The National Company Law Appellate Tribunal (NCLAT) dismissed two consolidated appeals challenging eviction directions passed by the NCLT, Chandigarh, holding that the liquidator’s statutory duty to take possession of liquidation estate assets prevails over rent control protections where occupants are unauthorized and no rent has been paid. The judgment clarifies the interplay between the Insolvency and Bankruptcy Code, 2016 (IBC) and state rent control statutes, affirming that Section 238 of the IBC operates as a complete override.
Background & Facts
The Dispute
The appellants, M/S Duke Fashions (India) Ltd. and M/S UV & W Products Private Limited, are corporate tenants occupying properties belonging to the corporate debtor, Venus Garments (India) Ltd. They challenged eviction orders directing them to vacate the Karabara Property (occupied since 13.05.2011) and the Hussainpura Property (occupied since 01.09.2018) within two weeks, contending that only rent control proceedings could effect eviction.
Key Facts
- The corporate debtor, Venus Garments (India) Ltd., was directed into liquidation on 22.07.2025.
- The impugned eviction order was passed by the Learned NCLT, Chandigarh on 11.06.2026.
- The appellants admittedly are related parties of the corporate debtor under Section 5(24) of the IBC.
- No lease deed was ever registered; consequently, under Section 49 of the Registration Act, 1908, the alleged lease cannot be received in evidence.
- No rent has been paid by the appellants to the corporate debtor for approximately seven years.
- The liquidator filed applications IA No.1975/2023 and IA No.1991/2023 during the CIRP period seeking eviction.
Procedural History
- 13.05.2011: Appellant Duke Fashions took possession of Karabara Property.
- 01.09.2018: Appellant UV & W Products took possession of Hussainpura Property.
- 22.07.2025: Liquidation order passed; liquidation estate vested in liquidator.
- 11.06.2026: NCLT Chandigarh passed common order directing eviction within two weeks.
- 22.09.2026: Present judgment delivered by NCLAT.
The Parties' Positions
- Appellants: Contended that eviction must proceed under the East Punjab Urban Rent Restriction Act, 1949 (Rent Act) before the Rent Controller; that Section 238 of IBC does not override the Rent Act absent direct conflict; that the liquidator lost locus after liquidation; and that the application is not maintainable.
- Respondents (Liquidator & Financial Creditor): Argued that Section 60(5)(c) of IBC confers jurisdiction on NCLT to adjudicate any question arising in relation to liquidation; that Section 35 imposes mandatory duties on liquidator to take custody of assets; that Section 238 provides a complete override of inconsistent laws; and that the dispute arises solely from the insolvency of the corporate debtor.
Relief Sought
The appellants sought to set aside the impugned order dated 11.06.2026, restrain eviction proceedings, and remit the matter to the Rent Controller for adjudication under the Rent Act.
The Legal Issue
The central question was whether the National Company Law Tribunal has jurisdiction under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 to entertain an eviction application filed by the liquidator against occupants of the corporate debtor’s property, and whether the provisions of the Rent Control Act, 1949 are overridden by Section 238 of the IBC in such circumstances.
Arguments Presented
For the Appellant
The appellants relied on the principle that rent control legislation is a special statute protecting tenants and that the IBC cannot override it absent a direct conflict. They cited Vishal N Kalsaria v. Bank of India (2016) 3 SCC 762 to argue that protection extends to blameless, rent-paying tenants, a condition absent here but contended that the statute’s spirit still applies. They asserted that after the liquidation order dated 22.07.2025, the liquidator’s locus to pursue the earlier application under Sections 18 and 25 of the IBC ceased, requiring a fresh application under Section 35, which they claimed was not pursued. They further argued that the appellants, being related parties and unauthorized occupants, could not be evicted without first establishing tenancy under the Rent Act, and that the IBC’s non-obstante clause in Section 238 does not apply to rent control laws operating in a different field.
For the Respondent/State
The liquidator and the financial creditor emphasized that Section 60(5)(c) of the IBC is a plenary jurisdiction-conferring provision enabling the NCLT to adjudicate any question of fact or law arising in relation to the liquidation of the corporate debtor. They relied on Jhanvi Rajpal Automotive Pvt. Ltd. v. Resolution Professional (CA(AT)(Ins.) No. 1417 of 2022) to hold that eviction proceedings by the liquidator before the NCLT are maintainable where the corporate debtor is the owner/landlord. They argued that Section 35(1)(b), (d), (e), (k) and (l) impose mandatory statutory duties on the liquidator to take custody and control of assets, rendering the application not discretionary but obligatory. They contended that Section 238 of the IBC operates ex proprio vigore, overriding any inconsistent law, including the Rent Act, and that the appellants’ status as unauthorized, non-rent-paying occupants related to the corporate debtor disentitles them to any protection under rent control statutes.
The Court's Analysis
The Tribunal began by noting that the impugned order arose solely from the liquidation of Venus Garments (India) Ltd., a fact admitted by the appellants. It examined the scope of Section 60(5)(c) and held that the jurisdiction conferred is “of the widest amplitude” and does not require a non-obstante clause to be invoked; the NCLT’s power to adjudicate disputes relating to the liquidation estate is inherent and plenary. Turning to the conflict between the IBC and the Rent Act, the Court quoted Section 238: “Section 238 of the IBC provides the IBC shall have effect notwithstanding anything inconsistent contained in any other law for the time being in force.” It emphasized that this provision is a complete override, not merely procedural, and applies irrespective of whether the inconsistency is specifically pleaded. The Tribunal distinguished Vishal N Kalsaria on three grounds: (a) it predated the enactment of Section 238 IBC; (b) it concerned a blameless, rent-paying third-party tenant, whereas the appellants are related parties who have not paid rent for seven years; and (c) the Supreme Court in that case conditioned protection on “paying and receiving rent,” a prerequisite absent here. The Court further held that the liquidator’s duty under Section 35 is mandatory, citing Sections 35(1)(b) and (d) which impose obligations to secure and safeguard assets. Since the alleged lease was unregistered and no rent paid, the appellants were deemed unauthorized occupants, not tenants protected by rent control statutes. Consequently, the liquidator’s application under Section 60(5)(c) was maintainable, and the impugned order directing eviction within two weeks was correct.
The Verdict
The appeals were dismissed; the impugned order dated 11.06.2026 of the NCLT, Chandigarh was upheld. The appellants are directed to vacate the Karabara Property and Hussainpura Property within two weeks from the date of this judgment, as originally directed. No monetary compensation, costs, or interest were awarded.
What This Means For Similar Cases
IBC Prevails Over Rent Control Laws
- Section 238 of the Insolvency and Bankruptcy Code, 2016 operates as a complete override of any inconsistent state rent control legislation.
- Liquidators may pursue eviction of occupants under IBC provisions without first resorting to rent control tribunals.
- The override applies irrespective of whether the inconsistency is expressly pleaded.
Unauthorized Occupants Cannot Defy Liquidator’s Statutory Duty
- Where occupants are not bona-fide tenants (no registered lease, no rent payment), they are not entitled to protection under rent control statutes.
- The liquidator’s duty under Sections 35(1)(b), (d), (e), (k) and (l) is mandatory; failure to pursue possession constitutes dereliction of statutory duty.
- Related-party status of the occupants does not confer any shield against eviction when the corporate debtor is the owner.
Section 60(5)(c) Confers Plenary Jurisdiction on NCLT
- The NCLT’s jurisdiction under Section 60(5)(c) extends to any question of fact or law arising in relation to the liquidation of the corporate debtor.
- No additional non-obstante clause is required; the jurisdiction is inherent and plenary.
- Eviction proceedings by the liquidator or resolution professional before the NCLT are maintainable where the corporate debtor owns the property.
