Conciliation Act and could not be disregarded in the insolvency process.

Jagpal Singh Khangura, who resided with her, argued that he had not been separately impleaded or issued notice before the NCLT.

Opposing the appeals, the Resolution Professional and the Committee of Creditors contended that the hotel was an asset of the corporate debtor and that control and custody of the property had to vest with the Resolution Professional during the insolvency process.

They submitted that neither the MoU nor the arbitral award formed part of the records of the corporate debtor. They further argued that the MoU, claimed to have been executed when Raman Khangura was a director and shareholder of the company, had not been disclosed as a related-party transaction. The documents, they said, surfaced for the first time in response to the Resolution Professional's eviction application.

The appellate tribunal examined the CoC minutes and noted that during the first CoC meeting held shortly after commencement of the insolvency proceedings, questions were raised regarding the basis on which the ninth floor was being occupied.

It noted that Jasbir Singh Khangura, husband of Raman Khangura and a suspended director of the company, had then stated that occupation of the ninth floor was a promoter's perquisite. The tribunal noted that no reliance was placed on the MoU or arbitral award during that discussion.

The NCLAT also noted the Resolution Professional's contention that neither document formed part of the company's statutory records, books of account, annual reports, or financial statements.

Holding that the MoU could not confer occupancy rights in the property, the tribunal observed, “As noted above, at best Mrs. Raman Khangura could have claimed on the basis of MoU that she has certain amount to recover from the corporate debtor as per agreement between the corporate debtor and Mrs. Raman Khangura for which amount, it was open for Mrs. Raman Khangura to file a claim in the CIRP but that cannot be a ground to occupy the premises of the CIRP on suppose ground that her commuted sum of Rs.10 Crore is to be exhausted by deducting amount of Rs.3 lakhs per month.”

The tribunal held that ownership of the hotel by the corporate debtor was undisputed and that it was the Resolution Professional's obligation to take possession of the company's assets. It further observed that even if Raman Khangura had a monetary claim under the MoU, the proper course was to submit a claim in the insolvency process.

Addressing the arbitral award, the tribunal observed that it was not reflected in the records of the corporate debtor and had surfaced only during the litigation.

The appellate tribunal also agreed with the NCLT's assessment that the MoU and arbitral award appeared collusive. It observed that the arbitral award could not confer a greater right than the MoU on which it was founded.

On Jagpal Singh Khangura's contention that he had not been separately issued notice, the tribunal pointed out that the eviction application had specifically sought directions against the suspended director as well as his family members, relatives and acquaintances. It further noted that Jagpal Singh Khangura had not asserted any independent right to occupy the premises.

Seeing no infirmity in the NCLT's order, the NCLAT dismissed both appeals. At the same time, it granted the appellants an additional two weeks to vacate the ninth floor. If they fail to do so within that period, the Resolution Professional has been permitted to seek assistance from the Commissioner of Police, Ludhiana, for recovering possession.