# MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM) v. ABHILASH LAL & ORS

- **Citation:** [2019] 14 S.C.R. 659
- **Court:** Supreme Court of India
- **Decided:** 2019-11-15
- **Case number:** Civil Appeal No. 6350 of 2019
- **Bench:** Arun Mishra, Vineet Saran, S. Ravindra Bhat
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/municipal-corporation-of-greater-mumbai-mcgm-v-abhilash-lal-ors-33366
- **Pages:** 36

## Headnote

Mumbai Municipal Corporation Act, 1888 - ss.92 and 92A
- Appellant owns inter alia, the lands in question - By contract dated
20.12.2005, one 'SHCL' agreed to develop these lands (to be
leased to it) and construct 1500 bed hospital - Construction was
to be completed in 60 months (excluding monsoons) which ended
on 24.04.2013 - Lease deed was to be executed after the
completion of the project - Project not completed within the period
- 'SHCL' had to pay lease rent at the annual rate of
` 10,41,04,000/- -Appellant alleged defaults in the payments -
Issued show cause notice on 23.01.2018, proposing contract
termination - Insolvency proceedings initiated by Axis Bank also
as 'SHCL' was unable to repay its debts - Before the period given
by appellant's show-cause notice ended, the Petition was admitted
by the National Company Law Tribunal (NCLT), Hyderabad Bench
- 1st respondent was appointed as the Resolution Professional (RP),
approved by Committee of Creditors (CoC)- Terms of the Request
for Proposal (RFP), criteria for evaluation (of RFPs received)
approved - Resolution plan submitted by one 'SNMC' - Revised
RFP submitted by RP - Revised resolution plan approved by CoC
- Appellant opposed the resolution plan - Plan approved by NCLT
and the Appellate Tribunal, NCLAT - Held: Resolution plan
contemplated infusion of capital and one of the modes for securing
capital was mortgaging the land - In view of the clear conditions
stipulated in the contract, the appellant reserved all its rights and
thus, its properties could not have been, in any manner, affected
by the resolution plan - Adjudicating authority could not have
approved the plan which implicates the assets of the appellant
especially when 'SHCL' had not fulfilled its obligations under the
contract - Further, the resolution plan was never approved by the
corporation - Also, s.238, IBC cannot be read as overriding the
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appellant's right- indeed its public duty to control and regulate how
its properties are to be dealt with- That exists in ss.92, 92A - s.238,
IBC could be of importance when the properties and assets are of
a debtor and not when a third party like the appellant is involved
- Therefore, in the absence of approval in terms of ss.92 & 92A,
the adjudicating authority could not have overridden appellant's
objections and enabled the creation of fresh interest in respect of
its properties and lands - Authorities under the Code could not
have precluded the control that the appellant has, under law, to
deal with its properties and the land in question, which undeniably
are public properties - Resolution plan therefore, would be serious
impediment to appellant'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 it - Impugned order and the order
of NCLT, set aside - Insolvency and Bankruptcy Code, 2016 -
s.238 and ss.14(1)(d), 22, 30(2), 31, 62 - Interpretation of Statutes
- IBBI (CIRP) Regulations, 2016 - Regulations 37, 38, 38(IA) &
39(4).
Insolvency and Bankruptcy Code, 2016 - Aim of; insolvency
process under- Discussed.
Insolvency and Bankruptcy Code, 2016 - s.238 - Scope of
- Discussed.
Allowing the appeal, the Court
HELD: 1. In the present case, Section 92 of the Mumbai
Municipal Corporation Act, 1888 (MMC Act) has 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 contemplate any disposal of the said land or creation of any
additional rights and obligations of appellant 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 pla

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MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v.
ABHILASH LAL & ORS.
(Civil Appeal No. 6350 of 2019)
NOVEMBER 15, 2019
[ARUN MISHRA, VINEET SARAN AND
S. RAVINDRA BHAT, JJ.]
Mumbai Municipal Corporation Act, 1888 - ss.92 and 92A
- Appellant owns inter alia, the lands in question - By contract dated
20.12.2005, one 'SHCL' agreed to develop these lands (to be
leased to it) and construct 1500 bed hospital - Construction was
to be completed in 60 months (excluding monsoons) which ended
on 24.04.2013 - Lease deed was to be executed after the
completion of the project - Project not completed within the period
- 'SHCL' had to pay lease rent at the annual rate of
` 10,41,04,000/- -Appellant alleged defaults in the payments -
Issued show cause notice on 23.01.2018, proposing contract
termination - Insolvency proceedings initiated by Axis Bank also
as 'SHCL' was unable to repay its debts - Before the period given
by appellant's show-cause notice ended, the Petition was admitted
by the National Company Law Tribunal (NCLT), Hyderabad Bench
- 1st respondent was appointed as the Resolution Professional (RP),
approved by Committee of Creditors (CoC)- Terms of the Request
for Proposal (RFP), criteria for evaluation (of RFPs received)
approved - Resolution plan submitted by one 'SNMC' - Revised
RFP submitted by RP - Revised resolution plan approved by CoC
- Appellant opposed the resolution plan - Plan approved by NCLT
and the Appellate Tribunal, NCLAT - Held: Resolution plan
contemplated infusion of capital and one of the modes for securing
capital was mortgaging the land - In view of the clear conditions
stipulated in the contract, the appellant reserved all its rights and
thus, its properties could not have been, in any manner, affected
by the resolution plan - Adjudicating authority could not have
approved the plan which implicates the assets of the appellant
especially when 'SHCL' had not fulfilled its obligations under the
contract - Further, the resolution plan was never approved by the
corporation - Also, s.238, IBC cannot be read as overriding the
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appellant's right- indeed its public duty to control and regulate how
its properties are to be dealt with- That exists in ss.92, 92A - s.238,
IBC could be of importance when the properties and assets are of
a debtor and not when a third party like the appellant is involved
- Therefore, in the absence of approval in terms of ss.92 & 92A,
the adjudicating authority could not have overridden appellant's
objections and enabled the creation of fresh interest in respect of
its properties and lands - Authorities under the Code could not
have precluded the control that the appellant has, under law, to
deal with its properties and the land in question, which undeniably
are public properties - Resolution plan therefore, would be serious
impediment to appellant'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 it - Impugned order and the order
of NCLT, set aside - Insolvency and Bankruptcy Code, 2016 -
s.238 and ss.14(1)(d), 22, 30(2), 31, 62 - Interpretation of Statutes
- IBBI (CIRP) Regulations, 2016 - Regulations 37, 38, 38(IA) &
39(4).
Insolvency and Bankruptcy Code, 2016 - Aim of; insolvency
process under- Discussed.
Insolvency and Bankruptcy Code, 2016 - s.238 - Scope of
- Discussed.
Allowing the appeal, the Court
HELD: 1. In the present case, Section 92 of the Mumbai
Municipal Corporation Act, 1888 (MMC Act) has 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 contemplate any disposal of the said land or creation of any
additional rights and obligations of appellant 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. Appellant cannot place any embargo on such
shareholding changes by resorting to proceeding under the
Code. On admission of an insolvency application preferred by a
financial creditor/operational creditor, a moratorium is declared
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on the continuation and initiation of all legal proceedings against
the debtor. The NCLT appoints an interim resolution
professional ("IRP"). The moratorium operates till the
completion of the insolvency resolution process which, by law
should be completed within a mandated time frame. During the
moratorium period, the debtor cannot 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 and operations. Information
may include data relating to operations, payments, list of assets
and liabilities. The IRP further has to receive and collate claims
submitted by creditors. The RP selected by the NCLT has to
constitute a committee of creditors (CoC) comprising all the
financial creditors of the corporate debtor. This provision is
aimed at creditors adopting a collective approach towards
insolvency resolution instead of proceeding individually. Key
decisions of the process, and the plan to be eventually finalized
are to be approved by the CoC upon its satisfaction that the
provisions of the most acceptable plan would ensure that their
dues are cleared. [Para 24, 26 and 27] [674-A-C-E-H; 675-AB]
2. The Insolvency and Bankruptcy Code, 2016 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 insolvency 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 operational creditors in a manner such that it shall
not be lesser than the 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 repayment of insolvency
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS.
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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 resolution plan are
approved by the committee of creditors, it has to be further
approved by the NCLT, which is the adjudicating authority. [Para
28] [675-B-D]
3.1 The show cause notice in this case preceded admission
of the insolvency resolution process. In view of the clear
conditions stipulated in the contract, appellant 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 of MCGM especially when
SevenHills had not fulfilled its obligations under the contract.
[Para 33] [683-D-E]
3.2 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
contemplated infusion of capital to achieve its objectives. One
of the modes spelt out in the plan for securing capital was
mortgaging the land. Initially, no doubt, SNMC stepped into the
shoes of SevenHills and assumed its control. The corporate
restructuring was a way of taking over of the company's
liquidation by SNMC as it was not only Seven Hills' project with
shares and liquidation of debts, but also the restructuring of the
company's liabilities if necessary, by creating fresh debts and
mortgage of the land which directly affected MCGM. Section 92
unequivocally prescribes the method whereby 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. The resolution plan was never
approved by the corporation and that it was put to vote. The
contesting parties, including the RP and CoC were unable to
point out to anything on the record to establish that a valid
permission contemplated by Section 92 was ever obtained with
regard to the proposal in the resolution plan. The proposal was
approved by the NCLT and MCGM's appeal was rejected by
NCLAT. The proposal could be approved only to the extent it
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did not result in encumbering the land belonging to MCGM. It
is evident from a plain reading of Section 92(c), that 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 hospital project was scheduled
to be completed by 24th April, 2013. MCGM cites Clause 15(g)
of the contract to urge that within a month of this event, 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 SevenHills 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 not complete construction of the
1600 bed hospital. Apparently, it did not even fulfill its
commitment, or pay annual lease rentals. In these circumstances,
MCGM was constrained to issue a show cause notice before the
insolvency resolution process began, and before the moratorium
was declared by NCLT on 13th March, 2018. According to
MCGM, in terms of Clause 26 (of the contract), even the
agreement stood terminated due to default by SevenHills. This
court does not propose to comment on that issue, as that is
contentious and no finding has been recorded by either the
adjudicating authority or the NCLAT. 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 means that if alienation
or creation of any interest in respect of MCGM's properties is
contemplated in the statute through a particular manner, that end
can be achieved only through the prescribed mode, or not at all.
[Paras 34-36, 39] [683-F-H; 684-A-H; 688-F-G]
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
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Ram Singh Vijay Pal Singh & Ors. v. State of U.P. &
Ors (2007) 6 SCC 44 : [2007] 5 SCR 1060 ; Essar
Bulk Terminal Limited & Anr. v. State of Gujarat & Ors.
(2018) 3 SCC 750 - relied on.
Saroj Screens Pvt. Ltd. v Ghanshyam & Ors. (2012)
11 SCC 434 : [2012] 5 SCR 141 - referred to.
Nazir Ahmad v. Emperor, AIR 1936 PC 253 - referred
to.
3.3 The material placed on record by MCGM before this
Court also reveals that the meeting held by the Corporation on
14th December, 2018, referred back to the resolution proposal
given by SNMC. The minutes of the meeting records that three
members were unanimous 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. [Para 41] [689-H; 690-A]
Jaipur Metals & Electricals Employees Organization
v. Jaipur Metals & Electricals Ltd. (2019) 4 SCC
227 : [2018] 14 SCR 926 ; Duncans Industries v. A.J.
Agrochem (2019) SCC Online (SC) 1319 ; Macquaire
Bank Ltd. v. Shilipi Cable Techologies Ltd. (2018) 2
SCC 674 : [2017] 13 SCR 751 ; Dharani Sugars &
Chemicals Ltd. v. Union of India & Ors. (2019) 5 SCC
480 - relied on.
4. 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 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 of a
debtor and not when a third party like the MCGM is involved.
Therefore, 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 of seeking MCGM's approval; they also
acknowledge the liabilities of the corporate debtor; equally,
however, there are proposals which envision the creation of
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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 corporation (MCGM). 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 demonstrated 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. The impugned order and the order of the
NCLT cannot stand; they are set aside. [Para 47-49] [693-H; 694E-H]
Kasinka Trading v. Union of India (1995) 1 SCC
274 : [1994] 4 Suppl. SCR 448 ; Darshan Oils (P) Ltd.
v. Union of India (1995) 1 SCC 345 : [1994] 5 Suppl.
SCR 278 ; Shrijee Sales Corporation v. Union of India
(1997) 3 SCC 398 : [1996] 10 Suppl. SCR 888 ; Shree
Sidhbali Steels Ltd. v. State of U.P. (2011) 3 SCC
193 : [2011] 3 SCR 134; Pappu Sweets and Biscuits
v. Commr. of Trade Tax, U.P. (1998) 7 SCC 228: [1998]
2 Suppl. SCR 119 ; Commr. of Customs v. Dilip Kumar
& Co. (2018) 9 SCC 1 : [2018] 7 SCR 1191 - referred
to.
Case Law Reference
[2007] 5 SCR 1060
relied on
Para 37
(2018) 3 SCC 750
relied on
Para 38
[2012] 5 SCR 141
referred to
Para 38
AIR 1936 PC 253
referred to
Para 39
[2018] 14 SCR 926
relied on
Para 43
[2017] 13 SCR 751
relied on
Para 45
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
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(2019) 5 SCC 480
relied on
Para 46
[1994] 4 Suppl. SCR 448
referred to
Para 48
[1994] 5 Suppl. SCR 278
referred to
Para 48
[1996] 10 Suppl. SCR 888
referred to
Para 48
[2011] 3 SCR 134
referred to
Para 48
[1998] 2 Suppl. SCR 119
referred to
Para 48
[2018] 7 SCR 1191
referred to
Para 48
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6350
of 2019.
From the Judgment and Order dated 07.08.2019 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal (AT)
Insolvency No. 808 of 2019.
Neeraj Kishan Kaul, Huzefa Ahmadi, Siddharth Bhatnagar, C.A.
Sundaram, P.S. Narsimha, Ramji Srinivasan, Maninder Singh, K.V.
Vishwanathan, Sr.Advs., Pralhad Paranjpe, Ms. Sneha Prabhu,
Ms. Pallavi Pratap, Varun Mathur, Ms. Neema, Ms. Divyya Kapur,
Divyanshu Srivastava, (for M/s. Pratap and Co.,) Siddharth Ranade,
Ms. Prerna Priyadarshini, Ms. Shivani Rawat, Ms. Priyashree Sharma
Ph, Supriyo Ranjan Mohapatra, Rahul G. Tanwani, Ms. Sindoora VNL.,
Ms. Aditi Tripathi, Shubhabra Chakraborti, Kamlendra Singh, Vrinda
Bagaria, Prabhash Bajaj, Ms. Sylona (for M/s. Juris Corp.),
Ms. Rachana Jain, Samiron Borkataky, Ms. Nitya Chadha, Ms. Krithika
Angirish, Apoorv Singhal, Gagan Gupta, Advs. for the appearing
parties.
The Judgment of the Court was delivered by
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. 155-156, 162 and 168 (all
plots hereafter called "the lands") in village Marol, Andheri (East)
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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 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 ` 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 show-cause 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 ` 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
MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM)
v. ABHILASH LAL & ORS. [S. RAVINDRA BHAT, J.]
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creditors were to be paid off to the extent of 75%. Further, 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 providing 20%
of the beds (of the hospital to be constructed) to the poor and weaker
sections of society. The net-worth 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 to clearing
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 and
approval had to be taken by the Improvement Committee of the
Corporation. It was also stated that the show cause notice ("SCN")
dated 23rd 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 Section
14(1)(d) of the Code could not prevent the MCGM from terminating
the agreement. Another argument made was that the period of CIRP
in the case began on 13th March, 2018 when the petition was admitted
and the period of 270 days expired on 8th September, 2018; an extension
of 90 days provided in Section 12(3) was granted by the Adjudicating
Authority on 4th September, 2018 and the extended period came to an
end on 7th 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 objections
to the Resolution Plan with the contention that it is
undisputed owner of the plot on which one of the hospitals
of the Corporate Debtor in Mumbai is built. The various
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objections raised by MCGM as enumerated hereinabove at
a belated stage are neither tenable nor acceptable. It is clear
from the record that MCGM is taking a stand which is totally
contrary to its own decisions and factual submissions. The
final prayer of MCGM is to reject the 'resolution plan' and
order for liquidation of the Corporate Debtor. The RP in his
submissions has clearly pointed out as to why the averments
of MCGM are erroneous and incorrect. For the sake of
briefness, the submissions made by RP as stated supra are
not discussed in detail once again. This Adjudicating
Authority is of the view that the contentions raised by MCGM
cannot be accepted due to the conflicting and contradictory
stands taken by it in the course of hearings. Further, the
contention of MCGM relating to expiry of the period of 270
days is untenable and unacceptable for the reason that the
Application by the Resolution Professional for the approval
of the Resolution Plan has been made well before the expiry
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 Regulations
37, 38, 38(IA) and 39(4) of IBBI (CIRP) Regulations, 2016. It also
held that the resolution plan did not contravene any of the provisions
of Section 29A and was unanimously approved by that CoC; it provided
for 78.07% of payment to financial creditors and 75% of payment to
operational creditors including doctors, irrespective of claims in incorrect
forms. Further, the resolution applicant is also addressing the dues
payable to MCGM as stated in the resolution plan. Further, that NCLT
observed that on comparison of the amount offered in the resolution
plan with Form-H submitted by the RP, it was seen that the amount
proposed in the plan was more than that of the value of liquidation 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 aware that
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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 the MMC
Act requiring express authorization by the corporation for transfer or
creation of any interest in land had not been complied with and
resultantly, the proposal and revised proposal approved by the NCLT,
so far as they dealt with the property and lands, were not enforceable
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 terms specified
in its written submissions, were to be incorporated. As a result, the
NCLAT was of the opinion that there was no scope for interference
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 owner
of the land; as there were no assets of the Corporate Debtor, it stated
that a duly registered lease deed would be executed. The proposal and
revised proposal seeking direction with regard to the lease deed, had
to be necessarily dealt with in accordance with law. This meant that
unless MCGM, expressly approved the revised plan, whereby a lease
deed could be executed in favour of the SevenHills Healthcare 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 which was
highlighted was in violation of Section 92 of the MMC Act. Learned
senior counsel underlined that the written submissions filed 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 incorporating
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, learned Senior
Counsel, urged that the terms of the original contract (dated 20th
December, 2005) had been violated; the 1500 bed hospital had not been
completed by the stipulated date. Furthermore, arrears of lease rentals
had mounted together every attendant liability. In these circumstances,
even before the insolvency proceedings were initiated, MCGM issued
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 with by the
revised proposal and later by the Adjudicating Authority. It was
submitted that the impugned order has completely noted these 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 28th November, 2018, 29th April, 2019 and
14th May, 2019 MCGM categorically stated that the resolution plan be
approved and its application before the NCLT ought to be disposed of
in terms of the commitment given by the resolution applicant/SNMC.
It is pointed out that the Appellate Tribunal, after 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 maintainable.
14. Mr. Sundaram argued that MCGM's contentions that no
interest or leasehold rights in the land were created in 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 leased 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 had 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 position as owner
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of the land on which the Mumbai hospital of the Corporate Debtor is
located. The issue of whether or not the corporate debtor has any
leasehold rights under the contract (of 2005) is a disputed question of
fact which can only be adjudicated upon in civil proceedings 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 leasehold
rights in favour of the respondent applicant/SNMC. Learned senior
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 that the
resolution plan transfers MCGM's assets to SNMC. It was argued
furthermore that though MCGM was not entitled to, nor treated as a
financial creditor, it was nevertheless invited to participate 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 proposal
of this nature, MCGM's stand seeking liquidation of the Corporate
Debtor appears not only arbitrary but also prima facie vindictive.
18. It is also submitted that the resolution plan is absolutely
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 20th August 2018. MCGM participated in the meetings of
the CoC, including the 8th CoC meeting, and was provided a copy 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 provision 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 approved
by the CoC and the NCLT on merits, the plan attained finality and binds
MCGM as a stakeholder in the Corporate Debtor. MCGM therefore,
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 that their dues
were paid, preferably in full. SNFC's resolution plan held out the 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 the contract,
which in fact amounted to a lease (as it was a registered instrument
and MCGM had received over 10 crores as initial lease consideration).
Therefore, the resolution plan approved by the NCLT, and later, NCLAT,
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 SNFC never
represented that it would mortgage or obtain any loan on the strength
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 contemplates
compliance with the various conditions of the contract agreement
including without limitation, 20% reservation of beds for MCGM's
employees and settlement of MCGM's claimed dues. The resolution
plan proposed payment to MCGM (which was enhanced to 100% by
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 admitted 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.
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24. In the present case, Section 92 of the MMC Act has 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 contemplate any
disposal of the said land or creation of any additional 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 any
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 the Corporate
Debtor by way of holding equity shares in the Corporate 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 relevant
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 ("IRP"). The
moratorium operates till the completion of the insolvency resolution
process which, by law should be completed within a mandated time
frame. During the moratorium period, the debtor cannot 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 and operations.
Information may include data relating to operations, payments, list of
assets and liabilities. The IRP further has to receive and collate claims
submitted by creditors.
27. The RP selected by the NCLT has to constitute a committee
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 proceeding
individually. Key decisions of the process, and the plan to be eventually
finalized are to be approved by the CoC upon its satisfaction 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 insolvency 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 operational
creditors in a manner such that it shall not be lesser than the 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 repayment 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 resolution 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 this
court has to primarily deal with; it is rather whether the process and
procedure adopted by the NCLT and later the NCLAT, in overruling
MCGM's concerns and objections with regard to the treatment of its
property (i.e. the lands) is in accordance with law.