The Supreme Court has dismissed Infrastructure Leasing and Financial Services Ltd. (IL&FS)'s appeal against HDFC Bank Ltd. under the Transfer of Property Act, 1882 (TPA). The court ruled that the rents owed by IL&FS tenants, lessees, and licensees are considered debts, and these debts have been transferred to HDFC, the creditor.

IL&FS appealed the NCLAT's decision, challenging the ruling. The core issue revolved around whether the documents in which IL&FS transferred rents to HDFC constituted an assignment and, consequently, fell outside the scope of the asset and security freeze order imposed by the NCLAT.

During the Course of hearing, the Court said that the NCLAT's conclusions were unexceptionable and as a result, the attempt to challenge their accuracy was unsuccessful.

IL&FS had initially sought financial support from HDFC, resulting in HDFC's approval of a ₹400 crore financial facility to the borrower. Subsequently, they entered into a "Master Facility Agreement" (MFA) for this ₹400 crore transaction. The MFA included provisions for the establishment of a separate escrow account, held with Housing Development Finance Corporation Bank Limited, to manage the funds. Simultaneously, an "Assignment Agreement" (AA) was also executed by both parties. Under the AA, it was agreed that IL&FS's authorized indebtedness as per the MFA, including the associated interest, would be paid from the gross income and revenue generated through the Business Centre Services Agreements, Lease, Leave and License Agreements, and other related sources.

The Court in its order said that it would be necessary to consider whether such amounts payable on a future date are to be considered property and, therefore, capable of transfer. Under the Transfer of Property Act, 1882, Section 5 states generally that all manner of property is capable of transfer. Section 6 lays out what are the kinds of properties or actions which are not transferable: these are “personal claims” in the nature of tortious claims and “choices in action” cannot be transferred.

Cause Title- Infrastructure Leasing and Financial Services Ltd. v. HDFC Bank Ltd. & Anr

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