NCLAT: Burden To Prove Ownership Of Assets Lies On Claimant; Liquidator Not Required To Establish Title For Assets In His Custody
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member), has upheld the NCLT’s order allowing the liquidator to remove movable assets from the leased premises of Reliance Realty Limited (RRL), while restraining RRL from obstructing such removal. The Tribunal held that the burden of proof regarding ownership of assets rests upon the person claiming ownership, and the liquidator is not required to establish title to assets lawfully in his custody.
Background
Reliance Realty Limited (RRL) had leased premises within Dhirubhai Ambani Knowledge City (DAKC) to Independent TV Limited (Corporate Debtor) for its DTH operations. Following defaults in rental payments, Independent TV was admitted into Corporate Insolvency Resolution Process (CIRP), which later transitioned into liquidation in 2023. During the liquidation process, the Liquidator compiled a list of movable assets located within the leased premises and conducted their auction under Regulation 32A of the IBBI (Liquidation Process) Regulations, 2016. M/s Shree Sai Baba Ship Breaking Co. emerged as the successful auction purchaser. After completion of the auction, RRL objected to the removal of certain assets, contending that several items belonged to it or its parent company, Reliance Communications Limited (RCL). The NCLT, Mumbai, however, rejected these objections, holding that RRL could not obstruct the liquidator or the auction purchaser from accessing and removing the assets. Aggrieved, RRL filed an appeal before the NCLAT.
Appellant’s Submissions
RRL argued that the NCLT had wrongly equated possession with ownership, disregarding its claims that the disputed assets were owned by RRL and RCL. It relied on a draft agreement annexed to the Share Purchase Agreement (SPA), allegedly showing that the assets were installed by RRL for use by the corporate debtor. The appellant contended that third-party assets in possession of the corporate debtor cannot form part of the liquidation estate, and the liquidator should have verified ownership and obtained documentary proof before conducting the auction.
Respondent’s Submissions
The Liquidator and the Successful Auction Purchaser opposed the appeal, submitting that the corporate debtor had lawful possession of the assets during both CIRP and liquidation. No ownership claims were made by RRL or RCL despite public notices inviting objections. They emphasized that the burden of proof lies on the party claiming ownership, not on the liquidator who already held possession lawfully. The auction purchaser also contended that having paid the full consideration, it was entitled to take possession, and any obstruction by RRL violated Section 70 of the Insolvency and Bankruptcy Code (IBC).
Tribunal’s Findings
The NCLAT upheld the NCLT’s findings, reiterating that the liquidator had lawful custody and control over the assets situated at the Navi Mumbai premises. The Tribunal clarified that the onus of proof now lay on the appellant (RRL) to establish ownership, particularly since no objections were raised during the CIRP or liquidation stages. The Bench observed: “It is not in dispute that the Corporate Debtor was occupying the Navi Mumbai Premises on the Insolvency Commencement Date and the Liquidation Commencement Date… Thus, it is evident that the Applicant, as Liquidator, holds legal custody of the assets lying at Navi Mumbai Premises. In such a scenario, in a dispute over ownership of movable property lying at Navi Mumbai Premises, the burden of proof rests on the person claiming to be the owner.”
The Tribunal emphasized that the Liquidator cannot be compelled to produce proof of ownership for assets under his statutory custody. It noted: “No person has the right to retain the custody of the Corporate Debtor's assets or demand the Liquidator to produce proof of ownership in respect of those assets… Requesting ownership documents from the Liquidator, without any valid basis or authority, constitutes an unlawful obstruction of the Liquidator's statutory duties.”
Regarding the appellant’s reliance on the Draft Premise Use Agreement, the Bench held that it was unsigned, undated, and unenforceable, and could not establish ownership. Similarly, the SPA did not confer any ownership rights since RRL was not a signatory to the agreement. The order stated: “Besides being an unsigned document there is no effective date of commencement or termination provided therein… both the SPA and Draft Agreement, at best, merely contemplated service arrangements but do not expressly confer any right of title or ownership over the inventory/assets lying in the leased premises.”
Finding no merit in the appeal, the NCLAT affirmed the NCLT’s direction allowing the liquidator to remove the assets and restraining RRL from creating any obstruction. The Bench observed that the liquidation process had already culminated with issuance of the sale certificate and distribution of proceeds under Regulation 42(2) of the Liquidation Regulations, and belated objections could not disturb the completed process. Accordingly, the Tribunal dismissed the appeal, holding that the burden of proving ownership rested solely on RRL, not the liquidator.
Appearance
For Appellant: Ms. Misha, Mr. Vaijayant Paliwal and Ms. Tanya Chib, Advocates.
For Respondent: Mr. Rachit Mittal, Mr. Parish Mishra, Mr. Kanishk Raj, Mr. Adarsh Srivastava and Mr. Abhishek Sinha, Advocates for R1. Mr. Anoop Kumar, Advocate for Liquidator. Mr. Sidhant Kumar, Mr. Parth Yadav, Mr. DM Batra, Mr. Vishal and Mr. Rishi Muraka, Advocates for R2.
Cause Title: Reliance Realty Limited Versus Anup Kumar And Ors.
Case No: Company Appeal (AT) (Insolvency) No. 900 of 2025
Coram: Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member)
