LAND DEVELOPMENT RIGHTS CONSTITUTES “PROPERTY” AND “ASSET” UNDER INSOLVENCY AND BANKRUPTCY CODE: SUPREME COURT
Supreme Court of India has ruled that land development rights constitute “property” and “asset” under the Insolvency and Bankruptcy Code (IBC). The judgment, delivered by a bench comprising Justice V. Ramasubramanian and Justice Pankaj Mithal, clarifies the interpretation of the terms “asset” and “property” in the absence of specific definitions in relevant acts and laws.
According to the judgment, the creation of a bundle of rights and interests in favor of the Corporate Debtor over immovable property amounts to “property” within the meaning of the IBC. The court stated, “A bundle of rights and interests were created in favor of the Corporate Debtor… these rights and interests in the immovable property are definitely liable to be included by the Resolution Professional in the Information Memorandum and the Resolution Professional is duty bound under Section 25(2)(a) to take custody and control of the same.”
The court also addressed the issue of the exclusion of assets owned by third parties but in possession of the Corporate Debtor under contractual arrangements. It held that the exclusion is limited to Section 18 of the IBC, and the Explanation under Section 18 does not extend to Section 25. The judgment further emphasized that the possession of the Corporate Debtor needs to be protected, stating, “NCLT as well as NCLAT were right in holding that the possession of the Corporate Debtor, of the property needs to be protected.”
This judgment provides clarity on the scope of “property” and “asset” under the IBC, ensuring a comprehensive understanding of the rights and interests held by the Corporate Debtor. It has significant implications for insolvency proceedings involving immovable property and will guide the actions of Resolution Professionals in handling such assets.
Date of Decision: March 14, 2023
VICTORY IRON WORKS LTD. vs JITENDRA LOHIA & ANR.
