NCLAT Delhi Affirms Easementary Right During Liquidation: Scope of Section 60(5)(c) of IBC Examined

Background of the Dispute

The National Company Law Appellate Tribunal, Principal Bench, New Delhi, recently decided a significant appeal in ARC Research And Development Centre Limited Vs Liquidator of Adya Oils And Chemicals Ltd. (NCLAT Delhi). The controversy revolved around whether the National Company Law Tribunal (“NCLT”) could, in liquidation proceedings under the Insolvency and Bankruptcy Code, 2016 (“IBC”), recognise and protect an easementary right of way over land owned by third parties, when such access was critical to the value realisation of the corporate debtor’s assets.

The corporate debtor, Adya Oils and Chemicals Ltd., owns a non‑agricultural industrial parcel at New Block No. 83 (Old Block No. 87), situated in Village Manglej, Taluka Karjan, District Vadodara, Gujarat. The only functional access to this land from the National Highway has historically been through adjoining lands bearing New Block Nos. 90 and 92 (Old Block Nos. 94 and 96). These adjoining parcels are presently owned by the appellants, ARC Research and Development Centre Limited and ARC Fintube Technologies Pvt. Ltd.

The critical legal question was whether the NCLT, while dealing with an application under Section 60(5)(c) of the IBC, could adjudicate and protect an alleged easementary right of way by prescription over the appellants’ land, and whether such adjudication was within the IBC framework or belonged exclusively to the civil courts.

Non‑Agricultural Permission and Origin of the Right of Way

NA Order of 04.11.1999

The starting point for the right of access lies in a Non‑Agricultural permission dated 04.11.1999, bearing No. N.A.S.R./2/99/99-2000/Land Vashi/1466/99, issued by the Taluka Panchayat Kacheri, Karjan. This NA Order allowed the corporate debtor to put its land in New Block No. 83 (Old Block No. 87) to non‑agricultural industrial use.

The NA Order was granted after the Taluka Panchayat obtained multiple clearances from various authorities, including:

Executive Engineer, National Highway Department
Special Land Acquisition Officer, Narmada Yojna
Deputy Collector
Chief District Health Officer
Deputy Town Planner
Collector, Vadodara under Section 63AA of the Tenancy Act, among others

A key condition in the NA Order (Condition No. 12) specifically noted that access to the corporate debtor’s land from the National Highway would be via Block Nos. 94 and 96 (new 90 and 92). This was stated to be:

“subject to the strict compliance of the undertaking given for the entry by making the Agreement on 20.09.1999 on a stamp of Rs.20-00, and subject to obtaining the permission of the government as per the rules for the entry in the Government Nel (Narrow way).”

This official recognition of access through the adjoining blocks formed an important plank of the liquidator’s case, both before the NCLT and NCLAT.

Subsequent Ownership of Adjoining Blocks

The land in New Block Nos. 90 and 92 (Old Block Nos. 94 and 96) was originally owned by Jord Engineers India Limited and was used for industrial purposes. In July 2007, the first appellant purchased these blocks. Industrial construction on New Block No. 90 commenced around March–April 2018, and operations reportedly began in October 2019, whereas New Block No. 92 remained largely vacant.

Despite this change in ownership, the passage through Block Nos. 90 and 92 continued to be used as the de facto and de jure access to the corporate debtor’s land for around two decades without any recorded objection from the owners of those blocks.

Insolvency and Liquidation Timeline

16.09.2019 – The corporate debtor, Adya Oils and Chemicals Ltd., was admitted into CIRP.
04.03.2020 – The process transitioned into liquidation.

During this period, the corporate debtor’s land formed part of the liquidation estate, and access for inspection, valuation and sale to potential purchasers was essential for maximising value.

Obstruction of Access During COVID‑19

Construction of Boundary Wall

During the COVID‑19 lockdown, the appellants constructed a wall along the boundary of their land (Blocks 90 and 92). This wall effectively blocked the long‑standing passage used to reach the corporate debtor’s factory premises at Block 83.

A police complaint was filed in February 2021 against this obstruction. The wall was later demolished, but according to the liquidator, the appellants then deposited earth and mud in front of the factory gate, which continued to disrupt movement of personnel and vehicles into the corporate debtor’s facility.

Police Proceedings

The complaint progressed before the police authorities at Vadodara. Eventually, on 09.06.2021, the police closed the complaint, citing a lack of supporting documents to show an established right of way, and noting the existence of an alleged alternative access route.

This closure did not resolve the practical problem of access for the liquidator. The obstruction was perceived as a serious impediment to the saleability and valuation of the corporate debtor’s industrial property.

Application Before NCLT Under Section 60(5)

Reliefs Sought by the Liquidator

Faced with continuing obstruction, the liquidator filed I.A. No. 2658 of 2021 in C.P. (I.B.) No. 2392/MB/2019 before the NCLT, Mumbai Bench, invoking Section 60(5) of the IBC. Among other things, the liquidator prayed for:

Injunction against construction or obstruction affecting the right of way.
Demolition of all obstructions and restoration of full access.
Declaration that the corporate debtor had a right of way through New Block Nos. 90 and 92, including recognition of an easement by prescription under Section 15 of the Indian Easements Act, 1882.
Directions to record the right of way in the relevant land/revenue records.
Assistance of local authorities and police to ensure unobstructed access going forward.

Prayer (a), dealing with removal of the wall, became infructuous during the proceedings as the wall had already been demolished.

NCLT’s Findings

The NCLT allowed prayers (b) to (h), giving wide‑ranging protection to the right of way, and held inter alia:

NCLAT Delhi on Easement Rights and IBC Liquidation: How Access to Property Can Be Protected