NCLAT: Moratorium Bars Lessor from Recovering Possession Even After Pre-CIRP Lease Termination

April 6, 2026 : The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has held that a lessor cannot recover possession of leased premises from a corporate debtor during the subsistence of moratorium under Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016, even where the lease had been terminated prior to commencement of the Corporate Insolvency Resolution Process (CIRP).

The ruling came in an appeal filed by Sudha Apparels Ltd. challenging the order of the National Company Law Tribunal (NCLT), Mumbai Bench, which had refused to direct handing over of possession of commercial premises situated at New Town, Rajarhat, Kolkata.

As per the record, the appellant had leased the premises in 2008 to Home Solutions Retail India Ltd. for 21 years. The leasehold rights were subsequently assigned through multiple entities, ultimately vesting in Future Lifestyle Fashion Ltd., the corporate debtor. Due to non-payment of rent since February 2022, the appellant issued a termination notice on 14 April 2023. CIRP against the corporate debtor commenced shortly thereafter on 4 May 2023.

Before the NCLAT, the appellant contended that termination of the lease prior to CIRP extinguished all contractual and possessory rights of the corporate debtor, and therefore the property could not be treated as its asset or be protected by the moratorium. It also argued that the premises were lying unused and that no meaningful purpose was served by retaining possession.

The Resolution Professional opposed the plea, submitting that the premises were crucial for the corporate debtor’s operations and that possession was necessary to maintain it as a going concern. It was also alleged that obstruction by the appellant had affected electricity supply and business continuity during CIRP.

The Appellate Tribunal examined Section 14(1)(d), which prohibits recovery of property by an owner or lessor where such property is occupied by or in possession of the corporate debtor. It held that the provision is absolute in nature and applies so long as possession remains with the corporate debtor or the Resolution Professional.

Rejecting the appellant’s arguments, the Tribunal clarified that even where a lease is terminated prior to insolvency commencement, recovery of possession during moratorium is impermissible. It emphasized that physical possession cannot be disturbed during the moratorium period and that juridical possession of a tenant continues to be protected until eviction is carried out in accordance with law.

The Tribunal also referred to Regulation 31(b) of the CIRP Regulations, noting that dues payable to lessors affected by Section 14(1)(d) are to be treated as CIRP costs. This, it observed, reinforces the legislative intent to bar recovery of possession during the resolution process.

On facts, the Tribunal found that the Resolution Professional continued to be in possession of the premises and that the property remained relevant for the corporate debtor’s business. It held that these factors attracted the protection of the moratorium.

Accordingly, the NCLAT dismissed the appeal and declined to interfere with the NCLT’s order. It further requested that the CIRP be concluded expeditiously, preferably within three months, and disposed of all pending applications.

Case Title: Sudha Apparels Ltd. v. Ravi Sethia, RP of Future Lifestyle Fashion Ltd.
Case No.: Company Appeal (AT) (Ins) No. 2026 of 2024
Coram: Justice Yogesh Khanna (Judicial Member) and Ajai Das Mehrotra (Technical Member)