IBC Simplified – Rajendra Bhutta v MHADA

  June 23, 2021

A summary of the Supreme Court judgment in the matter of Rajendra K. Bhutta v. Maharashtra Housing Area Development Authority and Another ~ By Sara Jain

Ratio: Interpretation of Section 14(1)(d) is to be done in a manner such that the moratorium shall prohibit (a) recovery of any property by the owner if it is occupied by the corporate debtor and (b) recovery of any property by the lessor if it is possessed by the corporate debtor.

Relevant Facts:

  • The Maharashtra Housing Area Development Authority (MHADA) entered into a contract with the corporate debtor for the joint development of a society in Goregaon.
  • The corporate debtor then entered into a loan agreement with the Union Bank of India. As a result of the corporate debtor’s failure to repay the said loan, Union Bank filed an application for corporate insolvency resolution under Section 7 of the IBC.
  • The application was admitted by the NCLT and a moratorium was imposed in accordance with Section 14.
  • Thereafter, the MHADA issued a termination notice to the corporate debtor and stated that the latter had to hand over possession of the society land to MHADA.
  • The appellant filed an application seeking direction from the NCLT to restrain MHADA from taking possession before completion of the corporate insolvency resolution process due to the existence of moratorium period (CIRP).
  • The NCLT dismissed the application and so, the appellant filed an appeal before the NCLAT. An appeal from the order of the NCLAT was then filed before the Supreme Court.

Issue:

  • What is the correct interpretation of Section 14(1)(d) of the IBC?

Analysis:

  • In the said case, the corporate debtor was granted a ‘licence’ to enter upon the land, demolish the existing structures and reconstruct new structures.
  • Section 14(1)(d) prohibits “recovery of any property by an owner or lessor that is occupied by or in possession of the corporate debtor”.
  • After relying on various judgments, the court observed that there could be two ways of interpreting this provision. In the first manner, ‘occupied’ and ‘possession’ could be used for either ‘owner’ or ‘lessor’. However, this interpretation is not tenable as a ‘lessor’ does not seek recovery of property ‘occupied by’ the lessee, he seeks ‘possession instead.
  • The second manner is based on the Latin maxim reddendo singula singulis which means referring each phrase or expression to its corresponding object. Thus, ‘owner’ corresponds to ‘occupied by’ and ‘lessor’ corresponds to ‘in possession of’.
  • Thereafter, the court identified the distinction between ‘possession’ and ‘occupation’ in the legal context after referring to various judgments. While ‘occupation’ means being in actual possession of or being actually used by, ‘possession’ on the other hand, connotes actual or constructive possession, thus including situations where there is legal possession, but no physical possession.
  • In light of this interpretation, the Apex Court held that as the corporate debtor ‘occupied’ the land, MHADA was prohibited to recover the property.

It was also observed that by virtue of Section 238 of the IBC, the provisions of the Code would prevail over the provisions of the MHADA Act.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Related Posts

“In adherence to the rules and regulations of Bar Council of India, Institute of Chartered Accountants of India, Institute of Company Secretaries of India, Institute of Cost Accountants of India and any other professional bodies (whether mentioned or not herein), this website has been designed only for the purposes of circulation and exchange of information, and not for advertising.
Your use of ibc16.com’s services are completely at your own risk. Readers and subscribers should seek proper advice from an expert professional before acting on the information mentioned herein. The content on this website is general information and none of the information contained on the website is in the nature of a legal opinion, or otherwise amounts to any legal advice. The user is requested to use their judgment, and exchange of any such information shall be solely at the user’s risk.
ibc16.com does not take responsibility for the actions of any member registered on the site, and is not accountable for any decision taken by the reader based on information/commitment provided by the registered member(s). By clicking ‘ENTER’, the visitor acknowledges that the information provided on the website (a) does not amount to advertising or solicitation, and (b) is meant only for his/her understanding about our activities and who we are.”