NCLT Kochi Says Decision on Retaining Leased Premises During CIRP Lies With CoC’s Commercial Wisdom

May 8, 2026 : The National Company Law Tribunal has held that the decision on whether a corporate debtor should continue to occupy or vacate leased premises during the Corporate Insolvency Resolution Process (CIRP) or liquidation is a matter that falls within the commercial wisdom of the Committee of Creditors (CoC).

Judicial Member Vinay Goel passed the order while disposing of an application filed by landlord G. Vinayan against the Interim Resolution Professional (IRP) of Davani Silks Pvt. Ltd., seeking vacant possession of commercial premises located at Muvattupuzha, Kerala.

The dispute arose from a lease agreement executed in September 2020 under which approximately 3500 sq. ft. of commercial space was leased to Davani Silks Pvt. Ltd. Initially fixed at Rs.1,68,300 plus GST, the monthly rent was revised multiple times and ultimately fixed at Rs.2,27,740 inclusive of GST. The landlord alleged that the company defaulted in payment of rent from April 2023 onwards and also failed to clear electricity charges and other statutory dues.

According to the applicant, both parties later agreed to terminate the lease through an agreement dated July 17, 2023, under which the corporate debtor undertook to vacate the premises on or before November 15, 2023 after clearing arrears and removing furniture and materials stored inside the building. However, the premises were neither vacated nor were the outstanding dues cleared.

The landlord thereafter initiated proceedings before the Rent Controller, Muvattupuzha under the Kerala Buildings (Lease and Rent Control) Act, 1965. However, after CIRP proceedings were initiated against Davani Silks Pvt. Ltd. on May 30, 2024, the rent control proceedings were kept in abeyance because of the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code, 2016.

The applicant argued that the premises had effectively been abandoned as the building remained locked and business operations had ceased. He further submitted that continued occupation without payment of rent had caused substantial hardship, especially due to mounting electricity dues and revenue recovery proceedings initiated against him.

Opposing the plea, the IRP contended that although the premises did not belong to the corporate debtor, the building still contained furniture, fittings, air conditioners, garments and other assets belonging to the company. It was argued that any decision regarding vacating the premises required approval of the CoC, particularly since liquidation proceedings were pending consideration before the Tribunal.

The IRP also relied upon the moratorium under Section 14 of the IBC, stating that no coercive action for recovery of possession could be initiated during CIRP and that the premises were being retained for purposes connected with revival or liquidation of the corporate debtor.

After examining the record, the Tribunal noted that no resolution plan had been received for revival of the corporate debtor and that the CoC had already resolved to proceed towards liquidation. The Bench observed that the premises were no longer being actively used for business operations and that continued occupation would result in recurring liabilities by way of rent and statutory dues.

The Tribunal relied upon the Supreme Court’s ruling in Sincere Securities Pvt. Ltd. v. Chandrakant Khemka and reiterated that while Section 14 restricts recovery of possession by a lessor during the moratorium period, the decision on whether the corporate debtor should retain or relinquish possession falls squarely within the domain of the CoC’s commercial wisdom.

The Bench further observed that rent payable during CIRP forms part of CIRP costs and, during liquidation, becomes part of liquidation costs, both of which enjoy priority under the IBC framework. Consequently, any decision regarding continuation of leased premises directly impacts the financial position of the corporate debtor and the recoveries available to creditors.

Holding that the issue must ultimately be decided by the Committee of Creditors, the Tribunal directed the CoC to convene a meeting within 15 days and take a considered decision regarding continuation or relinquishment of the premises after evaluating the financial position of the corporate debtor and the interests of all stakeholders. The application was accordingly disposed of.

Case Title: G. Vinayan v. C.S. Narendar Reddy Banala, IRP of Davani Silks Pvt. Ltd.
Case No.: IA(IBC)/75/KOB/2026 in CP(IBC)/5/KOB/2024