Entering into a rental or commercial property agreement without formal registration strips the lease of its legal standing, according to a significant ruling by the National Company Law Appellate Tribunal. The appellate authority clarified that an unregistered lease deed cannot be admitted as evidence to assert tenancy rights, clearing the path for insolvency liquidators to reclaim corporate properties directly without wading through state rent control litigation. This decision firmly places federal bankruptcy proceedings above local tenancy protections whenever a corporate debtor enters liquidation.
Appeals Dismissed Against Chandigarh NCLT Eviction Directives
The controversy originated from a dispute involving two Ludhiana entities, Duke Fashions along with UV&W Products. Both corporate entities had approached the appellate authority to overturn a directive from the Chandigarh bench of the National Company Law Tribunal. That original ruling had instructed the two occupants to vacate two commercial premises situated in Karabara and Hussainpura within a strict timeframe of two weeks. A two-member bench of the appellate tribunal rejected their pleas, determining that the lower tribunal acted well within its legal jurisdiction.
Rejection Of Thirty Year Tenancy Claim And Unregistered Deeds
In their challenge, the appellant firms maintained that they enjoyed protected tenancy status through a 30-year lease deed. They further asserted that any lawful eviction could solely be pursued before a designated rent controller pursuant to the East Punjab Urban Rent Restriction Act, 1949, rather than through summary tribunal proceedings. The appellate tribunal categorically turned down these contentions, observing that because the lease documents were never registered, they failed to qualify as admissible evidentiary material in the eyes of the law. Furthermore, the bench highlighted an internal link, noting that directors across the appellant firms were close relatives of the suspended directors belonging to the corporate debtor.
Statutory Mandate Under Section 35 And Primacy Of IBC
The appellate bench highlighted that Section 35 of the Insolvency and Bankruptcy Code imposes a mandatory statutory obligation upon the liquidator to take custody and control of all properties owned by the corporate debtor. Furthermore, the tribunal emphasized the overriding effect established by Section 238 of the Code, which gives bankruptcy statutes precedence over inconsistent state enactments. As a result, a liquidator is not legally obliged to launch separate, protracted proceedings under rent restriction legislation simply to recover assets belonging to an insolvent enterprise.
Origins In Venus Garments Insolvency And Liquidation
The underlying asset controversy stems from the insolvency proceedings of Venus Garments (India). The textile firm was initially admitted into the corporate insolvency resolution process by the Chandigarh bench of the NCLT. Following resolution efforts, an official liquidation decree was issued on July 22, 2025, enabling the court-appointed liquidator to identify, consolidate, and retrieve corporate holdings occupied by external commercial tenants.
