Lease rent is not operational debt, and a genuine pre-existing rent dispute bars Section 9 insolvency proceedings.

Lease rent for immovable property is not, by itself, an operational debt under the Insolvency and Bankruptcy Code because it does not arise from goods or services within Section 5(21). The landlord was therefore not treated as an operational creditor for a Section 9 insolvency petition. The record also showed a genuine pre-existing dispute on rent enhancement before the demand notice, supported by prior correspondence and a notice to vacate. Applying the Mobilox standard, that dispute was neither spurious nor illusory, so the Section 9 petition was not maintainable and the admission order could not stand.

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Issues: (i) Whether a landlord claiming unpaid enhanced lease rent is an operational creditor and the rent claim is an operational debt under the Insolvency and Bankruptcy Code, 2016; (ii) Whether the petition under Section 9 was barred by a pre-existing dispute regarding enhancement of rent and the alleged moratorium on rent escalation.

Issue (i): Whether a landlord claiming unpaid enhanced lease rent is an operational creditor and the rent claim is an operational debt under the Insolvency and Bankruptcy Code, 2016.

Analysis: The definition of operational debt covers claims arising from provision of goods or services, including employment, or dues payable under law to the Government or a local authority. Lease rent for immovable property does not fall within those categories. The Code does not specifically include rent dues within operational debt, and the fact that lease of land or premises may be treated as a supply of service under GST law does not control the meaning of operational debt under the insolvency framework. The claim was therefore one for recovery of rent under the lease and not a claim in respect of goods or services within Section 5(21).

Conclusion: The landlord was not an operational creditor for the purpose of Section 9, and the rent claim was not an operational debt.

Issue (ii): Whether the petition under Section 9 was barred by a pre-existing dispute regarding enhancement of rent and the alleged moratorium on rent escalation.

Analysis: The record showed that before issuance of the demand notice, there had already been correspondence and a notice to vacate under Section 106 of the Transfer of Property Act, 1882, and the corporate debtor had asserted an understanding that rent would not be enhanced for six years. That dispute on rent enhancement required evidence and further investigation. Under the Mobilox test, the adjudicating authority at the admission stage must reject a Section 9 application if there is a plausible and real dispute that is not spurious or illusory. The dispute here was not merely a feeble defence.

Conclusion: There was a pre-existing dispute, so the Section 9 petition was not maintainable.

Final Conclusion: The admission order was unsustainable, the insolvency proceedings could not continue on the basis of the rent claim, and the corporate debtor was entitled to relief.

Ratio Decidendi: A claim for lease rent of immovable property is not, by itself, an operational debt under Section 5(21) of the Insolvency and Bankruptcy Code, 2016, and where a genuine dispute on rent enhancement exists before the demand notice, a Section 9 petition must be rejected.

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