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Blu-Smart Charge Insolvency: NCLT Refuses Lessor's Plea to Recover Premises During
The has firmly declined to direct the of to remove the company’s assets from licensed premises or hand over to the lessor, . The ruling, delivered by Judicial Member Shammi Khan and Technical Member Sanjeev Sharma, underscores the protective scope of the under and offers critical guidance for lessors seeking to reclaim property from corporate debtors undergoing insolvency.
Background: A Lease Terminated Before Insolvency
The dispute arose from a executed on , between Eldeco and Blu-Smart Charge. The agreement was terminated by Eldeco on , prompting the lessor to file before the . On , the civil court directed both parties to maintain , and the suit remains pending.
Matters took a decisive turn on , when Blu-Smart Charge was admitted into the , triggering an automatic under Section 14 of the IBC. Eldeco, believing the termination had effectively ended Blu-Smart’s right to occupy the premises, issued communications on May 14 and , demanding removal of assets and handover of . The lessor also claimed of ₹7.56 lakh per month, plus common area maintenance (CAM) and electricity dues, from the insolvency commencement date, and sought to treat these amounts as under Section 5(13)(e) read with .
The NCLT’s Ruling: Trumps Termination
The NCLT bench categorically refused to order recovery of the premises or removal of assets during the period. Referring to of the IBC, the court observed that the provision explicitly prohibits an owner or lessor from recovering property that is “occupied by or in the of the corporate debtor” while the is in force. Since Blu-Smart Charge’s assets remained on the licensed premises and the company was in on the insolvency commencement date, the applied regardless of the prior termination of the licence agreement.
The bench drew heavily on a 2026 decision of the , which held that applies where the corporate debtor remains in on the insolvency commencement date, even if the underlying arrangement had been terminated before the CIRP began. The NCLT noted that the contractual consequences of the termination were already pending before the civil court and could not be adjudicated in the present proceedings.
Legal Analysis: , Not Title, Is Key
The ruling reinforces a fundamental principle of insolvency law: the protects the corporate debtor’s of assets, not merely its legal entitlement. Even where a lease or licence has been validly terminated, physical at the time of insolvency commencement triggers the protective shield of . This interpretation aligns with the IBC’s objective of preserving the corporate debtor’s estate as a to maximize value for all creditors.
For lessors, the decision signals that they cannot unilaterally re-enter premises or seize assets once the is in place, even if they have a strong contractual or legal claim. The proper remedy lies in the civil court for pre-insolvency breaches, but enforcement must await the conclusion of the CIRP or approval of a resolution plan.
: A Door Left Ajar
Eldeco’s claim for was not outright rejected. The NCLT declined to treat the amounts as at this stage, but left the issue open to be dealt with under read with Regulation 31(b) if the amounts are otherwise payable in accordance with the Code. This pragmatic approach allows the Resolution Professional or the adjudicating authority to assess the claim in the context of the overall insolvency process, recognizing that continued use of the premises may generate legitimate costs that could be prioritized.
The decision provides a pathway for lessors to seek compensation for post-insolvency use of their property, but such claims will be scrutinized under the IBC’s cost regime rather than through .
Impact on Legal Practice and Insolvency Proceedings
This judgment offers clear guidance for legal practitioners advising both lessors and resolution professionals. For lessors, the takeaway is that termination of a lease or licence before insolvency does not automatically entitle them to repossess property if the corporate debtor remains in . They must either wait for the to lift or file appropriate claims as or for .
For resolution professionals, the ruling affirms that they have a duty to retain of assets located on the debtor’s premises, even if the underlying agreement has been terminated. The serves as a critical tool to prevent and ensure the continuity of operations during the CIRP.
The NCLT’s reliance on NCLAT precedent also underscores the importance of appellate jurisprudence in shaping IBC practice. The 2026 NCLAT decision has now been endorsed by a coordinate bench, likely encouraging similar outcomes in other tribunals.
Conclusion
The NCLT Ahmedabad bench’s refusal to grant Eldeco’s plea is a textbook application of of the IBC. By prioritizing the over contractual termination, the tribunal has reinforced the insolvency framework’s central objective: preserving the corporate debtor’s assets for collective benefit. While lessors may feel frustrated by the inability to reclaim their property promptly, the law provides alternative avenues for compensation. This decision will serve as a key reference for future disputes involving pre-insolvency terminations and the protective scope of the .
