2017 (11) TMI 194 - Tri - Insolvency and Bankruptcy

Lease of property not 'Operational Debt' under IBC; Applicants not 'Operational Creditors'

Mrs Parmod Yadav, W/o Sh. Ram Chander Yadav, Mrs. Sneha Yadav, W/o Sh. Siddharth Yadav Versus Divine Infracon Pvt. Ltd.

Mrs Parmod Yadav, W/o Sh. Ram Chander Yadav, Mrs. Sneha Yadav, W/o Sh. Siddharth Yadav Versus Divine Infracon Pvt. Ltd. - TMI Issues Involved:1. Whether the lease agreement falls within the definition of 'Operational Debt' under Section 5(21) of IBC, 2016.2. Whether the Applicants can be categorized as 'Operational Creditors.'3. Whether the claim for damages due to wrongful termination of the lease agreement can be considered a debt under IBC, 2016.4. Whether the existence of an arbitration clause and prior arbitration proceedings affect the maintainability of the Petition.Detailed Analysis:1. Definition of 'Operational Debt':The Tribunal examined whether the transaction of leasing immovable property falls under 'Operational Debt' as defined in Section 5(21) of IBC, 2016. The Tribunal referred to various sections of IBC to understand the definitions of 'default,' 'debt,' and 'claim.' It concluded that 'Operational Debt' must relate to the provision of goods or services, including employment or dues to the government. The Tribunal emphasized that the term 'goods or services' should have a direct input-output relationship with the operations of the Corporate Debtor. Since the lease of immovable property does not fit this criterion, it cannot be considered an 'Operational Debt.'2. Categorization as 'Operational Creditor':The Tribunal analyzed whether the Applicants could be categorized as 'Operational Creditors' under Section 5(20) of IBC, 2016. It concluded that since the lease agreement does not qualify as 'Operational Debt,' the Applicants cannot be categorized as 'Operational Creditors.' The Tribunal noted that only claims directly related to the provision of goods or services or employment dues could qualify as 'Operational Debt,' and thus, the Applicants' claim does not meet this requirement.3. Claim for Damages:The Tribunal addressed the Applicants' claim for damages due to the wrongful termination of the lease agreement. It referred to the definition of 'debt' under Section 3(11) of IBC, 2016, and concluded that a claim for damages is not a 'debt' until adjudicated by a competent court or arbitrator. The Tribunal cited the Karnataka High Court's decision in Greenhills Exports (Private) Limited vs. Coffee Board, Bangalore, which clarified that damages become a debt only when a court awards them. Therefore, the Applicants' claim for future rents and damages does not constitute a debt under IBC, 2016.4. Arbitration Clause and Prior Proceedings:The Tribunal considered the existence of an arbitration clause in the Hotelier-Buyer Agreement and the prior arbitration proceedings initiated by the Corporate Debtor. The Tribunal noted that the Corporate Debtor had invoked the arbitration clause before the Applicants sent a notice of default. It emphasized that the existence of a genuine dispute, as indicated by the arbitration proceedings, affects the maintainability of the Petition. The Tribunal referred to the Supreme Court's judgment in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited, which stated that if a plausible dispute exists, the application for initiating CIRP should be rejected.Conclusion:The Tribunal concluded that the lease of immovable property does not fall within the definition of 'Operational Debt,' and thus, the Applicants cannot be categorized as 'Operational Creditors.' Additionally, the claim for damages due to wrongful termination of the lease agreement is not a debt under IBC, 2016, until adjudicated by a competent court or arbitrator. The existence of prior arbitration proceedings also indicates a genuine dispute, making the Petition non-maintainable. Consequently, the Petition was dismissed without costs.