NCLAT Upholds NCLT Mumbai Order Directing Eviction Of Unauthorised Occupant In Infra Company CIRP

The National Company Law Appellate Tribunal (NCLAT) at Delhi has upheld an order directing eviction of an unauthorised occupant from a corporate debtor's property during insolvency proceedings.

The court upheld the NCLT Mumbai's view that a Resolution Professional can approach the NCLT to secure possession of assets and that requiring separate civil proceedings would “unduly prolong the insolvency process which is a time bound process.”

A bench of Judicial Member Justice Ashok Bhushan and Technical Member Barun Mitra dismissed an appeal filed by Classic Marble Company Pvt. Ltd. and affirmed the NCLT Mumbai order directing it to vacate premises owned by Shree Ram Urban Infrastructure Ltd.

The Appellate Tribunal held that where ownership of the property is undisputed, the Resolution Professional is entitled to seek appropriate directions from the Adjudicating Authority to take control of such assets.

The dispute dates back to 2008, when the marble company was permitted to use a portion of the premises to stock marble. It continued in occupation and later claimed an oral tenancy, asserting that its possession was linked to outstanding dues of about 1.34 crore allegedly payable by the corporate debtor.

The Resolution Professional treated the occupation as unauthorised and initiated proceedings to recover possession as part of the insolvency process.

Before the tribunal, the appellant argued that the NCLT lacked jurisdiction under the Insolvency and Bankruptcy Code to adjudicate eviction disputes, which it said must be decided by civil courts.

It relied on an alleged oral tenancy and an interim civil court order restraining dispossession.

It also argued that its continued possession was justified on account of unpaid dues and the fact that it had been operating from the premises for several years.

The Tribunal was not persuaded. It pointed out that the Code places a clear obligation on the Resolution Professional to take control and custody of the corporate debtor's assets and to safeguard them. On the tenancy claim, the Bench found nothing on record to support it. The only document relied on simply allowed the appellant to store marble at the site. It did not confer any right in the property.

There was no indication of rent ever being paid, nor any material to show a landlord-tenant relationship. The bench noted that “the claim of the oral tenancy by the appellant is nothing but the imagination of the appellant to somehow justify its illegal occupation.”

On the question of jurisdiction, the tribunal held that the application was maintainable. It arose directly from the insolvency process and from the Resolution Professional's duty to take control of the corporate debtor's assets.

It rejected the argument that a civil suit was necessary, reiterating that such a requirement would delay a time-bound process. On the civil court's interim order, it noted that the restraint operated subject to due process of law and held that proceedings before the NCLT satisfied that requirement, also noting the bar on civil court jurisdiction under the Code.

The appeal was accordingly dismissed. The tribunal directed that if the appellant fails to vacate within 30 days, the Resolution Professional would be at liberty to take possession of the premises with police assistance.