Case Laws On IBC

Maharashtra Seamless Limited v.
Padmanabhan Venkatesh & Ors
Facts of the case
The National Company Law Tribunal, Hyderabad Bench, by an order dated 21.01.2019,
approved the resolution plan submitted by Maharashtra Seamless Ltd. in the matter of United
Seamless Tubulaar Private Limited (“Corporate Debtor”). However, an appeal was filed by
the promoter of the Corporate Debtor and the dissenting financial creditor on the preliminary
ground that the amount provided in the resolution plan is lower than the average of the
liquidation value arrived at by the valuers. In this regard, the NCLAT held that since the
amount provided in the resolution plan was lower than the average of the liquidation value
arrived at by the valuers, therefore, the resolution plan approved by the Adjudicating
Authority is against Section 30(2)(b) of the Code.
Aggrieved by the decision of NCLAT, the successful resolution applicant preferred an appeal
before the Hon’ble Supreme Court. The primary issue for consideration before the Apex
Court was whether the scheme of the Code contemplate that the sum forming part of the
resolution plan should match the liquidation value or not.
The Hon’ble Supreme Court held that there is no breach of the provisions of the Code or the
regulations, and upheld the order of the Adjudicating Authority approving the resolution plan.
Court Observation
The following were the major observations of the court:
 There is no provision in the Code or regulations under which the bid of any resolution
applicant has to match liquidation value arrived at in the manner provided in
Regulation 35 of the Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016, and the intent of
conducting valuation is only to assist the CoC in decision- making.
 While it may seem that release of assets at a value below its liquidation value is
inequitable, however, the Court ought to rely on the commercial wisdom of the
creditors rather than evaluating the resolution plan on the basis of quantum proposed
to be paid.
 Further, considering that the Code has been formulated for maximisation of value of
assets of stakeholders, and to balance the interests of all the stakeholders of the
corporate debtor, the court observed that resolution of the corporate debtor should be
given preference over liquidation of the corporate debtor. The rationale being that
during resolution, the corporate debtor remains a going concern, whereby the
financial creditors will have the opportunity to lend further money, the operational
creditors will have a continued business and the workmen and employees will have
job opportunities.
Rajendra K. Bhutta Versus Maharashtra Housing and Area Development

Authority & Anr.
Facts of the Case
 The Appeal was preferred by Mr. Rajendra K. Bhutta, the resolution professional for
Guru Ashish Construction Private Limited (“Corporate Debtor”) against the order
passed by NCLAT which upheld the order passed by the Adjudicating Authority
(“NCLT”).
 NCLT dismissed the application filed by the resolution professional to restrain
Maharashtra Housing and Area Development Authority from taking over the
possession of land from the Corporate Debtor till the completion of corporate
insolvency resolution process.
 NCLT stated that Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016
(“Code”) does not cover licences to enter upon land in pursuance of joint
development agreements (“JDA”) and as such licences would only be ‘personal’ and
not interests created in property.
Court Observation
 The Hon’ble Supreme Court while deciding the first issue held that, Section 14(1)
(d) of the Code does not deal with any of the assets or legal rights or beneficial
interest in such assets of the Corporate Debtor. Thus, any reference to Section
18 and Section 36 of the Code, as made, by NCLT, becomes wholly unnecessary in
deciding the scope of Section 14(1)(d) of the Code which refers to the ‘recovery of
any property’.
 It was further held that, ‘owner’ or ‘lessor’ qua ‘property’ is to be read with the
expression “occupied or in possession of” by applying the latin maxim reddendo
singular singulis in this regard.
 The Hon’ble Supreme Court discussed several judgments in this regard and held as
under:
 The expression ‘occupied by’ would mean or be synonymous with being in actual
possession of or being actually used by, in contra-distinction to the expression
‘possession, which would connote possession being either constructive or actual and
which, in turn, would include legally being in possession, though factually not being
in possession.”
 Thus, such an entry granted to the Corporate Debtor through license under JDA read
with the deed of modification, the property would be “occupied by” the Corporate
Debtor.
 While concluding the first issue, it was held that the development agreements create
an interest in property, they may be specifically performed, but not otherwise.
When Section 14(1)(d) of the Code speaks about recovery of property, “occupied”
does not refer to rights or interests created in property but only actually physical
occupation of property.
 While deciding the second issue and allowing the appeal, the Hon’ble Supreme Court
held as under: “When it comes to any clash between the MHADA Act and the
Insolvency Code, on the plain terms of Section 238 of the Insolvency Code, the Code
must prevail”.

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Maharashtra Seamless Limited v.

Padmanabhan Venkatesh & Ors

Facts of the case

The following were the major observations of the court:

Rajendra K. Bhutta Versus Maharashtra Housing and Area Development

Facts of the Case

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