Decision On Corporate Debtor's Leased Premises Falls Within CoC's Commercial Wisdom: NCLT Kochi

On 8 May 2026, the National Company Law Tribunal (NCLT), Kochi held that the decision on whether leased premises occupied by a corporate debtor should be retained or vacated during CIRP or liquidation falls within the commercial wisdom of the Committee of Creditors (CoC).

Judicial Member Vinay Goel passed the order and disposed of the application by directing the CoC to convene a meeting within 15 days and take a considered decision on the issue of continuation or vacation of the premises. He observed:

“while the moratorium under Section 14 of the Code restricts recovery of possession by the lessor, the decision as to whether the Corporate Debtor should continue to retain or relinquish possession of a leased premises squarely falls within the domain of the commercial wisdom of the Committee of Creditors.”

The applicant, G Vinayan, owner of a commercial premises, had leased the property to Davani Silks Private Limited in 2020. He alleged that the corporate debtor defaulted in rent payments from April 2023 and also failed to clear electricity and other statutory dues.

He further stated that in July 2023, the parties entered into an agreement under which the corporate debtor agreed to vacate the premises by 15 November 2023 after clearing liabilities. However, the corporate debtor neither vacated the premises nor cleared the outstanding dues.

The applicant subsequently initiated proceedings before the Rent Controller, Muvattupuzha. During their pendency, the Corporate Insolvency Resolution Process (CIRP) was admitted against the corporate debtor and a moratorium was imposed, leading to the proceedings being kept in abeyance.

He also contended that the corporate debtor had effectively abandoned the premises by locking the building and discontinuing business operations, without handing over possession or keys, while electricity dues continued to accumulate.

The Interim Resolution Professional (IRP), opposing the plea, submitted that CIRP was at an advanced stage and liquidation proceedings were pending. It was argued that the premises still contained furniture, fittings, and stock belonging to the corporate debtor, and therefore any decision regarding possession had to be taken with CoC approval.

The Tribunal observed that during CIRP, decisions relating to leased premises occupied by the corporate debtor necessarily involve the CoC and the Resolution Professional, particularly where financial implications affect the estate of the corporate debtor.

It further noted that the premises were not being actively used for business operations and that the CoC had already resolved to proceed towards liquidation. Continued occupation, it observed, would result in recurring rent and statutory liabilities.

Reiterating that rent during CIRP forms part of CIRP costs and during liquidation forms part of liquidation costs, the Tribunal held:

“….any decision to continue or discontinue such leased premises directly impacts the financials of the Corporate Debtor and, ultimately, the recovery available to the creditors.”

The Tribunal also referred to the Supreme Court decision in Sincere Sincere Securities Pvt Ltd v. Chandrakant Khemka, and observed:

“while the moratorium under Section 14 of the Code restricts recovery of possession by the lessor, the decision as to whether the Corporate Debtor should continue to retain or relinquish possession of a leased premises squarely falls within the domain of the commercial wisdom of the Committee of Creditors.”

Accordingly, the NCLT concluded that the decision to retain or vacate leased premises must be taken by the CoC in exercise of its commercial wisdom, and disposed of the application with a direction to the CoC to take a decision within 15 days.

For Applicant: Advocate Aadithya S.R

IRP: CS, Narendar Reddy Banala