NCLAT Dismisses Reliance Realty Appeal, Directs Swift Completion of Liquidation Process

An appeal filed by Reliance Realty, a step-down corporation of insolvent Reliance Communications, seeking the recovery of assets and rent from Independent TV, a company involved in the DTH industry that is currently in liquidation, was dismissed by the appellate panel NCLAT. The Mumbai bench of the National Company Law Appellate Tribunal (NCLAT) rejected Reliance Realty's appeal and stated that the liquidation process of Independent TV (formerly known as Reliance Big TV) must be finished as quickly as possible.

The NCLAT has upheld this decision. A two-member bench ruled that the appellant (Reliance Realty), who had never raised the question of ownership of the assets located in the rented space for no compelling reason, should not interfere with or sabotage the liquidation process.

Why Reliance Reality Facing the Heat?

On November 27, 2017, Independent TV, a corporate debtor, leased a portion of DKAC's (Dhirubhai Ambani Knowledge City) premises and pre-packaged infrastructure facilities from Reliance Realty to operate its Direct to Home (DTH) operation and store goods. According to NCLAT, there is nothing wrong with the contested order that permits the liquidator to take away all of the corporate debtor's movable assets that are located at the leased location and prohibits the appellant from preventing the liquidator and the winning bidder from obtaining these assets.

After a share purchase agreement and a draft agreement for premise usage were executed on November 27, 2017, Independent TV purchased the DTH business from the group. Up until October 2018, it paid service fees such as rent, power, and maintenance obligations; after that, it stopped making payments on schedule. In accordance with the terms of the Insolvency & Bankruptcy Code (IBC), insolvency proceedings were started against it on February 26, 2020, and its CEO turned over all of its assets to its Resolution Professional.

On March 17, 2023, NCLT ordered the start of Independent TV's liquidation after it was unable to locate a buyer, and an e-auction notice was published. However, during the liquidation process, Reliance Realty refused to allow inspection of the company's assets by potential bidders. It argued that Independent TV had not paid the property's rental fees for the previous five years and, before providing additional support and allowing a restricted inspection, sought payment of the rent and electricity fees.

Shree Sai Baba Ship Breaking Company Became SAP

A sale certificate and possession memo including 1,874 units of goods/inventory were turned over on December 10, 2024, after Shree Sai Baba Ship Breaking Company was declared the Successful Auction Purchaser (SAP) for Independent TV's assets. Later, amid the ongoing CIRP, Reliance Realty went to NCLT to collect unpaid rent and other debts. But the National Company Law Tribunal (NCLT) ordered Reliance Realty to let the liquidator and SAP into the rented space so they may remove the corporate debtor's assets without creating any obstacles. Reliance Realty later contested this in front of the NCLAT appeal tribunal.

It argued that the NCLT had mistakenly permitted the liquidator to remove assets that were lying at the leased premises, including Reliance Communication's assets, on the grounds that the corporate debtor's ownership could be established by the mere fact that the assets or goods were present at the premises during the CIRP.

However, NCLAT also rejected this, noting that in issuing the order, NCLAT had considered not only the events that transpired during CIRP and liquidation, but also the liquidator's site-visit reports and the fact that the assets and goods were under the control and possession of the corporate debtor.

While assuming custody and control of the corporate debtor's property, the former resolution professional had already carried out a fair and open investigation to determine the true ownership of the assets located in the leased space during the CIRP (corporate insolvency resolution) proceedings. Furthermore, the SPA that transferred the DTH operation to Independent TV did not include Reliance Realty as a party.