Case Note & Summary
The Municipal Corporation of Greater Mumbai (MCGM) appealed under Section 62 of the Insolvency and Bankruptcy Code, 2016 (IBC) against the order of the National Company Law Appellate Tribunal (NCLAT) which upheld the approval of a resolution plan by the National Company Law Tribunal (NCLT) for SevenHills Healthcare (P.) Ltd. (the corporate debtor). MCGM owned certain plots of land in Mumbai, which were the subject of a development agreement dated 20th December 2005 with SevenHills for constructing a 1500-bed hospital. The agreement required completion within 60 months and execution of a lease deed upon completion, but the project was not completed by the deadline. MCGM issued a show cause notice on 23rd January 2018 proposing termination of the contract. Meanwhile, insolvency proceedings were initiated against SevenHills by Axis Bank, and the NCLT admitted the petition on 13th March 2018. A resolution plan was submitted by Dr. Shetty's New Medical Centre (SNMC) and approved by the Committee of Creditors (CoC) on 4th September 2018. The plan proposed payment to MCGM of ₹102.3 crores against its claim of ₹140.88 crores and committed to honouring the agreement terms, including providing 20% of hospital beds for the economically weaker sections. MCGM initially filed an application claiming to be a financial creditor but later opposed the plan, arguing that no lease deed existed, the show cause notice had been issued, and the CIRP period had expired. The NCLT approved the plan, noting MCGM's contradictory stands and that the plan met statutory requirements. The NCLAT dismissed MCGM's appeal, relying on a memo filed by MCGM on 20th April 2019 indicating acceptance of the plan. The Supreme Court, after hearing arguments, held that MCGM's written submissions before the NCLT amounted to consent, and the resolution plan was validly approved. The Court rejected MCGM's contentions regarding non-compliance with the Mumbai Municipal Corporation Act, 1888 (MMC Act) and the expiry of the CIRP period, finding no merit in the appeal.
Headnote
A) Insolvency and Bankruptcy Code - Resolution Plan Approval - Section 30(2), Section 31, Section 62 IBC - Lease Rights - The Supreme Court considered whether the NCLAT erred in rejecting MCGM's appeal against the approval of a resolution plan that involved lands owned by MCGM, where no lease deed had been executed due to non-completion of the hospital project. The Court held that MCGM's written submissions before NCLT indicating acceptance of the plan, subject to certain conditions, amounted to consent, and the plan was validly approved. (Paras 1-13) B) Mumbai Municipal Corporation Act - Statutory Compliance - Section 92 MMC Act - Transfer of Interest in Land - MCGM argued that the resolution plan violated Section 92 of the MMC Act, which requires express authorization by the corporation for any transfer or creation of interest in land. The Court noted that MCGM's own written submissions and conduct indicated a willingness to proceed with the lease, and thus the plan did not contravene the Act. (Paras 10-12) C) Insolvency and Bankruptcy Code - CIRP Timeline - Section 12(3) IBC - Extension of Period - MCGM contended that the CIRP period had expired. The Court rejected this, noting that the application for approval of the resolution plan was filed before the expiry of the extended period, and thus the plan was within the prescribed timeline. (Paras 5-6)
Issue of Consideration
Whether the resolution plan approved by NCLT and NCLAT, which involved creation of encumbrances on lands owned by MCGM and execution of a lease deed, was valid despite MCGM's objections regarding non-compliance with the MMC Act and the absence of a subsisting lease.
Final Decision
The Supreme Court dismissed the appeal, holding that MCGM's written submissions before the NCLT indicated acceptance of the resolution plan, and the plan was validly approved. The Court found no merit in MCGM's contentions regarding non-compliance with the MMC Act or expiry of the CIRP period.
Law Points
- Insolvency and Bankruptcy Code
- 2016
- Section 30(2)
- Section 31
- Section 62
- Section 14(1)(d)
- Section 12(3)
- Section 29A
- Mumbai Municipal Corporation Act
- 1888
- Section 92
- IBBI (CIRP) Regulations
- Regulations 37
- 38
- 38(IA)
- 39(4)
- Resolution Plan Approval
- Committee of Creditors
- Lease Rights
- Public Body
- Statutory Compliance
