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SUPREME COURT OF INDIA
ARUN MISHRA, VINEET SARAN, S. RAVINDRA BHAT, JJ.
Municipal Corporation Of Greater Mumbai (MCGM) – Appellants
Versus
Abhilash Lal & Ors. – Respondents
Civil Appeal No. 6350 of 2019
Decided on : 15-11-2019
(a) Municipal Corporation of Greater Mumbai Act, 1888 - Section 92 r/w Clauses 5 and 17, the Contract - Property of MCGM - SHCL authorized to develop the property - Project to be completed within stipulated period - Non fulfillment of conditions to result in termination of contract and vesting of the property in MCGM free from all encumbrances - Project not completed within stipulated period - MCGM issuing notice for termination of contract - Property could not have been affected by Resolution Plan for SHCL - Resolution Plan involved restructuring of liabilities of SHCL, if necessary, by creating fresh debts and mortgage of the land which directly affected MCGM - After the notice NCLT could not have approved RP implicating assets of MCGM. (Para 33, 34)
(b) Municipal Corporation of Greater Mumbai Act, 1888 - Section 92 - MCGM’s properties can be dealt with through lease or by way of creation of any other interest only with its prior permission - Instantly Resolution plan never put up for MCGM’s approval - Therefore the proposal in the Resolution plan could be approved only to the extent it did not result in encumbering the land belonging to MCGM. (Para 35)
(c) Municipal Corporation of Greater Mumbai Act, 1888 - Section 92 - Contemplating alienation or creation of any interest in respect of MCGM’s properties in a particular manner - It can only be done through the prescribed mode, or not at all. (Para 39)
(d) Municipal Corporation of Greater Mumbai Act, 1888 - Section 92 r/w Section 238, Insolvency and Bankruptcy Code, 2016 - Non obstante clause in Section 238 - Could apply in case of properties and assets of a debtor - Not of a third party - Section 238 of the Code could not override section 92 and 92A of the Act - Adjudicating authority could not have overridden MCGM’s objections and enabled creation of a fresh interest in respect of MCGM’s properties and lands. (Para 47)
(e) Administration of justice - Concession by counsel - Counsel giving written statement of acceptance of resolution plan when there was no approval of MCGM - Cannot bind MCGM - There can be no estoppel against the express provisions of law. (Para 48)
Facts of the case:
MCGM owns inter alia, Plot Nos. 1551-56, 162 and 168 in village Marol, Andheri (East) Mumbai. By a contract (dated 20th December, 2005) SevenHills Healthcare (P.) Ltd. (the company facing insolvency proceedings) agreed to develop these lands (which were to be leased to it for 30 years) and construct a 1500 bed hospital. MCGM stipulated several conditions, including that 20% of the beds had to be reserved for use by the economically deprived, and that SevenHills had to complete the construction in 60 months (excluding monsoons). The sixty-month period ended on 24th April, 2013; but the project was not completed. The lease deed had to be executed within a month after completion. The deed was not executed as the project was not completed. Further, SevenHills had to pay lease rent at the annual rate of Rs.10,41,04,000. MGCM alleges that there were defaults in these payments. In these circumstances, MCGM issued a show cause notice on 23rd January, 2018, proposing termination of the contract/agreement. SevenHills owed MCGM an amount of Rs. 76,05,07,780.
On the strength of the contract, SevenHills had borrowed from banks and financial institutions. It had created security by way of mortgage of the said lands. SevenHills’ inability to repay its debts led to the initiation of insolvency proceedings by Axis Bank. On 13th March, 2018, before the period given by MCGM’s showcause notice ended, the Petition was admitted by the Hyderabad Bench of the NCLT. The first respondent was appointed as the Resolution Professional; this was approved by the Committee of Creditors as required by the Code. A resolution plan was submitted by Dr. Shetty’s New Medical Centre. The revised resolution plan was approved by the CoC on 4th September, 2018.
MCGM filed an application claiming that it ought to be declared as a Financial Creditor and a Member of the Committee of Creditors. It stated conditional acceptance of the RP.
The NCLT, after considering the views of the RP, MCGM, the creditors and SNMC, rejected the objections raised by the MCGM.
Aggrieved, MCGM approached the Appellate Tribunal.
The NCLAT refused to interfere with the order of the Adjudicating Authority/NCLT.
Finding of the Court:
Section 238 of the IB Code cannot override section 92 or 92A of MCGM Act.
Result: Appeal allowed.
JUDGMENT :
S. RAVINDRA BHAT, J.
1. The Municipal Corporation of Greater Mumbai (hereafter “MCGM”) appeals under Section 62 of the Insolvency and Bankruptcy Code, 2016 (hereafter “IBC” or “the Code”) against the order of the National Company Law Appellate Tribunal (hereafter variously “NCLAT” and “the Appellate Tribunal”), rejecting its plea with respect to a resolution plan approved by the National Company Law Tribunal (“NCLT”) under the provisions of that Code.
2. MCGM owns inter alia, Plot Nos. 1551-56, 162 and 168 (all plots hereafter called “the lands”) in village Marol, Andheri (East) Mumbai. By a contract (dated 20th December, 2005) SevenHills Healthcare (P.) Ltd. (the company facing insolvency proceedings, hereafter “SevenHills”) agreed to develop these lands (which were to be leased to it for 30 years) and construct a 1500 bed hospital. MCGM stipulated several conditions, including that 20% of the beds had to be reserved for use by the economically deprived, and that SevenHills had to complete the construction in 60 months (excluding monsoons). The sixty-month period ended on 24th April, 2013; the project however, was not completed. In terms of Clause 15(g), the lease deed had to be executed within a month after completion. However, the deed was not executed as the project was not completed. Further, SevenHills had to pay lease rent at the annual rate of Rs.10,41,04,000. MGCM alleges that there were defaults in these payments. In these circumstances, MCGM issued a show cause notice on 23rd January, 2018, proposing termination of the contract/agreement. It is submitted that SevenHills owed MCGM an amount of Rs. 76,05,07,780.
3. On the strength of the contract, SevenHills had borrowed from banks and financial institutions. It had created security by way of mortgage of the said lands, citing Clause 5, which enabled the creation of such encumbrances. SevenHills’ inability to repay its debts led to the initiation of insolvency proceedings by Axis Bank. On 13th March, 2018, before the period given by MCGM’s showcause notice ended, the Petition (CP (IB) No. 282/7/HBD/2017) was admitted by the Hyderabad Bench of the NCLT. The first respondent was appointed as the Resolution Professional (hereafter “RP”); this was approved by the Committee of Creditors (“CoC”) as required by the Code, on 12 April, 2018. A publication for expression of interest (“EOP”) was issued on 14 May, 2018; later, on 25th June, 2018 and 16th July, 2018, the terms of the Request for Proposal (RFP) and criteria for evaluation (of RFPs received) were approved. As a result of the RFP published, a resolution plan was submitted by Dr. Shetty’s New Medical Centre (“SNMC”). After discussion with the CoC, a revised RFP was submitted by the RP. The revised resolution plan was approved by the CoC on 4th September, 2018.
4. The resolution plan projected infusion of over Rs.1000 crores by SNMC. That amount was to be borrowed; for this purpose, SevenHills’ properties movable and immovable, were proposed to be secured by hypothecation and mortgage respectively. Operational creditors were to be paid off to the extent of 75%. Further, the plan proposed payout to the tune of Rs.102.3 crores to MCGM as against its total claim of Rs.140.88 crores, and also committed to honouring the terms of the agreement entered into by SevenHills and providing 20% of the beds (of the hospital to be constructed) to the poor and weaker sections of society. The networth certificate furnished by SNMC indicated that it possessed sufficient funds.
5. MCGM filed an application (I.A. No. 207/ 2018) claiming that it ought to be declared as a Financial Creditor and a Member of the Committee of Creditors. It made several submissions, which indicated that subject to stipulations with respect to completion of the hospital project in a timebound manner, and subject to SNMC providing 20% beds in the completed hospital, for use by the economically weaker sections (and at the disposal of MCGM) and, lastly subject
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