Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), New Delhi, has upheld the inclusion of leasehold land allotted by the West Bengal Housing Infrastructure Development Corporation Ltd. (WBHIDCO) to Concast Ispat Ltd. (CIL) in the liquidation estate of Concast Steel and Power Ltd. (CSPL), affirming that the transfer of leasehold rights upon amalgamation was made with WBHIDCO’s implied consent. A Bench comprising Justice Mohd. Faiz Alam Khan (Judicial Member) and Arun Baroka (Technical Member) dismissed WBHIDCO’s appeal and upheld the order of the National Company Law Tribunal (NCLT), Kolkata Bench, which had included the leasehold property as part of CSPL’s liquidation assets.

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Background

The dispute arose from a 99-year lease deed executed in 2012 between WBHIDCO and Concast Ispat Ltd. (CIL) for a parcel of land in New Town, Kolkata, intended exclusively for setting up a corporate office. The lease contained a clause prohibiting transfer or alienation without WBHIDCO’s prior written consent. Subsequently, through an amalgamation scheme approved by the Calcutta High Court in 2015, Concast Ispat Ltd. (CIL) was merged with Concast Steel and Power Ltd. (CSPL). Later, the NCLT, Kolkata Bench, in 2018, rectified the amalgamation order to include the leased land in the list of transferred assets.

In 2022, CSPL entered liquidation following an unsuccessful resolution process. The liquidator issued a public notice for sale of the corporate debtor’s assets, including the leasehold property, which prompted WBHIDCO to file an application before the NCLT objecting to the inclusion of the land in the liquidation estate. WBHIDCO contended that the land belonged to the State and that no formal consent was granted for the transfer of leasehold rights during the amalgamation. The NCLT rejected the application, leading WBHIDCO to file an appeal before the NCLAT.

WBHIDCO’s Contentions

WBHIDCO argued that the inclusion of the leased land in CSPL’s liquidation estate was illegal, as the transfer of leasehold rights from CIL to CSPL was made without its express approval, in contravention of the lease deed. It was contended that the amalgamation did not automatically transfer leasehold rights, which are not alienable without the lessor’s consent. WBHIDCO further submitted that the NCLT had exceeded its jurisdiction in recognizing the transfer of the leasehold property through the amalgamation scheme, as issues relating to state-owned land and leasehold rights fall outside the purview of the Insolvency and Bankruptcy Code (IBC).

Respondent’s Submissions

The liquidator, represented by Mr. Kshitiz Chawchharia, argued that WBHIDCO was fully aware of the amalgamation process and had even participated in post-merger proceedings, including seeking rectification of the amalgamation order before the NCLT. It was submitted that such conduct amounted to implied consent for the transfer of leasehold rights to CSPL, and that WBHIDCO’s challenge at the liquidation stage was a belated attempt to deny what it had earlier accepted. The liquidator also contended that the leasehold rights, though subordinate to ownership, still constitute property within the meaning of Section 3(27) of the IBC, and hence form part of the liquidation estate.

Tribunal’s Observations

The NCLAT observed that the record clearly demonstrated WBHIDCO’s knowledge and active involvement in the amalgamation proceedings. The Bench noted that WBHIDCO had not only been aware of the merger between CIL and CSPL but had also facilitated the filing of a rectification application before the NCLT, Kolkata Bench, to correctly reflect the leased land in the amalgamation order. Rejecting WBHIDCO’s plea that the transfer occurred without its consent, the Tribunal held:“Though no express permission was taken for amalgamation, there was an implied consent of the appellant for transferring this leasehold land in favour of CSPL, including its correspondence and advice to rectify the amalgamation order.”

The Tribunal clarified that only leasehold rights, and not ownership, were transferred to CSPL, which therefore stood vested with beneficial enjoyment of the property as lessee. It held that such rights fall squarely within the definition of ‘property’ under Section 3(27) of the IBC, and therefore rightly formed part of the liquidation estate. “The CSPL (corporate debtor) has stepped into the shoes of CIL only for beneficial enjoyment of leasehold rights as a lessee, and no ownership rights were transferred. The leasehold rights, being property within the meaning of Section 3(27) of the IBC, can validly be included in the liquidation estate,” the Bench observed.

Jurisdictional Findings

Addressing WBHIDCO’s contention that the NCLT lacked jurisdiction to determine the legality of the amalgamation, the Appellate Tribunal rejected the argument, holding that the NCLT and NCLAT have jurisdiction to decide whether an asset forms part of the liquidation estate. The Bench stated: “The question whether assets included in the liquidation estate belong to the corporate debtor goes to the core of the CIRP process. The NCLT and this Appellate Tribunal have jurisdiction to determine the same.”  The Tribunal also noted that WBHIDCO failed to challenge the amalgamation order or its rectification before the High Court or any competent authority within the limitation period, thereby waiving its right to object at a later stage.

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Dismissing the appeal, the NCLAT upheld the NCLT’s findings and confirmed that the leasehold interests of CSPL validly formed part of its liquidation estate. The Tribunal reiterated that while ownership remained with the lessor, the leasehold rights were transferable, and their inclusion in the liquidation estate was lawful under the IBC. The appeal filed by WBHIDCO was accordingly dismissed, affirming that leasehold rights vest with the corporate debtor upon amalgamation and are includable in the liquidation estate.

Appearance

For Appellant: Mr. Palash S. Singhai, Mr. Harshal Sareen, Mr. Manish Srivastava and Ms. Kamakshi S. Rao, Advocates.

For Respondent: Mr. Soorjya Ganguli, Ms. Kiran Sharma, Mr. Ananad Amit and Ms. Pooja Chakraborti, Advocates.

Cause Title: West Bengal Housing Infrastructure Development Corporation Ltd. v. Kshitiz Chawchharia (Liquidator of Concast Steel and Power Ltd.)

Case No: Company Appeal (AT) (Insolvency) No. 2119 of 2024

Coram: Justice Mohd. Faiz Alam Khan (Judicial Member), Arun Baroka (Technical Member)