Moratorium under Section 14(1)(d) Not a Bar to Voluntary Surrender of Leased Premises

The Hon’ble Supreme Court of India in the case of Sincere Securities Pvt. Ltd. v. Chandrakant Khemka, (2025 SCC OnLine SC 1608), dated August 5, 2025, held that the moratorium under Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016 (IBC), does not bar voluntary surrender of leased premises during the Corporate Insolvency Resolution Process (CIRP) where the Committee of Creditors (CoC) and the Resolution Professional (RP) deem retention financially unviable.

The dispute arose from financial arrangements executed in 2019, under which the corporate debtor, Nandini Impex Private Limited, obtained loans from the appellants, including Sincere Securities Private Limited, secured against a property at Rani Jhansi Road, New Delhi. When the corporate debtor defaulted, title to the premises was transferred to the appellants in 2020. However, on the very same day, the corporate debtor re-entered possession under leave and license agreements, paying substantial monthly rentals. However, defaults in rent soon followed, and the appellants terminated the licenses in May 2020. Accordingly, at the commencement of the CIRP, ownership of the property was already vested in the appellants pursuant to the 2020 conveyance deeds, while the corporate debtor continued in occupation under subsisting leave and licence arrangements.

In September 2022, CIRP was admitted against the corporate debtor on the petition of UCO Bank, the only financial creditor, making it the sole member of the Committee of Creditors (CoC). During CIRP, the CoC considered whether retaining the leased premises made commercial sense. Considering the huge rental liability and minimal ongoing operations of the corporate debtor, the CoC resolved in April 2023 that the property was not required and directed the RP to hand possession back to the appellants. The National Company Law Tribunal (NCLT) accepted this decision and ordered delivery of possession. However, Chandrakant Khemka, the suspended director of the corporate debtor, appealed, and the National Company Law Appellate Tribunal (NCLAT) held that Section 14(1)(d) barred recovery of leased property during moratorium and remanded the matter.

The Hon’ble Supreme Court set aside the NCLAT’s order. It clarified that Section 14(1)(d) prevents coercive recovery by an owner or lessor but does not prohibit voluntary surrender where the CoC and RP, in their commercial wisdom, resolve that retention of the leased premises is unviable. The Court emphasised that the appellants already had ownership of the property, and the CIRP stakeholders themselves, UCO Bank as CoC and the RP, had decided that continued possession served no purpose and imposed a heavy financial burden. Relying on K. Sashidhar v. Indian Overseas Bank, [(2019) 12 SCC 150], dated February 5, 2019, the Court reaffirmed that the commercial wisdom of the CoC is paramount and non-justiciable. The suspended director’s opposition, without willingness to meet rental obligations, was found to be extraneous and obstructive.

This judgment reaffirms that Section 14(1)(d) of the IBC cannot be invoked to frustrate consensual decisions of the CoC and RP. It strengthens the principle that the CoC’s commercial wisdom governs CIRP and prevents misuse of the moratorium by suspended management to stall resolution.