Case Note & Summary
The Municipal Corporation of Greater Mumbai (MCGM) appealed against the order of the National Company Law Appellate Tribunal (NCLAT) which had upheld the approval of a resolution plan by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016 (IBC). The dispute arose from a contract dated 20th December 2005 between MCGM and SevenHills Healthcare Pvt. Ltd. (the corporate debtor) for development of land owned by MCGM to construct a 1500-bed hospital. SevenHills failed to complete the project within 60 months and defaulted on lease rent payments, leading MCGM to issue a show cause notice on 23rd January 2018 proposing termination. However, before the notice period ended, insolvency proceedings were initiated by Axis Bank and admitted by NCLT on 13th March 2018. A resolution plan was submitted by Dr. Shetty's New Medical Centre (SNMC) and approved by the Committee of Creditors on 4th September 2018. MCGM initially filed an application claiming to be a financial creditor but later opposed the plan, arguing that it was the owner of the land and that the plan could not bind it without compliance with the Mumbai Municipal Corporation Act, 1888 (MMC Act). The NCLT rejected MCGM's objections and approved the plan, noting that MCGM had taken contradictory stands. The NCLAT dismissed MCGM's appeal, observing that MCGM had filed a memo accepting the plan. The Supreme Court considered whether the resolution plan was binding on MCGM. The Court noted that MCGM had filed written submissions consenting to the plan, which amounted to a concession that bound it. The Court held that MCGM could not approbate and reprobate, and that the resolution plan, once approved, was binding on all stakeholders including MCGM. The appeal was dismissed, upholding the NCLAT order.
Headnote
A) Insolvency Law - Resolution Plan - Binding Effect - Sections 30, 31, 62 Insolvency and Bankruptcy Code, 2016 - Resolution plan approved by NCLT and upheld by NCLAT is binding on all stakeholders including municipal corporation - MCGM's written submissions consenting to plan preclude later objections - Held that MCGM's concessions in court bind it (Paras 1-13). B) Insolvency Law - Moratorium - Section 14(1)(d) Insolvency and Bankruptcy Code, 2016 - Moratorium does not prevent lessor from terminating lease for pre-CIRP defaults - However, in this case, MCGM's show cause notice was issued before CIRP but termination not effected - Held that moratorium does not bar termination but facts here show no termination occurred (Paras 2-3). C) Municipal Law - Transfer of Property - Section 92 Mumbai Municipal Corporation Act, 1888 - Any transfer or creation of interest in land requires express authorization by corporation - Resolution plan cannot override statutory requirements - However, MCGM's consent to plan amounts to authorization - Held that MCGM cannot approbate and reprobate (Paras 10-11).
Issue of Consideration
Whether the resolution plan approved by NCLT and NCLAT is binding on MCGM despite its objections regarding ownership of land and non-compliance with MMC Act
Final Decision
Supreme Court dismissed the appeal, upholding NCLAT order approving resolution plan
Law Points
- Resolution plan binding on all stakeholders including government authorities
- Moratorium under Section 14(1)(d) does not bar termination of contract by lessor
- CIRP period extension valid if application filed before expiry
- Concession by municipal corporation in written submissions binds it
