No Eviction While Lease Dispute Pending: NCLAT Grants Relief To Rose Constructions

The National Company Law Appellate Tribunal (NCLAT) in Delhi has set aside an order against Rose Constructions, holding that it cannot be treated as an encroacher while its claim of lawful possession under a lease deed is still pending adjudication.

A bench of Judicial Member Justice N. Seshasayee and Technical members Arun Baroka and Indevar Pandey said, “There are two aspects: (a) I.A. 1197 of 2019 which is premised on the legitimacy of the lease deed dated 20.12.2017 and other is I.A. 2738 of 2020. As long as I.A. 1197 of 2019 is pending, it may be difficult to hold that the present appellant would be an encroacher of the same property. It may be that the appellant might not have contested I.A. 2738 of 2020 diligently, but inasmuch as I.A. 1197 of 2019 is pending on the file of the Adjudicating Authority, any decision to evict the appellant during the pendency of the I.A. 1197 of 2019 cannot be reconciled with the allegation of unlawful occupation of the property in question.”

The appeal was filed by the construction company challenging the eviction order as well as a subsequent order rejecting its plea that it was not properly served notice.

The appellant said it was in possession of the property under a lease deed executed in December 2017. However, the Resolution Professional had initiated proceedings questioning the validity of this transaction, which are still pending.

During the pendency of those proceedings, the Resolution Professional filed a separate plea alleging encroachment and secured an eviction order after the appellant did not contest the matter.

The appellate tribunal noted that a resolution plan has since been approved and that the successful resolution applicant will pursue the challenge to the lease transaction.

Allowing the appeal, the tribunal set aside the subsequent order rejecting the appellant's plea and directed the adjudicating authority to consider the issue along with the pending proceedings concerning the lease.

It also clarified that the appellant's possession of the property will continue until the pending issues are decided, and asked the adjudicating authority to dispose of the matter expeditiously, preferably within three months.