The Adjudicating Authority has jurisdiction to determine asset ownership in insolvency proceedings, and development rights constitute property under the Insolvency and Bankruptcy Code.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 18(1)(f) - Jurisdiction of Adjudicating Authority to determine asset ownership - The Adjudicating Authority held it had jurisdiction to assess whether the subject land constituted an asset of the corporate debtor, rejecting claims of ownership by the appellants. (Paras 1, 62, 74)

(B) Arbitration and Conciliation Act, 1996 - Section 32 - Termination of arbitration proceedings - The court found that the orders passed by the Sole Arbitrator did not amount to an arbitral award, thus not binding in subsequent proceedings. (Paras 30, 60)

Facts of the case:
The appellants are landowners who entered into various agreements with developers for a project. Disputes arose regarding the rights over the land, leading to arbitration and subsequent insolvency proceedings. (Paras 2.1, 2.2)

Findings of Court:
The court upheld the Adjudicating Authority's decisions regarding jurisdiction and the status of the subject land, affirming that development rights constitute property under the IBC. (Paras 62, 74)

Issues: The main issues included whether the subject land is an asset of the corporate debtor, the nature of the Sole Arbitrator's orders, and the jurisdiction of the Adjudicating Authority. (Paras 9, 10)

Ratio Decidendi: The court ruled that the development rights claimed by the corporate debtor were indeed property and that the Adjudicating Authority had the jurisdiction to determine asset inclusion in the CIRP process. (Paras 22, 62)

Result: Appeals dismissed. (Para 75)

JUDGMENT

Ashok Bhushan, J.

These two Appeals have been filed by the same Appellant challenging the order dated 30.04.2024 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi, Court-III. Company Appeal (AT) (Insolvency) No.1117 of 2024 has been filed challenging the order dated 30.04.2024 passed in IA No. 4648 of 2020 which was filed by the Appellant. By the impugned order the IA No. 4648 of 2020 has been disposed of. Company Appeal (AT) (Insolvency) No.1116 of 2024 has been filed against the order dated 30.04.2024 passed in Intervention Petition IA No. 58 of 2023 by which order Adjudicating Authority has allowed the intervention application filed by M/s. Art Constructions Pvt. Ltd., the Successful Resolution Applicant (SRA). Both the Appeals have arisen out of common facts and sequence, they have been heard together and are being decided by this common judgment. We refer pleadings in Company Appeal (AT) (Insolvency) No.1117 of 2024 for considering both the Appeals.

2. Brief facts giving rise to these Appeals are:-

2.1. Appellants herein are the owners of land measuring 36 acres 04 Guntas situated at Kengeri Village, Kengeri Hobli, Bangalore South Taluk. Appellants along with Mr. Karar Ahmed (brother of Appellant No.1) entered into MoU dated 25.04.2008 with M/s. Upkar Developers (India) Pvt. Ltd. which company was incorporated by the Appellants themselves for development of the land. A loan was taken from HUDCO of Rs.15 Crores mortgaging the assets. The Appellant entered with a Collaboration Agreement dated 05.07.2008 with M/s. Upkar Developers (India) Pvt. Ltd. and M/s. Era Landmarks (India) Ltd. M/s. Era Landmarks (India) Ltd. was referred to as Developer in the Collaboration Agreement who undertook to discharge the loan of HUDCO and obtain the building plan of the project land and develop the project. The developer undertook to pay Rs.35 Crores towards interest free Refundable Security Deposit. The developer was to market the project. The agreement captured the rights and obligations of the developers. Rights and obligations of the first party i.e. owner. First party has the rights to 37% of the gross sale proceeds received from sale of the project. By subsequent agreement dated 28.10.2009 executed in form of addendum, certain terms and conditions of the Collaboration Agreement dated 05.07.2008 was modified by the parties. The document was referred as ‘Addendum (Supplementary) to Collaboration Agreement dated 05.07.2008’. The owners have also executed a General Power of Attorney dated 05.07.2008 in favour of the developer.

2.2. On 25.01.2010, an Assignment Agreement was entered into by the Developer with its one of the subsidiaries namely— ‘Parinda Buildcon Private Limited’ assigning rights of developer to develop and carry on the project. The developers in the Assignment Agreement had also undertaken to discharge its liabilities under the Collaboration Agreement, in event of ‘Parinda Buildcon Private Limited’ failed to discharge its liabilities. The owners along with M/s. Upkar Developers (India) Pvt. Ltd. issued two legal notices dated 17.02.2012 and 22.02.2012 alleging that the corporate debtor has not been able to discharge its obligations under the Collaboration Agreement. By the legal notices, Collaboration Agreement dated 05.07.2008, addendum dated 28.10.2009, Assignment Agreement dated 25.01.2010 and General Power of Attorney dated 05.07.2008 were terminated. The developers were called upon to desist from dealing with project property. The developers objected to the legal notice and asked to withdraw the allegations made in the legal notice. M/s. Era Landmarks (India) Ltd. and ‘Parinda Buildcon Private Limited’ filed an application under Section 11(5) of the Arbitration & Conciliation Act, 1996 praying for appointing Sole Arbitrator for adjudication of the disputes between the parties in terms of the Collaboration Agreement dated 05.07.2008. In the application, owners as well as M/s. Upkar Deve

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2024 Supreme(Online)(NCLAT) 932

NATIONAL COMPANY LAW APPELLATE TRIBUNALJustice Ashok Bhushan (Chairperson) , Hon'ble Mr. Barun Mitra (Member (Technical)) ,1. KH KHAN – AppellantVersusART CONSTRUCTIONS PRIVATE LIMITED – Respondent1116/ND/2024 COMPANY APPEAL(AT)(INS)

The Adjudicating Authority has jurisdiction to determine asset ownership in insolvency proceedings, and development rights constitute property under the Insolvency and Bankruptcy Code.

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Justice Ashok Bhushan (Chairperson) , Hon'ble Mr. Barun Mitra (Member (Technical)) ,
1. KH KHAN – Appellant
Versus
ART CONSTRUCTIONS PRIVATE LIMITED – Respondent
1116/ND/2024 COMPANY APPEAL(AT)(INS)