Municipal Corporation of Greater Mumbai (mcgm) v. Abhilash Lal & Ors.
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 Trib unal
(“NCLT”) under the provisions of that Code.
2. MCGM owns inter alia, Plot Nos. 155-156, 162 and 168 (all
plots hereafter called “the lands”) in village Marol, A ndheri (East)
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Mumbai. By a contract (dated 20 th December, 2005) SevenHills
Healthcare (P.) Ltd. (the company facing insolvency pr oceedings,
hereafter “SevenHills”) agreed to develop these lands (w hich 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 24 th April, 2013; the project however, was
not completed. In terms of Clause 15(g), the lease dee d 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 10,41,04,000. MGCM alleges t hat
there were defaults in these payments. In these circumstances, MCGM
issued a show cause notice on 23 rd January, 2018, proposing termination
of the contract/agreement. It is submitted that SevenHills owed MCGM
an amount of ` 76,05,07,780.
3. On the strength of the contract, SevenHills had borrowed from
banks and financial institutions. It had created sec urity by way of
mortgage of the said lands, citing Clause 5, which enabled the creation
of such encumbrances. SevenHills’ inability to repay its d ebts led to
the initiation of insolvency proceedings by Axis Bank. On 13 th March,
2018, before the period given by MCGM’s show-cause notice ended,
the Petition (CP (IB) No. 282/7/HBD/2017) was admit ted by the
Hyderabad Bench of the NCLT. The first respondent was appoin ted
as the Resolution Professional (hereafter “RP”); this was a pproved by
the Committee of Creditors (“CoC”) as required by the C ode, on 12
April, 2018. A publication for expression of interest (“EOP”) was issued
on 14 May, 2018; later, on 25 th June, 2018 and 16 th 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 C oC on 4th
September, 2018.
4. The resolution plan projected infusion of over ` 1000 crores
by SNMC. That amount was to be borrowed; for this p urpose,
SevenHills’ properties - movable and immovable, were proposed to be
secured by hypothecation and mortgage respectively. Operational
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS. [S. RA VINDRA BHAT, J.]
creditors were to be paid off to the extent of 75%. Furthe r, the plan
proposed payout to the tune of ` 102.3 crores to MCGM as against its
total claim of ` 140.88 crores, and also committed to honouring the
terms of the agreement entered into by SevenHills and provi ding 20%
of the beds (of the hospital to be constructed) to the p oor and weaker
sections of society. The net-worth certificate furnis hed 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 Membe r 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 wea ker
sections (and at the disposal of MCGM) and, lastly subject to cleari ng
its (MCGM’s) claims to the tune of ` 140.88 crores, it was agreeable
to the resolution plan. However, later during the proceedings, it opposed
the resolution plan, arguing that being a public body as well as a planning
authority, it had to comply with the provisions of the Mumbai Municipal
Corporation Act, 1888 (“MMC Act”), which meant that all action a nd
approval had to be taken by the Improvement Committe e of the
Corporation. It was also stated that the show cause notic e (“SCN”)
dated 23 rd January, 2018 had been already issued by MCGM proposing
to terminate the contract (with SevenHills) to which there was no
response and that in the absence of a lease, the provisions of Se ction
14(1)(d) of the Code could not prevent the MCGM from terminat ing
the agreement. Another argument made was that the period of CI RP
in the case began on 13 th March, 2018 when the petition was admitted
and the period of 270 days expired on 8 th September, 2018; an extension
of 90 days provided in Section 12(3) was granted by the Adjudicatin g
Authority on 4 th September, 2018 and the extended period came to an
end on 7 th December, 2018; thus the CIRP has lapsed by efflux of time.
6. The NCLT, after considering the views of the RP, MCGM,
the creditors and SNMC, held that:
“29. It may be relevant to note here that the Application for
approval of the resolution plan was filed on 07.09.2018. The
MCGM at a belated stage has come up with its object ions
to the Resolution Plan with the contention that it is
undisputed owner of the plot on which one of the hos pitals
of the Corporate Debtor in Mumbai is built. The var ious
669
objections raised by MCGM as enumerated hereinabove at
a belated stage are neither tenable nor acceptable. It is cl ear
from the record that MCGM is taking a stand which is totally
contrary to its own decisions and factual submission s. The
final prayer of MCGM is to reject the ‘resolution p lan’ and
order for liquidation of the Corporate Debtor. The RP in his
submissions has clearly pointed out as to why the aver ments
of MCGM are erroneous and incorrect. For the sake o f
briefness, the submissions made by RP as stated sup ra are
not discussed in detail once again. This Adjudicati ng
Authority is of the view that the contentions raised by MCGM
cannot be accepted due to the conflicting and contradi ctory
stands taken by it in the course of hearings. Furth er, the
contention of MCGM relating to expiry of the period of 270
days is untenable and unacceptable for the reason th at the
Application by the Resolution Professional for the app roval
of the Resolution Plan has been made well before the expi ry
of the period of CIRP and the same is in accordance with
the provisions of the Code. Therefore, the objections raised
by the MCGM are hereby rejected.”
7. The NCLT also held that the plan filed along with the application
met the requirements of Section 30(2) of the Code, and Regulat ions
37, 38, 38(IA) and 39(4) of IBBI (CIRP) Regulations, 2016. It al so
held that the resolution plan did not contravene any of the provis ions
of Section 29A and was unanimously approved by that CoC; it provided
for 78.07% of payment to financial creditors and 75% of payment t o
operational creditors including doctors, irrespective of claims in incorrect
forms. Further, the resolution applicant is also addressi ng the dues
payable to MCGM as stated in the resolution plan. Further, that NCLT
observed that on comparison of the amount offered in the resoluti on
plan with Form-H submitted by the RP, it was seen that th e amount
proposed in the plan was more than that of the value of liqu idation of
the Corporate Debtor. It accordingly approved the plan.
8. Aggrieved by NCLT’s order, MCGM approached the
Appellate Tribunal, before which several grounds were urged, including
that since the conditions stipulated in the contract (with SevenHills
Healthcare) had not been complied with, there was no lease deed and
consequently no interest inured in the land, in favour of the Corporate
Debtor. It was also urged that the resolution applicant was aw are that
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS. [S. RA VINDRA BHAT, J.]
the property belonged to MCGM, and had not vested in the Corporate
Debtor. Despite these circumstances, the proposal and revised proposal
incorporating encumbrances of the lands were made contrary to law.
It was also specifically urged that mandatory provisions of t he MMC
Act requiring express authorization by the corporation for t ransfer or
creation of any interest in land had not been compl ied with and
resultantly, the proposal and revised proposal approved b y the NCLT,
so far as they dealt with the property and lands, were not e nforceable
against MCGM.
9. The NCLAT in its impugned order, took note of a memo filed
on behalf of the MCGM on 20th April, 2019 (before the NCLT) , that
the revised resolution plan had been accepted and all term s specified
in its written submissions, were to be incorporated. As a result, the
NCLAT was of the opinion that there was no scope for i nterference
with the order of the Adjudicating Authority/NCLT.
10. It is argued on behalf of MCGM by its learned senior counsel,
Mr. Neeraj Kaul, that no lease deed was executed in favour of
SevenHills, the Corporate Debtor. MCGM was the undeniable ow ner
of the land; as there were no assets of the Corporate Debt or, it stated
that a duly registered lease deed would be executed. The proposal and
revised proposal seeking direction with regard to the lea se deed, had
to be necessarily dealt with in accordance with law. Thi s meant that
unless MCGM, expressly approved the revised plan, whereby a lease
deed could be executed in favour of the SevenHills Healthcar e Pvt.
Ltd. (or in favour of the resolution applicant SNFC ), neither the
adjudicating authority nor the NCLAT could issue any direction seeking
to bind MCGM with respect to the manner it had to deal with properties
that belonged to it.
11. It was emphasised that the effect of the impugned order is
to prevent MCGM from violating the law. The direction whi ch was
highlighted was in violation of Section 92 of the MMC Act. Learned
senior counsel underlined that the written submissions file d on behalf
of MCGM could not be construed as an admission, or that MCGM was
bound to agree to the revised proposal. It was alternatively argued that
at best, these submissions could be considered as concessions of law
which were never binding on MCGM.
12. It was argued that there was no question of incorporati ng
any direction or approving the revised plan, which in any manner affected
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MCGM’s properties. In this context, Mr. Neeraj Kaul, lear ned Senior
Counsel, urged that the terms of the original contr act (dated 20 th
December, 2005) had been violated; the 1500 bed hospital had not been
completed by the stipulated date. Furthermore, arrears of le ase rentals
had mounted together every attendant liability. In these circumstances,
even before the insolvency proceedings were initiated, MCGM i ssued
a show cause notice proposing to terminate the contract. It was further
emphasised that since the terms of the contract were infringed, in fact,
there was no subsisting lease which could have been dealt wi th by the
revised proposal and later by the Adjudicating Autho rity. It was
submitted that the impugned order has completely noted thes e salient
aspects.
13. On behalf of the RP (who has been arrayed as the first
respondent) it is argued by Mr. C.A. Sundaram, learned senior counsel
that MCGM had categorically consented to the resolution plan in writing
before the NCLT and the Appellate Tribunal. He points out that in the
written submissions dated 28 th November, 2018, 29 th April, 2019 and
14 th May, 2019 MCGM categorically stated that the resolution plan be
approved and its application before the NCLT ought to be dispos ed of
in terms of the commitment given by the resolution applicant /SNMC.
It is pointed out that the Appellate Tribunal, afte r hearing the
submissions of MCGM that it had no objections to the resolution plan,
affirmed it. MCGM, counsel submitted, has not refuted that such a
statement was made before the NCLAT. It is therefore the undisputed
position that MCGM had no objections to the resolution plan. That being
the case, counsel argues that the appeal is not maintainab le.
14. Mr. Sundaram argued that MCGM’s contentions that no
interest or leasehold rights in the land were created i n favour of the
Corporate Debtor, flies in the face of its letters and also its application
to the NCLT, which in para 4, admitted that the lands were le ased to
the Corporate Debtor. In fact, MCGM filed the application claiming that
the lease was a capital or finance lease and the unpaid lease rentals
were a financial debt within the meaning of the Code. Unlike the written
submissions, MCGM did not even explain on what basis it h ad filed
the application to the NCLT regarding its position that no leasehold rights
subsisted.
15. Learned senior counsel submitted that MCGM was invited
to attend and participate in CoC meetings due to its positi on as owner
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS. [S. RA VINDRA BHAT, J.]
of the land on which the Mumbai hospital of the Corporate De btor is
located. The issue of whether or not the corporate d ebtor has any
leasehold rights under the contract (of 2005) is a disputed question of
fact which can only be adjudicated upon in civil proc eedings after
conducting a civil trial.
16. It is also argued alternatively, that assuming for the purpose
of argument that no leasehold rights were created in favour of the
Corporate Debtor, the resolution plan does not create any lease hold
rights in favour of the respondent applicant/SNMC. Learned se nior
counsel argued that the resolution plan merely envisages a change in
the shareholding of the Corporate Debtor but does not transfer any of
MCGM’s assets to SNMC. Therefore, it is false to suggest t hat the
resolution plan transfers MCGM’s assets to SNMC. It was argued
furthermore that though MCGM was not entitled to, nor treate d as a
financial creditor, it was nevertheless invited to part icipate in CoC
meetings, interact as well as negotiate favourable terms with potential
resolution applicants. To further safeguard MCGM’s interests, the RFP
also required all prospective resolution applicants to submit their plans
to resolve the dispute with MCGM.
17. Mr. Sundaram also submitted that SNMC’s revised proposal
to MCGM assured repayment of its entire dues. In light of a pr oposal
of this nature, MCGM’s stand seeking liquidation of the Co rporate
Debtor appears not only arbitrary but also prima facie vindictive .
18. It is also submitted that the resolution plan is abs olutely
unconditional in nature and in no manner contingent on the resolution
of the dispute with MCGM. It is submitted that such unconditionality is
the most fundamental aspect of the resolution plan. This unconditional
nature is recorded in the minutes of meetings of the 8th meeting of the
CoC held on 20 th August 2018. MCGM participated in the meetings of
the CoC, including the 8th CoC meeting, and was provided a cop y of
the minutes contemporaneously. These minutes record SNMC’s
categorical statement that the negotiations with MCGM are in progress
and that the resolution plan is unconditional and in no manner dependent
on the outcome of such negotiations. Further, there is no provisi on in
the resolution plan (and none has been cited by MCGM) which suggests
that the plan is conditional on settlement with it (i.e. MCGM).
19. It is also submitted that any dispute with MCGM in relation
to the lease of the underlying land has no bearing on the validity of the
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resolution plan, under Section 31 of the Code. Having been app roved
by the CoC and the NCLT on merits, the plan attained finality and binds
MCGM as a stakeholder in the Corporate Debtor. MCGM theref ore,
cannot hold the entire CIRP of the Corporate Debtor to ransom despite
not even having raised a single objection on the validity of any specific
term in the resolution plan under Section 30(2) of the Code.
20. Mr. Ramji Srinivasan, appearing on behalf of the CoC, argued
that the financial creditors were interested in ensuring th at their dues
were paid, preferably in full. SNFC’s resolution plan held out t he best
assurance toward that end. He also argued that the question of obtaining
any approval under Section 92A either for creation of charge, or for
any other purpose did not arise, because the terms of t he contract,
which in fact amounted to a lease (as it was a registere d instrument
and MCGM had received over 10 crores as initial lease consideration).
Therefore, the resolution plan approved by the NCLT, and later, NCLA T,
were sound and did not call for interference.
21. It was argued, furthermore, that the reliance on Section 92
of the MMC Act is misguided as it seeks to superimpose provisions of
the MMC Act on the provisions of the Code. This is clearly
impermissible in terms of the non-obstante provision contained in Section
238 of the Code.
22. Mr. K.V . Vishwanathan, learned senior counsel for SNFC,
argued that the plan approved provided the best solution for the financial
woes of the Corporate Debtor. It was argued that SN FC never
represented that it would mortgage or obtain any loan on the str ength
of the lease. Nor did it ever urge that MCGM’s permission was not
necessary. He pointed to the terms of the resolution plan and submitted
that they were subject to MCGM’s obligations to follow the law.
23. It was submitted that the proposed plan contempl ates
compliance with the various conditions of the contrac t agreement
including without limitation, 20% reservation of beds for MCGM’s
employees and settlement of MCGM’s claimed dues. The resolut ion
plan proposed payment to MCGM (which was enhanced to 100% b y
a later proposal) at clause 2.2.2(b). Further, clause 2.2.3(f) of the
resolution plan again records the proposed payment to MCGM by stating
that while the resolution professional has not admi tted the claims
submitted by MCGM, SNMC recognizes such dues payable to it and
shall pay ` 102 crores in terms of the offer made to MCGM as
recorded.
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS. [S. RA VINDRA BHAT, J.]
24. In the present case, Section 92 of the MMC Act ha s no
bearing on the validity of the resolution plan, the approval order or the
impugned order. Section 92 of the MMC Act mandates and prescribes
the manner in which disposal of land belonging to the appellant would
take place. However, the resolution plan does not contem plate any
disposal of the said land or creation of any additio nal rights and
obligations of MCGM or the Corporate Debtor in relation to the lands.
It is merely the shareholding of the Corporate Debtor which undergoes
a change pursuant to the resolution plan. MCGM cannot place a ny
embargo on such shareholding changes by resorting to proceeding under
the Code.
25. It was urged that SNMC does not acquire any interest in
the said land and only acquires managerial control over th e Corporate
Debtor by way of holding equity shares in the Corpora te Debtor.
Therefore, there arises no question of Section 92 of the MMC Act being
violated through the resolution plan.
Discussion regarding the insolvency process and rel evant
provisions of the MMC Act
26. On admission of an insolvency application preferred by a
financial creditor/operational creditor, a moratorium is declared on the
continuation and initiation of all legal proceedings against the debtor.
The NCLT appoints an interim resolution professional (“IR P”). The
moratorium operates till the completion of the insolvency re solution
process which, by law should be completed within a mandate d time
frame. During the moratorium period, the debtor can not transfer,
encumber or sell any asset. Upon appointment of an IRP, the board of
directors stands suspended and management vests with the IRP. These
professionals (IRPs) have to conduct the insolvency resolution process,
take over the assets and management of the company, assist creditors
in collecting information and manage the insolvency resolution process.
The term of the IRP continues until an RP is appointed under Section
22. The IRP has to first determine the debtor’s financial position through
information collection regarding assets, finances a nd operations.
Information may include data relating to operations, payments, list of
assets and liabilities. The IRP further has to receive and collate c laims
submitted by creditors.
27. The RP selected by the NCLT has to constitute a commit tee
of creditors (CoC) comprising all the financial creditors of the corporate
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debtor. This provision is aimed at creditors adopting a collective
approach towards insolvency resolution instead of p roceeding
individually. Key decisions of the process, and the plan to be eventually
finalized are to be approved by the CoC upon its satisfacti on that the
provisions of the most acceptable plan would ensure that their dues are
cleared.
28. The Code is principally aimed at aiding a corporate debtor in
the resolution of its insolvency condition without approaching liquidation.
The key to this process is the finalization of an insol vency resolution
plan. A suitably structured plan would provide for repayment of the
debtor’s outstanding liabilities after evaluating its financial worth, at the
same time ensuring its survival as a going concern. The resolution plan
must necessarily provision for repayment of the debt of op erational
creditors in a manner such that it shall not be lesser than t he amounts
that would be due, should the debtor be liquidated per Section 30(2) of
the Code. Also, the plan should identify the manner of repayme nt of
insolvency resolution costs, the implementation and supervision of the
strategy, and should be in compliance with the law. If the terms
(including the terms of repayment) under the resolu tion plan are
approved by the committee of creditors, it has to be further approved
by the NCLT, which is the adjudicating authority.
29. In this case, it is not the provisions of the IBC which thi s
court has to primarily deal with; it is rather whether the process and
procedure adopted by the NCLT and later the NCLAT, in overr uling
MCGM’s concerns and objections with regard to the treatmen t of its
property (i.e. the lands) is in accordance with law . The relevant
provisions of the Municipal Corporation of Greater Mumbai Act, 1888
are extracted below:
Provisions governing the disposal of municipal prop erty:
Section 92. With respect to the disposal of propert y
belonging to the corporation other than property ves ting in
the corporation for the purposes of the Brihan Mumb ai
Electric Supply and Transport Undertaking, the foll owing
provisions shall have effect, namely: —
(a) the Commissioner may, subject to the regulation s made
in this behalf, dispose of, by sale or otherwise, any movable
property belonging to the corporation not exceeding in value,
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS. [S. RA VINDRA BHAT, J.]
in each instance, five lakh rupees, of grant a leas e of any
immovable property belonging to the corporation, in cluding
any right of fishing or of gathering and taking fruit and the
like, for any period not exceeding twelve months at a time :
Provided that every lease of immoveable property gr anted
by the Commissioner (other than a contract for a mo nthly
tenancy) the annual rent where of at a rack rent exce eds 6
[fifty thousand rupees] shall be reported by him, w ithin
fifteen days after the same has been granted, to th e
Improvements Committee;
(b) the Commissioner may, —
(i) with the sanction of the concerned Committee,
dispose off, by sale of otherwise any movable
property held by the Corporation, the value of which
exceeds rupees five lakhs ;
(ii) with the sanction of the 9[Standing Committee],
dispose off any moveable property held by the
Corporation, the value of which exceeds rupees two
crores ;
(iii) with the sanction of the concerned Committee, grant
a lease (other than a lease in perpetuity) of any
immovable property belonging to the Corporation,
including any such right as aforesaid; or sell, or
grant a lease in perpetuity of any immovable
property, the value of which does not exceed 50,000
rupees or the annual rent of which does not exceed
3,000 rupees ;
(c) with the sanction of the corporation, the Commi ssioner
may lease, sell or otherwise convey any immovable prop erty
belonging to the corporation
(cc) the consideration for which any immovable prope rty or
any right belonging to the corporation may be sold, leased
or otherwise transferred shall not be less than marke t value
of such premium, rent or other consideration;
(d) sanction of the corporation under clauses (b) and (c) may
be given either generally for any class of cases or spec ially
in any particular case ;
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(dd) notwithstanding anything contained in this secti on, the
Commissioner may, with the sanction of the Corporation, and
with the approval of the State Government, grant a le ase of
immovable property belonging to the Corporation to a Co-
operative Housing Society formed exclusively by the of ficers
and servants of the Corporation, or to a public tru st
exclusively for medical and educational purposes regi stered
under the Bombay Public Trust Act, 1950 or to a soc iety
registered under the Societies Registration Act, 186 0 or the
Maharashtra Co-operative Societies Act, 1960, a public trust
registered under the Bombay Public Trust Act, 1950, or a
company registered under the Companies Act, 1956 3[or any
person for the purposes of provision of public latr ines,
urinals and similar conveniences or construction of a plant
for processing excrementitious and other filthy mat ters of
garbages] or to a person who is dishoused as a resu lt of
the implementation of any Development Scheme of the
Corporation or to a Co-operative Housing Society fo rmed
exclusively by the persons who are dishoused as a res ult of
the implementation of any Development Scheme of the
Corporation, at such rent, which may be less than the market
value of the premium, rent, or other consideration, for the
grant of such lease, and subject to such conditions, as may
be provided by the bye-laws made under section 461;
(ddd) notwithstanding anything contained in this section, the
Commissioner may, with the sanction of the Corporation, and
with the approval of the State Government, grant a lease for
a period not exceeding 60 years, of municipal land which
is declared as a slum area under the provisions of the
Maharashtra Slum Areas (Improvement, Clearance and R e-
development) Act, 1971 to a co-operative society of slum
dwellers occupying such land, at such rent, which m ay be
less than the market value of the premium, rent, or other
consideration, for grant of such lease, and subject to such
conditions, as the Corporation may impose. The approv al of
the State Government under this clause may be given e ither
generally for any class of cases of such lands or speci fically
in any particular case of such land : Provided that , the
Commissioner may in like manner renew, from time to time ;
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS. [S. RA VINDRA BHAT, J.]
the lease for such period and subject to such conditi ons as
the Corporation may determine and impose ;
(dddd) All leases granted by the corporation of the
immovable properties belonging to the corporation f or
whatever term shall be subject to the following con ditions
in addition to the conditions stipulated in the Lease-d eed or
Lease-agreement executed by the corporation, namely: —
(i) Leasehold rights in respect of the properties belong ing
to the corporation and given on lease may be further
assigned or transferred only with the prior permissio n
of the Commissioner, on payment of such premium on
account of unearned income and transfer fees or
charges at such rates as may be specified by the
corporation, from time to time.
(ii) In the case of any contravention of the provisi ons of
sub-clause (i), the lessee or transferor of such
leasehold rights, shall be liable to pay penalty in
addition to such premium and transfer fees or charges,
at such rates as may be specified by the corporation,
from time to time.
(e) the aforesaid provisions of this section shall apply,
respectively, to every disposal of property belongi ng to the
Corporation made under or for any purpose of this A ct;
Provided that nothing in this section shall apply D r. Bhau
Daji Lad Museum or to the site thereof referred to in sec tion
89C except with the previous sanction of 5[the 6[St ate]
Government].
Section 92A. Where—
(1) the Commissioner has transferred by way of sale or
exchange any immovable property belonging to the
Corporation and the terms of such transfer direct t hat the
property shall be applied or enjoyed in a particular m anner
or the use or enjoyment thereof shall be restricted in a
particular manner, or
(2) the owner of any immovable property has entered into
an agreement with the Corporation concerning the
679
application, enjoyment or use of the property in a parti cular
manner, such term, condition or obligation shall be h eld to
be annexed to the property which is the subject-matter of the
transfer or agreement and shall be enforced against the
transferee or owner and all persons deriving title or int erest
under or through him, notwithstanding—
(a) any law for the time being in force, and
(b) that the Corporation are not in possession of or
interested in any immovable property for the benefit of
which, the term, condition or obligation was agreed to,
entered into or imposed.”
30. At this stage, it would be relevant to notice certain conditions
in the contract. Clause 2(i) stipulates the minimum lease rent as 10.40
crores for which SHCL agreed to pay 0.1% over and a bove the
minimum lease rent. Clause 5 of the agreement permitted Sev enHills
to mortgage and/or create charge of the schedule pr operty. The
conditions read as follows:
“5. The Owner hereby agrees to permit and allow the SHCL
on the terms and conditions to be approved by the Owne r
which permission/approval shall not be unreasonably
withheld, to mortgage and/or create charge on the Schedul e
Property and/or SHCL’s leasehold right thereon with or
without the Buildings on the Schedule property duri ng the
lease period or prior thereto i.e. during the proje ct period)
in any manner whatsoever either in whole or in part as S HCL
may require from time to time to the satisfaction o f the
lenders, for the purpose of raising financial assista nce from
the Financial Institutions/Banks/NBFOs/Co-operative
Societies/ Trust/ UF/ Partnership/Proprietary Firm a nd any
other lending individuals/institutions, whether inc orporated
or not, for any purpose for and in connection with the said
Project including for the purpose of commencing, ca rrying
out and completing the construction of the Buildings, se tting
up of hospital, Medical Educational institutions comm ercial
and other establishments within the Frame work of
Development Control Regulations in force, in such Building s,
their running, maintenance, renovation, reconstruct ion etc.
For this purpose, the SHCL shall have to apply for
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS. [S. RA VINDRA BHAT, J.]
permission not mortgage and/or create charge to Muni cipal
Commissioner two months in advance and if the approval is
not received within two months from the date of rec eipt of
such a request by the Commissioner, it will be deem ed as
approved and SHCL shall be at liberty to create the
mortgage of the Schedule Property in favour of the L enders
without any recourse to the Owner.”
31. Clause 15(a) which stated that the lease deed ha d to be
entered into upon on completion of the project and containe d other
conditions, pertinently, reads as follows:
“15. LEASE OF PLOT:
a) Lease period:
i) The SHCL shall enter into a Lease Deed on completion
of project period for leasing the plot to SHCL for t he
period of 60 years. After 60 years, the lease perio d
will be extended with the mutual consent of Owner and
SHCL on the terms that may be mutually agreed upon
by both the parties for further period.
ii) The lease period of 60 years shall commence from the
dateof completion of the Project period.
iii) On completion of the said Project the Owner shall issue
to SHCL ‘Project Completion Certificate’. Till the
completion and commissioning of the project and
running of the Project facilities, till the end of lease
period, this Contract Agreement is to be read, in
conjunction with the said Lease Deed which both
Parties will enter into on completion of the projec t
period.
iv) The SHCL shall complete the construction of the
hospital building within the project period of 60 months
excluding monsoon. the MCGM shall be liable to issue
the Project Completion Certificate on written
application by SHCL to that effect after completion o f
the project.
xxxxxx xxxxxx xxxxxx
681
e) Penalty for delay:
i) SHCL shall complete the entire Project and open t he
facility to public use within the approved time lim it.
SHCL shall submit the work programme with defined
milestones.the progress of the work shall be strictly as
per the programme of construction submitted by SHCL
and approved by the Commissioner.
In case SHCL fails to complete the Project as afores aid
within the said Project Period of 60 (sixty) months
excluding monsoon from issuance of Commencement
Certificate, and unless such failure is due to forc e
Majeure conditions, penalty for delay shall be charged
for the period of delay which will be equivalent to 25%
of Lease Rent which SHCL would have paid to the
Owner for that period, had the Project been completed
within the Project Period and this shall be in addition
to lease rent.
ii) SHCL shall have to separately pay the compensatio n
for delay to the Owner at the end of notice period.
iii) However, in case any delay occurs because of
circumstances beyond the control of SHCL only
suitable extension in the period of the Project with out
imposing penalty or demand for compensation for
delay shall be granted for completing the Project. No
other claim or compensation of whatsoever nature shall
be entertained.
xxxxxx xxxxxx xxxxxx
g) Lease Deed:
A Lease Deed shall be executed as per draft annexed to t his
Contract Agreement as Annexure-’II’ within one month from
the expiry of the Project period or on intimation f rom the
owner whichever is earlier.
17. MORTGAGE OF PLOT AND BUILDINGS
a) The SHCL is hereby allowed to sublease; mortgage and
create a charge on the said plot and buildings either in part
or in total to the satisfaction of lenders for the purpose of
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS. [S. RA VINDRA BHAT, J.]
raising financial assistance to commence, progress, compl ete,
commission and run the hospital complex and other
commercial activities during the Pendency of the le ase
period, from the financial institutions/ FIIS/Banks /Mutual
Funds/Co-operative Societies, Trusts/individuals/HU Fs/
Partnership Firms, other lending institutions and lende rs of
any constitution for the said Project with the prior permis sion
of the Commissioner, which permission shall not be
unreasonably withheld, during the Project period an d/or
during the subsistence of the lease and the Owner sh all be
kept informed of such deals after permission by the
Commissioner and SHCL shall file relevant documenta ry
evidence to that effect for record of the owner.
The permission which shall be granted by the Owner to SHCL
to mortgage the Schedule Property in favour of the lender
(s) for raising finance will remain irrevocable and irrever sible
during the tenure of the Project period and lease p eriod
except when the contact is terminated. In case the contract
is terminated for valid reason, the Owner shall not bear any
cost and consequences of resultant termination of mor tgage
by SHCL to any Financial Institution. While the rig ht of
ownership will remain with the Owner, the leasehold rights
to the property will remain free from encumbrances and
dedicated to the lenders during the currency of loan o r the
lease period whichever is earlier and the lenders s hall
continue to enjoy the same rights and privileges as that of
SHCL.
SHCL is also hereby allowed, with prior written perm ission
from Commissioner to sublet the whole or part thereo f and/
or the buildings on the Schedule Property. The SHCL s hall
be entitled to sublet the Schedule Property and the Buildi ng/
s thereon from time to time in whole or in part for any
duration (not beyond the lease period) to any other Party/
ies (sub-lessee/s) on such terms and conditions, as may be
agreeable to SHCL within the frame work of the tender and
this Agreement and for the same or similar purposes for
which agreement is intended, by means of duly regis tered
Deed/s. SHCL shall have to apply for permission to
683
Municipal Commissioner two months in advance and if the
approval is not received within two months from the dat e of
receipt of such a request by the Commissioner, it s hall be
deemed as approved.”
32. A cumulative reading of the stipulations reveals t hat the
contract/agreement contemplates that the lease deed was to be executed
after the completion of the project. The contract reveals th at (a) the
project period was for 60 months starting from the date exc luding the
monsoon period; (b) by Clauses 5 and 17, SevenHills could mor tgage
the property for securing advances from financial institu tions for the
construction of the project and thereafter towards its worki ng. Such
mortgage/charge or interest was subject to approval by MCGM. In the
event the contract was to be terminated, it was agreed t hat MCGM
would not in any manner be liable towards the mortgaged amount and
all its rights and ownership would continue to vest in it free from
encumbrances (Clause 17).
33. The show cause notice in this case preceded admission of
the insolvency resolution process. In view of the cle ar conditions
stipulated in the contract, MCGM reserved all its rights and its properties
could not have therefore, in any manner, been affected by the resolution
plan. Equally in the opinion of this Court, the adjudicating authority could
not have approved the plan which implicates the assets o f MCGM
especially when SevenHills had not fulfilled its obligations under the
contract.
34. The argument of the RP, the financial institutions (CoC), and
the SNMC with regard to MCGM’s interest not being affected, i n this
court’s opinion is insubstantial. SNMC’s proposed insolvency plan on
the one hand no doubt provided for the liquidation of MCGM’s liabilities
initially to the tune of ` 102 crores (later revised to over ` 140 crores).
However, the provisions of the resolution plan clearly contempl ated
infusion of capital to achieve its objectives. One of the modes spelt out
in the plan for securing capital was mortgaging the land. Initi ally, no
doubt, SNMC stepped into the shoes of SevenHills and assumed its
control. What is important to notice is that the corporate restructuri ng
was a way of taking over of the company’s liquidation by SNMC a s it
was not only Seven Hills’ project with shares and liquidation of debts,
but also the restructuring of the company’s liabilities if ne cessary, by
creating fresh debts and mortgage of the land which directly affected
MCGM.
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS. [S. RA VINDRA BHAT, J.]
35. Section 92 unequivocally prescribes the method whereb y
MCGM’s properties can be dealt with through lease or by way of
creation of any other interest. The only mode permitted is through prior
permission of the corporation. It is a matter of record that in the present
case, the resolution plan was never approved by the corporation and
that it was put to vote. The contesting parties, including t he RP and
CoC were unable to point out to anything on the record to establ ish
that a valid permission contemplated by Section 92 was ever obtained
with regard to the proposal in the resolution plan. The propos al was
approved by the NCLT and MCGM’s appeal was rejected by NCLAT.
The proposal could be approved only to the extent it did not result in
encumbering the land belonging to MCGM.
36. It is evident from a plain reading of Section 92(c), t hat the
Commissioner (of MCGM) is empowered to, with the sanction of the
corporation, “lease, sell or otherwise convey any immovable property
belonging to the corporation.” It is not in dispute that the original
contract entered into on 20-12-2005 contemplated the fulfilment of some
important conditions, including firstly, the completion of the hospital
project within a time frame; and secondly, timely payment of annual
lease rentals. It is a matter of record that the hos pital project was
scheduled to be completed by 24 th April, 2013. MCGM cites Clause
15(g) of the contract to urge that within a month of this eve nt, i.e.
completion of the hospital, a lease deed had to be executed. This event
never took place. Therefore, the terms of the contract remained, in the
opinion of the court, an agreement to enter into a lease; it did not per
se confer any right or interest, except that in the event of MCGM ’s
failure or omission to register the lease (in the event Se venHills had
complied with its obligations under the contract), it could be sued for
specific performance of the agreement, and compelled to execute a
lease deed. That event did not occur; SevenHills did no t complete
construction of the 1600 bed hospital. Apparently, it did not even fulfill
its commitment, or pay annual lease rentals. In these cir cumstances,
MCGM was constrained to issue a show cause notice before the
insolvency resolution process began, and before the moratorium
was declared by NCLT on 13 th March, 2018 . According to MCGM,
in terms of Clause 26 (of the contract), even the agr eement stood
terminated due to default by SevenHills. This court does not p ropose
to comment on that issue, as that is contentious and no finding has been
recorded by either the adjudicating authority or the NCLAT.
685
37. In Ram Singh Vijay Pal Singh & Ors. v. State of U.P. &
Ors (2007) 6 SCC 44, this court dealt with a similar provision, requiring
prior approval of the statutory authority without which the property could
not be disposed of. The court held that:
“The proviso to Sub-section (1) of Section 12 of th e Act
would show that the Mandi Samiti (Committee) is not
empowered to transfer any immovable property without the
previous approval in writing of the State Agricultural P roduce
Markets Board (Mandi Parishad). Section 26-L of the Act
deals with the powers and functions of the Board. T he
Director of Mandi Parishad (Board) has not been confe rred
any power whereunder he may issue a general direction that
the shops, godowns and sheds of the Mandi Parishad s hall
be transferred or sold to the traders on hire-purchase b asis.
Therefore, the appellants can derive no benefit from the lette r
of the Director dated 4.11.1995, wherein it was men tioned
that a decision had been taken to give the shops on hire-
purchase basis. In the counter affidavit the respondents have
specifically asserted that the Board never took any such
decision to sell the property of the Mandi Samiti t o the
traders either on hire-purchase basis or otherwise. No
document has been filed to show that the Board ever took
any such decision. It is the case of the respondents t hat the
letter sent by the Director was his own action whic h had
never been authorized by the Board. At any rate the proposal
made by the Director never fructified as no such de cision
was taken by the Board and the Board never authorized the
Mandi Samities (Committees) of various districts in the S tate
to transfer the property of the Samiti in favour of the t raders
of agricultural produce who had been allotted the s hops,
godowns and sheds by the Mandi Parishad. In this vie w of
the matter, the appellants have no legal right to cl aim that
the property be given to them on hire-purchase basis .”
38. In Essar Bulk Terminal Limited & Anr. v. State of Gujarat
& Ors. (2018) 3 SCC 750, again, this court held as follows:
“16. Despite this, what is clear from the record is that the
Appellants appear to have actually dredged the chann el to
a depth of 14 meters and appear to have reclaimed an area
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS. [S. RA VINDRA BHAT, J.]
of 164 hectares plus 170 hectares to the south of t he
mangroves, without any permission at all. When this was
pointed out to Shri Mihir Joshi, the answer given wa s that
when permission is granted Under Section 35(1) of t he
Gujarat Maritime Board Act, a letter granting such
permission specifically says that it is permission that is
granted Under Section 35(1) and for this purpose, a letter
dated 2nd August, 2008 was referred to. According to him,
therefore, the letter dated 14th June, 2007, which referred
only to an NOC for reclamation, could not be given the status
of permission Under Section 35(1). According to the learne d
Counsel, therefore, if Section 35(1) were to be rea d with
Section 35(2), it would be clear that permission fo r
reclamation would only be necessary if a private asset were
to be created in the hands of a private person. Howev er, it
is clear that the asset to be created belonged only to the
Government of Gujarat and it was for the GMB to gra nt
permission to the Appellants to use the same. We are afraid
that it is difficult for us to accept this line of argument.
Section 35(1) is couched in negative language and does not
refer to private rights being created. Section 35(2 ) cannot
be read so as to throw light on Section 35(1), as U nder
Section 35(2), the GMB is only given a discretionary po wer
to require a person, who has acted in contravention of
Section 35(1), to remove the illegal erection. The wide
language of Section 35(1) cannot be whittled down b y
Section 35(2) in the manner argued by Shri Joshi, a s the
GMB may or may not utilise the discretionary power granted
to it Under Section 35(2). The plain language of Se ction
35(1) cannot be curtailed by reading by inference, into Sub-
section (2), the fact that the GMB may, by notice, re quire a
person to remove an erection, only when it has been made
without previous permission, so as to create a priv ate asset
in the hands of a private person. The wide language of
Section 35(1) makes it clear that any reclamation within the
limits of the GMB cannot be carried out except with the
previous permission in writing of the GMB. It is cl ear,
therefore, that dredging to a depth of below 8 mete rs and
reclamation of any area to the south of the mangrove s was
687
done by the Appellants in the teeth of Section 35(1 ) of the
Gujarat Maritime Board Act.
17. Mr. Sibal laid great stress on the letter dated 15th
November, 2012 to show that, in point of fact, what the
Appellants were really angling for was to conduct commercial
operations beyond the captive requirements of the Essar S teel
plant at Hazira. This letter, while asking for an a ddition of
3700 meters in addition to the existing 1100 meters
waterfront, also went on to speak of developing a 700 meters
berth, along with the GMB, for handling commercial ca rgo.
Apart from this, Essar planned to build a world cla ss
container terminal and a dry dock, which would serv e the
shipping industry generally. It also proposed to re claim a
further 334 hectares land on the southern side with the
additional dredged material. A perusal of this lett er would
leave no doubt about the fact that despite Essar St eel’s
production being at much less than what was projected, the
Appellants’ continued demands would show that the r eal
motive was to go beyond a captive jetty and to deve lop a
commercial port which, as we have seen, cannot be d one
without a global tender under the Gujarat Infrastru cture
Development Act.
18. As stated hereinabove, as many as three MOUs we re
executed between the Appellants, the GMB and the Sta te
Government, which MOUs were valid only for a period of
12 months and were stated not to have granted any right t o
the Appellants, who would incur all the expenditure fo r the
same. This being the case, it is a little difficult to appreciate
Shri Joshi’s contention that any legitimate expectation c ould
be based on any of the aforesaid expired MOUs. The High
Court is correct in its conclusion that no such exp ectation
could possibly have arisen out of the aforesaid MOUs or the
correspondence between the Appellants and the GMB
referred to.
19. It is also important to note from the correspon dence
between the Appellants and the GMB, that the Appell ants
were clearly told that the land to be reclaimed by the
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS. [S. RA VINDRA BHAT, J.]
Appellants would not only belong to the Government of
Gujarat, but also that the GMB could utilize the af oresaid
land for any purpose. What seems to emerge on a rea ding
of the letters between the parties is that the Appe llants
wished to dredge the canal, at their own cost, which was ne xt
to their captive jetty, for their own purposes, for w hich they
obtained the necessary permission. However, since dumpi ng
of earth, which would emerge as a consequence of dredging,
into the open sea would be extremely expensive, it was stated
that instead this earth could be dumped to create re claimed
land next to the captive jetty, which would then benefit both
the Appellants and the GMB. In point of fact, 140 h ectares
out of 195 hectares that is reclaimed by the Appell ants is
allocated to the Appellants for their own purposes, the
balance to be given as and when a jetty of 1100 meters plus
3700 meters of waterfront is constructed. The argument th at
huge amounts had been spent to reclaim land is whol ly
fallacious-huge amounts were spent to dredge a canal wh ich
was permitted as the Appellants alone were to bear the cos t,
and as an increased draft would benefit all, as the canal was
open to all to use. Therefore, any plea as to a leg itimate
expectation of reclaimed land being allocated for t he
Appellants’ own use, thanks to large amounts being spent,
is contrary to the correspondence by the Appellants
themselves.”
An identical approach was adopted in Saroj Screens Pvt. Ltd.
v Ghanshyam & Ors., (2012) 11 SCC 434.
39. The principle that if a statute requires a thing to be done in
a particular manner, it should be done in that manner or not at all,
articulated in Nazir Ahmad v. Emperor, AIR 1936 PC 253, has found
widespread acceptance. In the context of this case, it me ans that if
alienation or creation of any interest in respect of MCGM’s propert ies
is contemplated in the statute through a particular manner, that end can
be achieved only through the prescribed mode, or not at all.
40. This Court also notices that an initial No Objection Certificate
was issued by MCGM voluntarily, for creation of interest in respect of
its properties. Upon its refusal to grant approval, S evenHills filed
689
proceedings under Article 226 before the Bombay High court (W .P.
No 1728 of 2011), in which the Court directed to grant issuance of
certificate. At the same time, the High Court observed as f ollows:
“11. ...... It is, however, required to be noted he re that the
Corporation is nor borrowing any amount for its purpose....If
the petitioners want financial assistance from the Bank,
naturally, it cannot mortgage only the superstructure but the
entire property is required to be mortgaged. Aprart from that
even if there is a defect in the title in the matter of creating
mortgage, the Corporation is not going to suffer in any
manner and it is for the concerned Bank to consider the same
while giving financial assistance. The Corporation is not
going to get any financial assistance from the Bank and,
therefore, whatever documents which the petitioners may
execute in favour of the Bank, the Corporation is not b ound
by the same....The said NOC can be granted by the
Corporation without prejudice to its rights and conte ntions
that the land in question belongs to them and, ther efore, no
mortgage could have been created for the same. It is always
open to the Corporation to ascertains right to the exte nt that
they are not bound by execution of such documents with the
Bank....However, such grant of NOC, would be withou t
prejudice to the rights and contentions of the Corpo ration.
The Corporation may also mention such aspect while gi ving
NOC to the petitioners that such NOC is given witho ut
prejudice to the rights and contentions that their land cou ld
not have been mortgaged by the petitioners with the Bank.
(emphasis supplied)
12. ......Apart from the same, by granting NOC it cann ot be
construed that the Corporation has also mortgaged its proper ty
in favour of Axis Bank in any manner....
15. ....It is clarified that this order is passed without prejudice to
the rights and contentions of both the sides and it will h ave no
effect so far as deciding the matter on merit is concerned.... .”
*************** *************
41. The material placed on record by MCGM before this Cour t
also reveals that the meeting held by the Corporation on 14 th December,
2018, referred back to the resolution proposal given by SNMC . The
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS. [S. RA VINDRA BHAT, J.]
minutes of the meeting records that three members were unanim ous
in their view that since SevenHills had not complied with the terms and
had even sought to encumber the property by mortgage, SNMC, a UAE
based company, ought not be granted approval to take over the plot
and proceed with its project.
42. Now, this court proposes to deal with the contention that the
provisions of the Code override all other laws and henc e, that the
resolution plan approved by the NCLT acquires primacy over all other
legal provisions. Facially, this argument appears merited. Section 238
enacts that:
“238. Provisions of this Code to override other laws. — The
provisions of this Code shall have effect, notwiths tanding
anything inconsistent therewith contained in any ot her law
for the time being in force or any instrument having effect
by virtue of any such law.”
43. The scope of this provision has been the subject matter of
debate in several judgments of this court. In Jaipur Metals &
Electricals Employees Organization v. Jaipur Metals & Electricals
Ltd. (2019) 4 SCC 227, the correctness of a High Court’s view which
refused to transfer winding up proceedings pending before i t and set
aside the NCLT’s order admitting an insolvency resolution application
at the behest of a financial creditor, was in issue. This c ourt held as
follows, setting aside the judgment impugned in that case:
“It is clear that Respondent No. 3 has filed a Sect ion 7
application under the Code on 11.01.2018, on which an
order has been passed admitting such application by the
NCLT on 13.04.2018. This proceeding is an independe nt
proceeding which has nothing to do with the transfe r of
pending winding up proceedings before the High Cour t. It
was open for Respondent No. 3 at any time before a winding
up order is passed to apply under Section 7 of the Code.
This is clear from a reading of Section 7 together with Sec tion
238 of the Code which reads as follows:
“238. Provisions of this Code to override other laws. —
The provisions of this Code shall have effect,
notwithstanding anything inconsistent therewith contained
in any other law for the time being in force or any
instrument having effect by virtue of any such law.”
691
18. Shri Dave’s ingenious argument that since Secti on 434
of the Companies Act, 2013 is amended by the Eleven th
Schedule of the Code, the amended Section 434 must be read
as being part of the Code and not the Companies Act 2013 ,
must be rejected for the reason that though Section 434 of
the Companies Act, 2013 is substituted by the Eleve nth
Schedule of the Code, yet Section 434, as substitut ed,
appears only in the Companies Act, 2013 and is part and
parcel of that Act. This being so, if there is any inconsi stency
between Section 434 as substituted and the provisions of the
Code, the latter must prevail. We are of the view t hat the
NCLT was absolutely correct in applying Section 238 of the
Code to an independent proceeding instituted by a s ecured
financial creditor, namely, the Alchemist Asset Reconstructio n
Company Ltd. This being the case, it is difficult t o
comprehend how the High Court could have held that the
proceedings before the NCLT were without jurisdiction. On
this score, therefore, the High Court judgment has to be set
aside.”
44. In the recent judgment in Duncans Industries v. A.J.
Agrochem 2019 SCC Online (SC) 1319, the issue was that action under
Section 16D(4) of the Tea Act, which provides that the Central
Government could take such steps as may be necessary for the purpose
of efficiently managing the business of the undertaking, had been taken.
It was urged that any notification under Section 16D has effect for five
years, which could only be extended if the Central Government was
of the opinion that it is expedient to do so in public intere st, for such
period not exceeding one year at a time, and for tot al period not
exceeding six years. It was submitted that Section 16E re fers to the
power of the Central Government to restart the tea undertaking if it is
found necessary in the interest of the general public. The argument was
that an insolvency process is also meant to culminate in liquidati on, if
there is no revival, and that since the Tea Act permits the Central
Government to take over the management of a tea estate w hich is not
run properly, prior permission under Section 16G is applicable to such
an estate, the management of which has been taken o ver by the
Government. This contention was negatived, by this court, which relied
on Section 238 of the Code.
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS. [S. RA VINDRA BHAT, J.]
45. In Macquaire Bank Ltd. v. Shilipi Cable Techologies Ltd.
(2018) 2 SCC 674, one of the issues was the interplay between Section
9 of the Code and provisions of the Advocates Act. It was arg ued that
a demand notice issued through an advocate was not permiss ible and
that the provisions of the Code overrode all other laws. Th is court
negative the contention, holding that it is only in the case of inconsistency,
that by reason of Section 238 of the Code would its provisions prevail.
On a harmonious construction of the seemingly inconsistent provisions,
if the court could give effect to both, it would do so.
46. Dharani Sugars & Chemicals Ltd. v. Union of India &
Ors. (2019) 5 SCC 480 is a relevant recent decision of this court. The
question which arose in that case was the legality and constitutionality
of directions issued by the Reserve Bank of India, through a circular
of 12 th February, 2018 regulating resolution of stressed assets of debtors.
This court elaborately dealt with provisions of the Banking Regulation
Act, 1949 and the Reserve Bank of India Act, 1934 and held that the
power to issue directions regarding initiation of insolvency proceedings
vested in the RBI, subject to the approval of the Central Go vernment.
The court significantly held that the power was contained “wit hin the
four corners” of Section 35AA and observed as follows:
“A conspectus of all these provisions shows that the Banking
Regulation Act specifies that the Central Government is eit her
to exercise powers along with the RBI or by itself. The role
assigned, therefore, by Section 35AA, when it comes to
initiating the insolvency resolution process under the
Insolvency Code, is thus, important. Without author isation
of the Central Government, obviously, no such directions c an
be issued.
30. The corollary of this is that prior to the enac tment of
Section 35AA, it may have been possible to say that when it
comes to the RBI issuing directions to a banking co mpany
to initiate insolvency resolution process under the Insolven cy
Code, it could have issued such directions Under Se ctions
21 and 35A. But after Section 35AA, it may do so only within
the four corners of Section 35AA.
31. The matter can be looked at from a slightly dif ferent
angle. If a statute confers power to do a particular act and
has laid down the method in which that power has to be
693
exercised, it necessarily prohibits the doing of the act in any
manner other than that which has been prescribed. T his is
the well-known Rule in Taylor v. Taylor, [1875] 1 Ch. D. 426,
which has been repeatedly followed by this Court. T hus, in
State of U.P. v. Singhara Singh, (1964) 4 SCR 485, this Court
held:
‘The Rule adopted in Taylor v. Taylor [(1875) 1 Ch D
426, 431] is well recognised and is founded on soun d
principle. Its result is that if a statute has conf erred a
power to do an act and has laid down the method in which
that power has to be exercised, it necessarily prohibits t he
doing of the act in any other manner than that which has
been prescribed. The principle behind the Rule is th at if
this were not so, the statutory provision might as well n ot
have been enacted. A Magistrate, therefore, cannot in the
course of investigation record a confession except in the
manner laid down in Section 164. The power to recor d
the confession had obviously been given so that the
confession might be proved by the record of it made in
the manner laid down. If proof of the confession by other
means was permissible, the whole provision of Secti on
164 including the safeguards contained in it for th e
protection of Accused persons would be rendered
nugatory. The section, therefore, by conferring on
Magistrates the power to record statements or confessions,
by necessary implication, prohibited a Magistrate f rom
giving oral evidence of the statements or confessions made
to him. (at pp. 490-491)
Following this principle, therefore, it is clear th at the RBI
can only direct banking institutions to move under the
Insolvency Code if two conditions precedent are spe cified,
namely, (i) that there is a Central Government authoris ation
to do so; and (ii) that it should be in respect of specific
defaults. The Section, therefore, by necessary impl ication,
prohibits this power from being exercised in any ma nner
other than the manner set out in Section 35AA.”
47. In the opinion of this court, Section 238 cannot be read as
overriding the MCGM’s right – indeed its public duty - to control and
regulate how its properties are to be dealt with. That exists in Sections
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS. [S. RA VINDRA BHAT, J.]
92 and 92A of the MMC Act. This court is of opinion that Section 238
could be of importance when the properties and assets are o f a debtor
and not when a third party like the MCGM is involved. Therefor e, in
the absence of approval in terms of Section 92 and 92A of the MMC
Act, the adjudicating authority could not have overridden MCGM’s
objections and enabled the creation of a fresh interest in respect of its
properties and lands. No doubt, the resolution plans talk o f seeking
MCGM’s approval; they also acknowledge the liabilities of the corporate
debtor; equally, however, there are proposals which envision the creation
of charge or securities in respect of MCGM’s properties. Nevertheless,
the authorities under the Code could not have precluded the control that
MCGM undoubtedly has, under law, to deal with its properties and the
land in question- which undeniably are public properties. The resolution
plan therefore, would be a serious impediment to MCGM’s independent
plans to ensure that public health amenities are developed in the manner
it chooses, and for which fresh approval under the MMC Act may be
forthcoming for a separate scheme formulated by that c orporation
(MCGM).
48. The last contention of the respondents, that MCGM was
bound by the statement made by its counsel, in the opinion of this court,
cannot prevail. As held earlier, there is no approval for the plan, in
accordance with law; in such circumstances, the written plea accepting
the plan, by a counsel or other representative who is not demonstr ated
to possess the power to bind MCGM, is inconclusive. In this regard,
the court notices the well-known principle that there can be no estoppel
against the express provisions of law. (Ref. Kasinka Trading v. Union
of India (1995) 1 SCC 274, Darshan Oils (P) Ltd. v. Union of India
(1995) 1 SCC 345, Shrijee Sales Corporation v. Union of India
(1997) 3 SCC 398, Shree Sidhbali Steels Ltd. v. State of U.P. (2011)
3 SCC 193, Pappu Sweets and Biscuits v. Commr. of Trade Tax, U.P.
(1998) 7 SCC 228 and Commr. of Customs v. Dilip Kumar & Co.
(2018) 9 SCC 1.)
49. In view of the foregoing reasons, this court holds that the
impugned order and the order of the NCLT cannot stand; they are
hereby set aside. The appeal is accordingly allowed, without orders on
costs.
Divya Pandey Appeal allowed.