In Municipal Corporation of Greater Mumbai v. Abhilash Lal & Ors.[1], the Supreme Court (‘SC’) was considering the challenge of the Municipal Corporation of Greater Mumbai (‘MCGM’) to a resolution plan approved for Sevenhills Healthcare Private Limited (‘Corporate Debtor’). The resolution plan contained proposals which envisioned the creation of security over MCGM’s properties, which had been leased to the Corporate Debtor.

SC held, inter alia, that in the absence of approval being taken in terms of sections 92 and 92A of the Mumbai Municipal Corporation Act, 1888 (which prescribes the method for dealing with MCGM’s properties through lease or by way of creation of any other interest), the objections by MCGM could not have been overridden to enable the creation of a fresh interest in respect of MCGM’s properties and lands. SC concluded that Section 238 of the IBC (as per which the provisions of the IBC override other laws in effect or instruments having effect by virtue of any such law) cannot be read to override MCGM’s right and public duty to control and regulate how its properties are dealt with and that Section 238 could be of relevance when the properties and assets are of a debtor, and not a third party such as MCGM is involved.

[1] 2019 SCC OnLine SC 1479