Section 18 IBC | Unlawful Possession Post-Eviction Decree Cannot Be Included in CIRP Assets: NCLAT

The National Company Law Appellate Tribunal has delivered a landmark ruling clarifying that unlawful possession of immovable property, following a final eviction decree affirmed by the Supreme Court, cannot constitute an asset of the corporate debtor under the Insolvency and Bankruptcy Code. This judgment reinforces the principle that CIRP cannot validate or perpetuate illegal occupancy, even where the corporate debtor initiates insolvency proceedings.

Background & Facts

The Dispute

The Appellant, Calcutta Pinjrapole Society, a registered society under the Societies Registration Act, 1860, is the owner of a two-storied building and 14 bigha of land located at 30, Goshala Road, Mauza Lillooah Thana, Bally, District Howrah, West Bengal. On 05.01.1958, the Appellant executed a lease deed in favour of R.S. Iron Industries Private Limited (the Corporate Debtor) for a period of 21 years at a monthly rent of Rs. 675. The lease expired on 31.12.1978. Despite the termination of the lease, the Corporate Debtor refused to vacate the premises.

Key Facts

• The Appellant filed Title Suit No. 101 of 2004 before the Civil Judge (Senior Division), Howrah, seeking eviction and mesne profits from 01.01.1979.
• The Trial Court, by judgment dated 21.05.2005, decreed the suit, ordering eviction within six months and mesne profits at Rs. 700 per month from 01.01.1979.
• The Corporate Debtor appealed; the Additional District Judge, Howrah, by judgment dated 30.06.2010, affirmed the eviction decree but remanded the mesne profits issue for fresh determination.
• The High Court dismissed the second appeal by order dated 17.10.2012.
• The Supreme Court dismissed the Special Leave Petition (SLP(Civil) No. 19628 of 2013) on 12.08.2013, directing the execution proceedings to proceed expeditiously.
• The Appellant filed Execution Proceeding No. 4 of 2005; the Corporate Debtor raised objections under Section 47 of the CPC, which were rejected by the Trial Court on 21.02.2014.
• The Corporate Debtor filed an Original Application (O.A. No. 1081 of 2014) before the West Bengal Land Reforms and Tenancy Tribunal, seeking to declare the eviction decree as nullity on grounds of land vesting under the Land Reforms Act, 1955.
• The Tribunal, by order dated 02.05.2014, declared the eviction decree null and void.
• The Appellant challenged this order before the Calcutta High Court in WPLRT No. 160 of 2014.
• The High Court, by order dated 14.09.2023, set aside the Tribunal’s order dated 02.05.2014, holding that the eviction decree could not be declared nullity in collateral proceedings.
• The Appellant had also filed Writ Petition No. 7588 of 2001 before the Calcutta High Court challenging the vesting of land by the State of West Bengal; an interim status quo order was passed.
• On 12.05.2023, the West Bengal Land Reforms and Tenancy Tribunal granted an interim injunction in M.A. No. 1240 of 2022, directing parties to maintain status quo - but only between the Appellant and the State of West Bengal.
• The Corporate Debtor filed an application under Section 10 of the IBC before the NCLT, Kolkata, on 15.07.2019.
• The NCLT admitted the application on 24.04.2024, appointing Pratap Mukherjee as Interim Resolution Professional, and imposed a moratorium under Section 14 of the IBC.
• The Appellant submitted a claim for arrears of rent and mesne profits amounting to Rs. 68,72,94,678 in Form B on 09.09.2024, which was rejected by the Resolution Professional on 22.10.2024.
• On 09.12.2024, the Appellant filed I.A. (IB) No. 198/KB/2025 seeking exclusion of the property from the CIRP.
• The Adjudicating Authority, by order dated 22.01.2026, rejected the application, observing that ownership was in dispute and the Appellant had not produced a registered sale deed.

Procedural History

• 05.01.1958: Lease deed executed between Appellant and Corporate Debtor for 21 years.
• 31.12.1978: Lease expired; Corporate Debtor continued unlawful possession.
• 21.05.2005: Trial Court decreed eviction and mesne profits.
• 30.06.2010: First Appellate Court affirmed eviction, remanded mesne profits.
• 17.10.2012: High Court dismissed second appeal.
• 12.08.2013: Supreme Court dismissed SLP, directed execution.
• 21.02.2014: Trial Court rejected Section 47 objections.
• 02.05.2014: Land Reforms Tribunal declared eviction decree nullity.
• 14.09.2023: Calcutta High Court set aside Tribunal’s nullity order.
• 12.05.2023: Tribunal granted status quo between Appellant and State of West Bengal.
• 24.04.2024: NCLT admitted CIRP application and imposed moratorium.
• 09.12.2024: Appellant filed I.A. (IB) No. 198/KB/2025.
• 22.01.2026: Adjudicating Authority rejected application.
• 30.06.2026: NCLAT delivered judgment.

The Parties' Positions

Appellant: Argued that the Corporate Debtor had no subsisting right in the property after lease expiry and eviction decree. Ownership was conclusively established by the Supreme Court’s affirmation of the eviction decree. The property was not an asset under Section 18(1)(f) of the IBC. The Adjudicating Authority erred in questioning ownership and ignoring binding judicial findings.

Resolution Professional: Contended that the property was not claimed as owned by the Corporate Debtor, but its possession and litigation history were disclosed in the Information Memorandum. The Resolution Plan provided that the Successful Resolution Applicant would abide by the outcome of pending litigation. The Appellant’s claim for mesne profits was unadjudicated.

Successful Resolution Applicant: Submitted that the prayer for possession was beyond the scope of the appeal. The CIRP had concluded with approval of the Resolution Plan. The Appellant’s remedies lay in execution proceedings.

Relief Sought

The Appellant sought:

• Exclusion of the immovable property (14 bigha land and two-storied building) from the CIRP assets.
• Payment of arrears of rent and mesne profits amounting to Rs. 68,72,94,678.
• Declaration that the Corporate Debtor’s possession was unlawful and could not form part of the resolution process.

The Legal Issue

The central question was whether an immovable property, over which the corporate debtor holds no subsisting legal right - having lost leasehold rights upon expiry and been subject to a final eviction decree affirmed by the Supreme Court - can be treated as an asset under the Insolvency and Bankruptcy Code, 2016, and included in the Corporate Insolvency Resolution Process.

Arguments Presented

For the Appellant

The Appellant relied on the finality of the eviction decree affirmed by the Supreme Court, which conclusively established its ownership and the Corporate Debtor’s unlawful possession. It cited Atma Ram Properties Ltd. v. Federal Motors (P) Ltd. and Heera Traders v. Kamla Jain to establish that post-eviction possession is wrongful and cannot confer any proprietary right. It argued that Section 18(1)(f) of the IBC only permits control over assets where the corporate debtor has ownership rights, and the Explanation to Section 18(1) explicitly excludes third-party property held under contractual arrangements. The Adjudicating Authority’s observation that ownership was in dispute was legally untenable, as the eviction decree had settled the issue. The status quo order dated 12.05.2023 was between the Appellant and the State of West Bengal, not the Corporate Debtor, and conferred no benefit on the latter.

For the Respondent

The Resolution Professional and Successful Resolution Applicant argued that the property’s ownership was subject to pending litigation, particularly the vesting claim under the Land Reforms Act. They contended that the Information Memorandum disclosed the litigation and that the Resolution Plan preserved the Appellant’s rights by undertaking to abide by the outcome of pending proceedings. They relied on Jasmeet Singh Marwah v. Nuway Organic Naturals to argue that adjudication of title disputes is beyond the jurisdiction of the Adjudicating Authority. They further cited Chittoori Subbanna v. Kudappa Subbaana and Rama Kt. Barman v. Md. Mahim Ali to assert that the Resolution Professional cannot be compelled to deliver possession.

The Court's Analysis

The NCLAT undertook a rigorous analysis of the statutory framework under the IBC, particularly Sections 3(27), 18(1)(f), and 14, alongside binding precedents. It held that the term "asset" under Section 18(1)(f) requires a subsisting ownership or proprietary right in the corporate debtor as of the insolvency commencement date. The Court emphasized that unlawful possession, even if prolonged, cannot transform into a legal right.

"The Corporate Debtor was not owner of the asset or has any leasehold right or has any other right and Corporate Debtor was clearly in unauthorised possession of the asset."

The Court rejected the Adjudicating Authority’s reasoning that ownership was in dispute, noting that the eviction decree, affirmed by the Supreme Court, had conclusively determined the Appellant’s ownership and the Corporate Debtor’s wrongful possession. The Tribunal’s order dated 02.05.2014, which had declared the eviction decree null, had already been set aside by the High Court on 14.09.2023.

The Court distinguished Jasmeet Singh Marwah on the ground that in that case, title disputes were pending before a civil court, whereas here, the dispute between the Appellant and the Corporate Debtor had been finally adjudicated. The status quo order dated 12.05.2023 was held to be inapplicable to the Corporate Debtor, as it was granted only between the Appellant and the State of West Bengal.

The Court further relied on Victory Iron Works Ltd. v. Jitendra Lohia and A A Estates Pvt. Ltd. v. Kher Nagar Sukhsadan Co-operative Housing Society Ltd. to hold that only existing, subsisting, and enforceable rights qualify as assets under the IBC. The lease had expired in 1978, and the eviction decree had extinguished any residual right of possession. The Corporate Debtor’s continued occupation was illegal and could not be protected under the moratorium.

"An asset may include any kind of property which is owned by a company but a property in which the Corporate Debtor has no right or subsisting right could not be part of the CIRP process."

The Court held that the Resolution Professional’s inclusion of the property in the CIRP process was illegal and violative of the IBC’s statutory scheme. The Explanation to Section 18(1) explicitly excludes third-party property held under contractual arrangements - and here, no such arrangement existed after 31.12.1978.

The Verdict

The Appellant succeeded. The NCLAT set aside the Adjudicating Authority’s order dated 22.01.2026 and allowed I.A. (IB) No. 198/KB/2025 in part. The immovable property measuring 14 bighas and 1 cottah, situated at 30, Goshala Road, Bally, Howrah, is excluded from the CIRP process of the Corporate Debtor. All subsequent actions taken by the Resolution Professional or Successful Resolution Applicant in relation to the property are declared non-est. The Appellant is free to pursue possession through execution proceedings as directed by the Supreme Court and Calcutta High Court. The claim for mesne profits remains subject to adjudication by the Trial Court, which had remanded the issue for determination. Parties shall bear their own costs.

What This Means For Similar Cases

Unlawful Possession Cannot Be an Asset Under IBC

• Practitioners must now argue that any claim of asset inclusion under IBC requires a subsisting legal right as of the insolvency commencement date.
• Prolonged unlawful possession, even if unchallenged for decades, does not create a proprietary interest.
• CIRP cannot be used as a shield to perpetuate illegal occupation.

Final Judicial Decrees Override CIRP Proceedings

• Where ownership or possession rights have been finally determined by a court of competent jurisdiction - especially if affirmed by the Supreme Court - the Adjudicating Authority cannot reopen or question those findings.
• The doctrine of res judicata applies to CIRP proceedings; a final eviction decree is binding on all parties, including resolution professionals.
• Resolution Professionals must conduct due diligence on title and possession status before including any immovable property in the Information Memorandum.

Status Quo Orders Between Third Parties Do Not Protect Corporate Debtors

• Interim orders granted in litigation between the owner and the State (e.g., on land vesting) do not confer any rights on a corporate debtor who is merely an unlawful occupant.
• Corporate debtors cannot invoke third-party litigation to delay or obstruct eviction or asset exclusion.
• Resolution Plans cannot rely on pending litigation involving third parties to justify inclusion of disputed assets.