NCLAT Upholds Liquidator’s Right to Remove Assets from Reliance Realty Premises, Dismisses Ownership Claims

NCLAT Upholds Liquidator’s Right to Remove Assets from Reliance Realty Premises, Dismisses Ownership Claims

Introduction

The National Company Law Appellate Tribunal (NCLAT), New Delhi, upheld the order of the National Company Law Tribunal (NCLT) allowing the liquidator of Independent TV Limited to remove movable assets from the leased premises owned by Reliance Realty Limited (RRL). The Tribunal held that once the liquidator had lawfully taken custody of the assets, the burden of proof shifted to the party later claiming ownership.

Factual Background

Reliance Realty Limited had leased the Dhirubhai Ambani Knowledge City (DAKC) premises to Independent TV Limited for its Direct-to-Home (DTH) operations. Upon default in rent payments, the corporate debtor was admitted into Corporate Insolvency Resolution Process (CIRP), and liquidation proceedings commenced in 2023.

During liquidation, the liquidator prepared a list of movable assets located in the leased premises and auctioned them under Regulation 32A of the IBBI (Liquidation Process) Regulations, 2016. M/s Shree Sai Baba Ship Breaking Co. emerged as the Successful Auction Purchaser (SAP).

Procedural Background

After the auction, RRL objected to the removal of assets, contending that several items belonged to it or its parent company, Reliance Communications Limited (RCL). The NCLT rejected RRL’s objection, directing that neither RRL nor any third party shall obstruct the liquidator or the successful purchaser from removing the assets. Aggrieved, RRL filed an appeal before the NCLAT.

Issues

1.  Whether the liquidator could remove assets from the leased premises when ownership was disputed.
2.  Whether possession of assets by the corporate debtor during CIRP and liquidation constituted sufficient basis for their inclusion in the liquidation estate.
3.  Whether the burden of proof lay on the liquidator or on the claimant asserting ownership.

Contentions of the Parties

Appellant (Reliance Realty Limited): The NCLT wrongly equated possession with ownership and failed to recognize that several assets belonged to RRL and its parent entity. The Draft Premises Use Agreement annexed to the Share Purchase Agreement (SPA) demonstrated that certain assets were installed by RRL for the corporate debtor’s use. Assets owned by third parties cannot form part of the liquidation estate, and the liquidator was required to verify ownership titles before conducting the auction.

Respondents (Liquidator & Auction Purchaser): The corporate debtor was in undisputed possession of the assets during CIRP and liquidation, and no ownership objections were raised earlier. Despite public notices, RRL or RCL did not assert ownership at any stage. The burden of proof lies with the claimant alleging ownership, not the liquidator, who holds lawful custody. The Successful Auction Purchaser contended that obstruction to asset removal violated Section 70 of the IBC.

Reasoning and Analysis

The NCLAT found that the assets were under the lawful possession of the liquidator and formed part of the liquidation estate. The Tribunal held that once the liquidator assumes control of the corporate debtor’s assets, the onus shifts to any third party asserting ownership to substantiate such claims with credible proof. The Tribunal states that, “The Applicant, as Liquidator, holds legal custody of the assets lying at Navi Mumbai Premises… In such a scenario, the burden of proof rests on the person claiming to be the owner.”

The bench of Justice Ashok Bhushan and Mr. Barun Mitra (Technical Member) rejected RRL’s reliance on the Draft Premises Use Agreement, noting that it was unsigned, undated, and unenforceable. Similarly, the SPA did not confer any ownership rights since RRL was not a signatory to it. Finally, since the liquidation process had been completed, sale proceeds distributed, and sale certificates issued under Regulation 42(2) of the Liquidation Regulations, the Tribunal declined to interfere with the concluded process.

Implications

The decision reinforces that once a liquidator lawfully takes custody of assets during liquidation, the presumption of ownership lies with the corporate debtor. The burden to prove otherwise rests squarely on any third party claiming title. The decision also underscores that post-liquidation objections cannot undo completed auctions or disrupt finalized distributions under the IBC.

In this case the appellant was represented by Ms. Misha, Mr. Vaijayant Paliwal and Ms. Tanya Chib, Advocates. Meanwhile the respondent was represented by Mr. Rachit Mittal, Mr. Parish Mishra, Mr. Kanishk Raj, Mr. Adarsh Srivastava and Mr. Abhishek Sinha, Advocates for R1. Mr. Anoop Kumar, Advocate for Liquidator. Mr. Sidhant Kumar, Mr. Parth Yadav, Mr. DM Batra, Mr. Vishal and Mr. Rishi Muraka, Advocates for R2.