GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION v. GUJARAT HYDROCARBONS AND POWER SEZ LIMITED & ORS.
The moratorium under section 14(1) of the Insolvency and Bankruptcy Code, 2016 bars a lessor from recovering property in the possession of the corporate debtor, and bars eviction proceedings before a statutory authority, whatever ground is stated for the lease termination; the Explanation added to section 14(1) was inserted by way of abundant caution to invalidate ipso facto terminations of government grants and cannot be read as an enabling provision permitting termination for other defaults; leasehold rights are 'property' under section 3(27); the word 'proceedings' in section 14(1)(a) is not limited to civil proceedings and covers proceedings under the Public Premises Act; and a statutory authority that has lodged its claim in the resolution process cannot claim a higher footing than other creditors.
By CA Nikhil Gupta · Reviewed against the retained judgment 2026-10-10
Gujarat Hydrocarbons and Power SEZ Ltd. held SEZ land on a 99-year lease from GIDC and went into insolvency, and GIDC terminated the lease and ordered eviction while the moratorium was in force. The Division Bench held that both orders were barred and upheld the Single Judge.
What happened
GIDC leased land to Gujarat Hydrocarbons and Power SEZ Ltd. on 21 February 2008 for 99 years at an annual rent of Rs. 3,768 for developing a Special Economic Zone. GIDC issued show cause notices on 19 March 2011, 20 December 2018 and 4 February 2019 for non-use of the land, breach of the utilisation clause and non-payment of rent. The NCLT, New Delhi admitted the company into the corporate insolvency resolution process on 18 November 2020 on the petition of a financial creditor and declared a moratorium. GIDC filed a claim of Rs.180,62,53,182 on 10 March 2021, and then on 13 December 2021 terminated the lease for persistent breaches and, on 10 March 2022, ordered eviction under the Gujarat Public Premises (Eviction of Unauthorised Occupants) Act, 1972. The resolution professional challenged both orders by Special Civil Application No. 4937 of 2022. The resolution plan, under which GIDC received Rs. 6,14,48,685, was approved by the NCLT, and GIDC's appeals against the approval were pending before the NCLAT. The Single Judge allowed the petition on 1 December 2025. GIDC argued that the termination was for breach of covenant, not insolvency, and that the Explanation to section 14(1) saved it; it relied on P. Mohanraj v. Shah Bros. Ispat Pvt. Ltd., Embassy Property Developments Pvt. Ltd. v. State of Karnataka, and Municipal Corporation of Greater Mumbai v. Abhilash Lal, and on Biotor Industries Ltd. v. GIDC. The corporate debtor and the successful resolution applicant relied on Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta and Ghanshyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd.
Questions before the court
- Could GIDC, as lessor, terminate a lease and evict the corporate debtor under the Public Premises Act, 1972 during the moratorium under section 14 of the IBC, on the ground of breach of the lease and non-payment of rent?
Why the court ruled this way
Section 14(1)(d) prohibits recovery by a lessor of property occupied by or in the possession of the corporate debtor, and leasehold rights are 'property' under section 3(27), so the lease was within the protection. The Court followed Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta in holding that the Explanation to section 14(1), added with effect from 28 December 2019 on the Insolvency Law Committee's report, was inserted by way of abundant caution to make explicit that government grants cannot be terminated on the ground of insolvency; it does not enable acts that would make section 14 nugatory (paragraphs 74 to 76). Relying on P. Mohanraj v. Shah Bros. Ispat Pvt. Ltd., 'proceedings' in section 14(1)(a) is not confined to civil proceedings and covers the proceedings of an Estate Officer under the Public Premises Act (paragraphs 52 to 59). The lease had no ipso facto clause, the lessee could change the use of the premises with the lessor's consent and create charges on it, and the termination order itself referred to the effect of the admission of the insolvency case on the asset, which showed that it was triggered by the insolvency (paragraphs 77 to 82 and 79). The right of re-entry under clause 15.1 required 90 days' notice, and both re-entry and eviction were frozen during the moratorium (paragraphs 83 to 87). Embassy Property Developments does not help GIDC, since the NCLT was not asked to adjudicate on an administrative order. The Court found no error in the Single Judge's findings.
Controlling point
Neither the termination of the lease for breach of covenant nor the eviction proceedings under the Gujarat Public Premises Act, 1972 were permissible during the moratorium, and the Single Judge rightly quashed them.
Order and next steps
The appeal was dismissed with no order as to costs; the pending civil application would not survive; the prayer for a stay of the judgment was rejected; and the Court made no comment on the merits of the approval of the resolution plan or GIDC's claim, which lie with the NCLAT.
Practical implications
A lessor, including a statutory land allotment body, must not terminate a lease of a company in the corporate insolvency resolution process or start eviction proceedings against it during the moratorium, and should pursue its dues by filing its claim in the resolution process.
Limits of this ruling
- The Court did not decide the merits of the resolution plan or GIDC's claim, which are before the NCLAT, and the position after the moratorium ceases on approval of the plan under section 14(4) was not decided; the ruling concerns a lease where the corporate debtor's leasehold rights are its principal asset.
Law and judgment source
- Insolvency and Bankruptcy Code, 2016, sections 3(27), 14, 25, 31 and 238
- Gujarat Public Premises (Eviction of Unauthorised Occupants) Act, 1972
- Constitution of India, articles 226 and 227
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Source checked: 2026-10-10 · Judgment paragraphs: paragraphs 1-92 · Later case history: not verified. Verify appeals, stays and subsequent orders before reliance.
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