NCLAT Upholds NCLT’s Power To Evict Subsidiaries From Corporate Debtor’s Properties During Liquidation Under IBC
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), New Delhi, has upheld an order of the National Company Law Tribunal, Ahmedabad Bench directing eviction of two subsidiary companies from premises owned by a corporate debtor undergoing liquidation. The appellate tribunal held that the NCLT was well within its jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC) to order recovery of possession and outstanding dues, where the underlying lease and licence arrangements were found to be invalid and unenforceable. The decision was rendered by a Bench comprising Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra, which dismissed appeals filed by Fivebro Water Services Pvt. Ltd. and Gondwana Engineers Ltd., subsidiaries of the corporate debtor, Doshion Pvt. Ltd.
Doshion Pvt. Ltd. entered the Corporate Insolvency Resolution Process (CIRP) in August 2021 and was subsequently ordered to be liquidated in November 2023. The dispute concerned two immovable properties of the corporate debtor—one situated in Ahmedabad and the other in Mumbai—which were in the occupation of its subsidiaries. Fivebro Water Services Pvt. Ltd. was occupying the Ahmedabad premises, while Gondwana Engineers Ltd. was in possession of the Mumbai property.
In relation to the Ahmedabad premises, Fivebro claimed occupation under an unregistered lease deed executed in September 2020, followed by a fresh registered lease deed executed on 31 August 2021—the very day on which the CIRP admission order and moratorium under Section 14 of the IBC came into effect. With respect to the Mumbai premises, Gondwana Engineers relied on an unregistered licence agreement which, according to the liquidator, did not comply with the mandatory requirements of the Maharashtra Rent Control Act.
After liquidation commenced, the liquidator filed applications before the NCLT, Ahmedabad, seeking directions for handing over vacant possession of both properties and recovery of outstanding rent and licence fee dues. The adjudicating authority allowed these applications, holding that the properties formed part of the liquidation estate and that the subsidiaries had no enforceable right to continue in occupation. Aggrieved, the subsidiaries approached the NCLAT.
Before the appellate tribunal, the appellants contended that disputes relating to eviction and recovery of rent arose purely out of contractual lease and licence arrangements and fell outside the jurisdiction of the NCLT. Relying on the Supreme Court’s decision in Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, it was argued that Section 60(5) of the IBC could be invoked only where there was a direct and proximate nexus with insolvency or liquidation, and not for ordinary contractual disputes which were triable by civil courts or arbitral fora.
Rejecting these submissions, the NCLAT examined the factual matrix and the timing of the agreements. In respect of the Ahmedabad property, the tribunal noted that the fresh lease deed was executed after the CIRP had commenced and the moratorium had come into force. It held that once moratorium under Section 14 is declared, the corporate debtor is prohibited from creating or transferring any rights in its assets. The post-moratorium lease, therefore, was hit by Section 14 and was legally unenforceable. The tribunal observed that execution and registration of the lease on the very day of CIRP admission, despite full knowledge of the proceedings, indicated lack of bona fides.
With respect to the Mumbai premises, the NCLAT found that the licence agreement relied upon by Gondwana Engineers was unregistered and failed to satisfy the statutory requirements under the Maharashtra Rent Control Act. As a result, the licence was held to be void and incapable of conferring any lawful right of occupation.
The appellate tribunal emphasised that under Section 35 of the IBC, the liquidator is statutorily obliged to take custody and control of all assets of the corporate debtor and to bring them within the liquidation estate. It held that applications filed by the liquidator seeking possession of the corporate debtor’s properties and recovery of dues clearly arose out of and were connected with the liquidation proceedings.
Clarifying the scope of Section 60(5) of the IBC, the NCLAT held that “as long as the residuary jurisdiction of the adjudicating authority is invoked in respect of a contract that has a nexus with the insolvency or liquidation of the corporate debtor, the invocation of this jurisdiction cannot be questioned.” The tribunal further observed that deciding issues relating to invalidity of leases, recovery of possession, and outstanding rent or licence fees was essential to ensure effective liquidation and maximisation of asset value.
Finding no illegality or perversity in the impugned order, the NCLAT upheld the directions issued by the NCLT, Ahmedabad, requiring the subsidiaries to hand over peaceful and vacant possession of the Ahmedabad and Mumbai premises to the liquidator and to clear outstanding dues. Consequently, both appeals were dismissed, affirming the powers of the insolvency court to order eviction and asset recovery during liquidation where occupation is based on invalid agreements.
Appearance
For Appellants: Advocates Arjun R. Sheth and Somya Jain, Advocates.
For Respondents: Advocates Kunal Vaishnav and Yuvraj Thakar for R-1.
Cause Title: Fivebro Water Services Pvt. Ltd. and Anr. Vs. Bijay Murmuria, Liquidator of Doshion Pvt. Ltd. and Ors.
Case Number: Company Appeal (AT) (Insolvency) No. 1730 of 2025
Coram: Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra
