NCLAT Upholds Order Against Reliance Realty's Claim on Independent TV Assets

The National Company Law Appellate Tribunal (NCLAT) has ruled against Reliance Realty, a subsidiary of Reliance Communications, in its bid to recover rental dues and assets from Independent TV, a company now undergoing liquidation. The NCLAT upheld an earlier order from the National Company Law Tribunal (NCLT) Mumbai, which had stated that the liquidation of Independent TV must proceed without delay.

NCLAT highlighted that Reliance Realty had not presented valid reasons for its delay in raising ownership issues for assets located on leased premises and that the liquidation process should not be disrupted. The tribunal found no fault with the NCLT's order allowing the Liquidator to remove movable assets of Independent TV from the leased property and restraining Reliance Realty from obstructing the Liquidator and the successful bidder.

Reliance Realty had leased part of the Dhirubhai Ambani Knowledge City (DAKC) to Independent TV in 2017 for its Direct to Home (DTH) business. Independent TV, after making payments until October 2018, defaulted on rent and other charges, leading to insolvency proceedings in February 2020. As no buyer was found, the NCLT ordered liquidation in March 2023. During the liquidation, Reliance Realty attempted to block the inspection and removal of assets, demanding outstanding rental payments. However, NCLAT observed that Reliance Realty had not challenged the custody and control of assets by the Resolution Professional during the Corporate Insolvency Resolution Process (CIRP) or by the Liquidator subsequently, until after the auction process. The tribunal also noted that Reliance Realty was not a party to the original Share Purchase Agreement (SPA) through which Independent TV acquired the DTH business, and the ultimate parent, Reliance Communications, which was a signatory to the SPA, is also in liquidation and has not claimed ownership of these assets.

Impact: This ruling directly supports the orderly liquidation of Independent TV, allowing its assets to be sold to a successful bidder. It underscores the principle that companies undergoing insolvency proceedings should not have their liquidation processes hampered by unrelated claims or delayed objections from related parties. This could impact the recovery prospects for creditors of Independent TV and provides clarity on asset ownership disputes within the Reliance group's insolvency proceedings. The rating reflects the significance of this legal precedent in corporate insolvency cases. Impact Rating: 7/10

Difficult Terms: * NCLAT (National Company Law Appellate Tribunal): An appellate body established to hear appeals against orders passed by the National Company Law Tribunal (NCLT). * NCLT (National Company Law Tribunal): A quasi-judicial body in India that adjudicates issues relating to companies in India. * Liquidation: The process of winding up a company, where its assets are sold, and proceeds are distributed to creditors and shareholders. * DTH (Direct to Home): A service that delivers digital television and radio signals directly to a subscriber's home using a satellite dish. * Share Purchase Agreement (SPA): A legal contract that transfers ownership of shares from a seller to a buyer. * Insolvency Proceedings: Legal procedures initiated when a company or individual is unable to pay their debts. * Resolution Professional: An insolvency professional appointed by the NCLT to manage the Corporate Insolvency Resolution Process (CIRP) for a corporate debtor. * CIRP (Corporate Insolvency Resolution Process): The process under the Insolvency and Bankruptcy Code, 2016, aimed at resolving a company's debt and financial distress. * Corporate Debtor: A company that owes a debt. In this case, Independent TV. * Appellant: A person or entity who applies to a higher court for a reversal of the decision of a lower court. Here, Reliance Realty. * Liquidator: A person appointed by the NCLT to oversee the liquidation process of a company. * Successful Auction Purchaser (SAP): The highest bidder who wins an auction for assets and becomes the legal owner. * RCOM (Reliance Communications): A major Indian telecommunications company, which is currently in liquidation. * DAKC (Dhirubhai Ambani Knowledge City): A business district in Mumbai, India, housing various corporate offices.