NCLT ruled that leasehold rights over land constitute assets of the company and are transferable in liquidation proceedings under IBC.
Leasehold Rights Recognized as Company Assets in Liquidation: NCLT Rules
The National Company Law Tribunal (NCLT) held that leasehold rights over land are actionable claims and form part of a company’s assets during liquidation under the Insolvency and Bankruptcy Code, 2016 (IBC). The ruling came while deciding on an interlocutory application seeking directions for inclusion of such rights in the liquidation estate.
The tribunal observed that leasehold rights, though not freehold, have proprietary value and are transferable under contractual terms or applicable law. Relying on Section 31 of the IBC, which vests all assets of the corporate debtor in the liquidator, the NCLT directed the liquidator to realize value from leasehold interests through sub-leasing, assignment, or surrender where beneficial. The order clarified that officers and employees were discharged upon liquidation order, but asset identification remained necessary for realization.
This decision strengthens the position of stakeholders in liquidation by expanding the pool of realizable assets. Legal advisors must now conduct thorough due diligence on lease agreements to identify monetizable rights. Assignability and consent requirements under lease deeds will become focal points during asset recovery planning.
Citations
- Insolvency and Bankruptcy Code, 2016, Section 31
