Summary: Rajendra K. Bhutta v. MHADA
Rajendra K. Bhutta v. Maharashtra Housing Area Development Authority and Another
(Civil Appeal No. 12248 of 2018)
Judgment delivered on February 19, 2020
Ratio: Interpretation of Section 14(1)(d) is to be done in a manner such that the moratorium shall prohibit (a) recovery of any property by the owner if it is occupied by the corporate debtor and (b) recovery of any property by the lessor if it is possessed by the corporate debtor.
· The Maharashtra Housing Area Development Authority (MHADA) entered into a contract with the corporate debtor for the joint development of a society in Goregaon.
· The corporate debtor then entered into a loan agreement with the Union Bank of India. As a result of the corporate debtor’s failure to repay the said loan, Union Bank filed an application for corporate insolvency resolution under Section 7 of the IBC.
· The application was admitted by the NCLT and a moratorium was imposed in accordance with Section 14.
· Thereafter, the MHADA issued a termination notice to the corporate debtor and stated that the latter had to handover possession of the society land to MHADA.
· The appellant filed an application seeking direction from the NCLT to restrain MHADA from taking possession before completion of the corporate insolvency resolution process due to the existence of moratorium period (CIRP).
· The NCLT dismissed the application and so, the appellant filed an appeal before the NCLAT. An appeal from the order of the NCLAT was then filed before the Supreme Court.
· What is the correct interpretation of Section 14(1)(d) of the IBC?
· In the said case, the corporate debtor was granted a ‘license’ to enter upon the land, demolish the existing structures and reconstruct new structures.
· Section 14(1)(d) prohibits “recovery of any property by an owner or lessor that is occupied by or in possession of the corporate debtor”.
· After relying on various judgments, the court observed that there could be two ways of interpreting this provision. In the first manner, ‘occupied’ and ‘possession’ could be used for either ‘owner’ or ‘lessor’. However, this interpretation is not tenable as a ‘lessor’ does not seek recovery of property ‘occupied by’ the lessee, he seeks ‘possession instead.
· The second manner is based on the latin maxim reddendo singula singulis which means referring each phrase or expression to its corresponding object. Thus, ‘owner’ corresponds to ‘occupied by’ and ‘lessor’ corresponds to ‘in possession of’.
· Thereafter, the court identified the distinction between ‘possession’ and ‘occupation’ in the legal context after referring to various judgments. While ‘occupation’ means being in actual possession of or being actually used by, ‘possession’ on the other hand, connotes actual or constructive possession, thus including situations where there is legal possession, but no physical possession.
· In light of this interpretation, the Apex Court held that as the corporate debtor ‘occupied’ the land, MHADA was prohibited to recover the property.
· It was also observed that by virtue of Section 238 of the IBC, the provisions of the Code would prevail over the provisions of the MHADA Act.