Rajendra K. Bhutta Versus Maharashtra Housing and Area Development Authority & Anr.

Court / Forum : Supreme Court of India
Citation : Civil Appeal No. 12248 of 2018
Coram : Justice R.F. Nariman, Justice S. Ravindra Bhat, Justice V. Ramasubramanian
Subject : Section 14 of the Insolvency and Bankruptcy Code, 2016
Date of Decision : February 19, 2020

Brief Facts

• 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.

Issues

1. Whether licences to enter upon land pursuant to JDA would be covered under Section 14(1)(d) of the Code?
2. Whether provisions of Maharashtra Housing Area and Development Act (“MHADA Act”) would prevail over the provisions of the Code?

Decision

• 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”.