The NCLAT has upheld the eviction of occupants, ruling that unregistered profit-sharing agreements do not create tenancy rights over the assets of a corporate debtor during the Corporate Insolvency Resolution Process (CIRP).
NCLAT on Profit-Sharing Agreements
The National Company Law Appellate Tribunal (NCLAT) has ruled that unregistered profit-sharing agreements do not confer occupancy rights on individuals during the Corporate Insolvency Resolution Process (CIRP). This decision underscores the importance of formal tenancy agreements in securing rights over corporate assets.
The tribunal found that such profit-sharing arrangements lacked the characteristics of tenancy as per existing legal frameworks, thus denying any claims for occupancy based on these agreements. The ruling clarifies that in insolvency proceedings, only legally recognized tenancies can survive.
This decision serves as a significant cautionary note for individuals and entities engaged in informal profit-sharing arrangements. Legal practitioners must advise clients on the necessity of formalized agreements to avoid disputes during insolvency proceedings.
Citations
- NCLAT (2026) NCLAT 2
