Brief Overview:

The lease, even if contrary to law, can only be determined by an appropriate forum of civil jurisdiction and not by the Committee of Creditors (“COC”) in its commercial wisdom and NCLT at the time of approval of resolution plan.

Technical Details:

NCLT adjudicated the question : whether the Resolution Professional (“RP”) /COC could extinguish the leasehold interest on a piece of land which the Corporate Debtor as a Lessor had leased?

Section 25 of the Insolvency and Bankruptcy Code, 2016 (“IB Code”) casts a duty upon the RP to represent and act on behalf of the corporate debtor (“CD”) with third parties, exercise rights for the benefit of the CD, which includes its right to get a lease legally terminated by a competent court of law so that a clear title passes on to the Successful Resolution Applicant (“SRA”).

The RP cannot short circuit the procedure and seek approval of a resolution plan that leads to cancellation of an existing lease created by the CD, on the ground that it has been approved by the COC in its commercial wisdom. The lease, even if contrary to law, can only be determined by an appropriate forum of civil jurisdiction.

For further details, please see:

UCO Bank v. M/s. GIT Textiles Manufacturing Limited

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