The NCLT has jurisdiction to determine asset ownership in insolvency proceedings, and development rights constitute property under the IBC, while the Sole Arbitrator's orders do not constitute binding awards.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 18(1)(f) and 60(5)(c) - Jurisdiction of National Company Law Tribunal (NCLT) - Adjudicating Authority has jurisdiction to determine whether the subject land is an asset of the corporate debtor and need not relegate parties to the Civil Court - Development rights constitute property under Section 3(27) of the Code - The corporate debtor's claim to development rights is valid and enforceable. (Paras 22, 28, 72)

(B) Arbitration and Conciliation Act, 1996 - Section 32 - Orders of the Sole Arbitrator - Orders dated 27.05.2014 and 15.07.2015 do not amount to an arbitral award and are not binding on the parties - The proceedings were terminated without determining the rights of the parties. (Paras 30, 60)

Facts of the case:
The Appellants challenged the NCLT's orders regarding the inclusion of their land in the corporate debtor's insolvency resolution process, asserting ownership and disputing the corporate debtor's rights under various agreements. (Paras 2-4)

Findings of Court:
The NCLT has jurisdiction to determine asset claims within the CIRP, and the corporate debtor retains development rights over the subject land, which were properly included in the Information Memorandum. (Paras 74-75)

Issues: 1) Jurisdiction of NCLT regarding asset ownership; 2) Validity of the Sole Arbitrator's orders; 3) Inclusion of subject land in CIRP. (Paras 9-10)

Ratio Decidendi: The court held that development rights are property under the IBC, and the NCLT rightly exercised its jurisdiction to determine asset status, while the Sole Arbitrator's orders did not constitute binding awards. (Paras 22, 60)

Result: Appeals dismissed.

JUDGMENT

(14th November, 2024)

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 wel

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2024 Supreme(Online)(NCLAT) 931

NATIONAL COMPANY LAW APPELLATE TRIBUNALJustice Ashok Bhushan (Chairperson) , Hon'ble Mr. Barun Mitra (Member (Technical)) ,K.H. KHAN – AppellantVersusMR. UDAYRAJ PATWARDHAN – Respondent1117/ND/2024 COMPANY APPEAL(AT)(INS)

The NCLT has jurisdiction to determine asset ownership in insolvency proceedings, and development rights constitute property under the IBC, while the Sole Arbitrator's orders do not constitute binding awards.

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Justice Ashok Bhushan (Chairperson) , Hon'ble Mr. Barun Mitra (Member (Technical)) ,
K.H. KHAN – Appellant
Versus
MR. UDAYRAJ PATWARDHAN – Respondent
1117/ND/2024 COMPANY APPEAL(AT)(INS)