NCLAT Upholds Eviction of Hotel Operator Following Resolution Plan Approval
The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal filed by Nazru S. Basheer, the proprietor of Hotel MB International, upholding an NCLT order that directed him to vacate the hotel premises after the approval of a resolution plan for Pancard Clubs Ltd.
NclatNcltInsolvencyHotelReal EstateReal EstateJun 21, 2025
In May 2025, the National Company Law Tribunal (NCLT), Mumbai Bench, directed Basheer to hand over vacant possession of the property, noting that the term of the agreement had expired in August 2023 and no rights remained with the appellant to continue occupying the premises. The NCLT order was passed in I 2023 during the Corporate Insolvency Resolution Process (CIRP) of Pancard Clubs.
The case stems from a 2017 agreement between Pancard Clubs and the appellant, giving the latter operational control over the hotel, a restaurant, and a gift shop. The agreement included payment of royalty and offered the possibility of extension at the corporate debtor's discretion. In 2022, insolvency proceedings were initiated against Pancard Clubs Ltd. under Section 7 of the Insolvency and Bankruptcy Code (IBC). A resolution professional (RP) was appointed, who, in the course of reviewing assets and agreements, identified the hotel premises as part of the corporate debtor’s estate. Notices were issued to Basheer in December 2022 and again in April and May 2023, demanding outstanding royalty and return of possession.
The RP then filed I.A. No. 3958 of 2023, seeking a direction from the NCLT to recover possession. A parallel application under Sections 45 and 48 of the IBC was also filed to challenge the original agreement as a preferential transaction. In April 2024, a resolution plan was approved, and the successful resolution applicant, Chemhub Tradelink Pvt. Ltd., took over and continued prosecuting the possession-related application.
Basheer argued that although the agreement was signed in 2017, he only took possession in 2021. Therefore, he claimed the six-year term should be counted from that date. He further contended that significant investments had been made in running the hotel, and Clause 28 of the agreement allowed for extension, which had not been explicitly denied by the corporate debtor. He also argued that once the resolution plan was approved, the NCLT ceased to have jurisdiction, and the possession claim became unnecessary. Additionally, he raised a technical objection that the RP had dropped monetary claims under the application during the hearing but still pursued the possession claim. He also contended that the pending application under Sections 45 and 48, which sought to challenge the Conducting Agreement as a preferential transaction, created an overlapping issue.
The NCLAT rejected all the arguments put forward by the appellant. It noted that the agreement expired in August 2023. Even if there was an expectation of extension, that hope was rendered void once the moratorium under Section 14 of the IBC came into effect with the commencement of CIRP. The Tribunal clarified that during the moratorium, the affairs and properties of the corporate debtor remain frozen, and no unilateral expectation of extension can override that legal status. The Tribunal also found no merit in the argument that the NCLT had lost jurisdiction after the approval of the resolution plan. It cited previous judgments, such as Jhanvi Rajput Automotive Pvt. Ltd. v. RP of Rajpal Abhikaran Pvt. Ltd., to reaffirm that the Adjudicating Authority retains powers under Section 60 of the IBC even post-resolution, especially when it concerns properties of the corporate debtor.
Holding that the appellant’s possession ceased to be lawful once the agreement expired, and that there was no vested right to continue occupying the property post-CIRP, the NCLAT dismissed the appeal and upheld the NCLT’s directive for eviction.
Frequently Asked Questions
What is the National Company Law Appellate Tribunal (NCLAT)?
The National Company Law Appellate Tribunal (NCLAT) is an appellate body established under the Companies Act, 2013, to hear appeals against the orders of the National Company Law Tribunal (NCLT). It deals with matters related to insolvency, company law, and other corporate issues.
What is the Corporate Insolvency Resolution Process (CIRP)?
The Corporate Insolvency Resolution Process (CIRP) is a process under the Insolvency and Bankruptcy Code (IBC) that aims to revive a financially distressed company. It involves the appointment of a resolution professional to manage the company's affairs and the formulation of a resolution plan to either revive or liquidate the company.
What is the role of a resolution professional (RP) in insolvency proceedings?
A resolution professional (RP) is appointed during the CIRP to manage the affairs of the corporate debtor. The RP's role includes reviewing the company's assets and liabilities, preparing a resolution plan, and ensuring the process is conducted in a transparent and fair manner.
What happens when a resolution plan is approved under the IBC?
When a resolution plan is approved under the IBC, the successful resolution applicant takes over the management of the corporate debtor. The approved plan outlines the strategy to revive the company, including the payment of debts and the continuation of business operations.
What is a preferential transaction in the context of insolvency?
A preferential transaction in the context of insolvency is a transaction that gives one creditor an advantage over other creditors. Under the IBC, such transactions can be challenged to ensure fair distribution of the corporate debtor's assets among all creditors.
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