Lease and licence dues are not financial debt, so a section 7 insolvency petition was not maintainable.

A lease and licence arrangement for use of premises against monthly licence did not amount to borrowing or any other transaction creating a financial debt under the Insolvency and Bankruptcy Code. Although the claim was supported by an arbitral award for unpaid licence fees and interest, the underlying relationship remained rental in nature and lacked the essential character of a financial debt. As a result, the applicant could not be treated as a financial creditor and could not invoke section 7 on that basis.

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Issues: Whether the applicant, founded on a lease and licence arrangement and an arbitral award for unpaid licence fees, could be treated as a financial creditor with a financial debt so as to maintain an application under section 7 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The transaction arose out of agreements granting the corporate debtor use of premises on payment of monthly licence fee. The claim was for unpaid licence charges and interest under an arbitral award. Such a rental or lease-based arrangement does not have the character of borrowing or any other transaction amounting to financial debt under the Code. The applicant therefore did not satisfy the statutory status of a financial creditor for invoking section 7.

Conclusion: The application under section 7 was not maintainable and was rejected against the applicant and in favour of the corporate debtor.

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