The National Company Law Tribunal (NCLT) held that leasehold rights in land constitute assets of a corporate debtor, allowing an interim application in insolvency proceedings. The ruling clarifies the scope of 'assets' under the IBC during liquidation.
Leasehold Rights Recognized as Corporate Assets Under IBC
The National Company Law Tribunal (NCLT) has ruled that leasehold rights over land qualify as 'assets' of a corporate debtor under Section 3(3)(d) of the Insolvency and Bankruptcy Code, 2016 (IBC). This determination came while deciding an interim application in ongoing liquidation proceedings, where the liquidator sought direction on the status of land held under lease.
The NCLT observed that even though the corporate debtor did not hold title to the land, its leasehold interest possesses economic value and is capable of realization for the benefit of creditors. The tribunal emphasized that the definition of 'asset' under the IBC is broad and includes both tangible and intangible property rights, citing Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC 17. The order for liquidation was deemed a notice of discharge to officers, employees, and workmen under Section 33(6) of the IBC.
For practitioners, this ruling reinforces the need to identify and assess all forms of property rights—including leasehold interests—when mapping a corporate debtor’s estate. It may also influence valuation strategies and recovery planning in insolvency cases, particularly where land use rights form part of operational infrastructure.
Citations
- Insolvency and Bankruptcy Code, 2016, Section 3(3)(d)
- Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC 17
- IBC Section 33(6)
