2020 (9) TMI 747 - Tri - Insolvency and Bankruptcy

NCLT Mumbai Bench rejects Company Petition under IBC for non-payment of licensing fees

The Mumbai Bench of the NCLT rejected a Company Petition under section 9 of the IBC seeking to initiate CIRP against a Corporate Debtor for non-payment of ... Corporate insolvency resolution process under section 9 of the IBC - operational debt within the meaning of section 5(21) of the IBC - operational creditor as assignee of copyright - demand notice under section 8 of the IBC - jural relationship for operational debtOperational debt within the meaning of section 5(21) of the IBC - operational creditor as assignee of copyright - jural relationship for operational debt - Whether the petitioner is an operational creditor and the claim constitutes an operational debt permitting initiation of CIRP under section 9 of the IBC. - HELD THAT: - The Tribunal applied the tests articulated by the NCLAT to determine whether a claim qualifies as an operational debt: the amount must be a 'claim' under section 3(6), a 'debt' under section 3(11), and must fall within the scope of 'operational debt' as defined in section 5(21). The petitioner asserted rights as an assignee/authorised agent of copyright holders and raised an invoice for a licence to permit public performance at an event. The Tribunal found that the existence of a jural relationship between the parties in respect of provision of goods or services was not established. The claim arose from a licence/purchase of public performance rights based on copyright assignment rather than from the provision of goods or services or dues under law payable to government authorities; accordingly it did not satisfy the statutory definition of 'operational debt'. Having concluded that the petitioner cannot be treated as an operational creditor, the petition under section 9 could not be maintained. The Tribunal clarified that these observations do not express any opinion on the underlying merits of the licensing claim and that the petitioner's remedies before other forums remain unimpaired. [Paras 9, 10, 11, 12, 13]The petition is not maintainable as the petitioner is not an operational creditor and the claim does not constitute an operational debt; the petition is rejected.Final Conclusion: The Company Petition under section 9 of the IBC is rejected on the ground that the claim for payment in respect of a licence/public performance right does not qualify as an operational debt and the petitioner is not an operational creditor; no opinion is expressed on merits and the petitioner's rights before other forums remain open. Issues:Company Petition under section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) seeking to initiate Corporate Insolvency Resolution Process (CIRP) against a Corporate Debtor for non-payment of dues.Detailed Analysis:1. Jurisdiction and Background:The Company Petition was filed by an Operational Creditor against a Corporate Debtor under section 9 of the IBC. The Corporate Debtor failed to make payment of a principal sum and interest, leading to the initiation of the CIRP. The Corporate Debtor is a private company incorporated under the Companies Act, 2013, with jurisdiction falling under the Mumbai Bench of the National Company Law Tribunal.2. Operational Creditor's Claims:The Operational Creditor, an assignee of copyrights over sound recordings, entered into agreements with various entities for rights over songs. The Corporate Debtor, an event management company, approached the Operational Creditor for performance rights for an event. Despite issuing an invoice and receiving a bounced cheque, the Corporate Debtor failed to make the payment, resulting in a total debt of Rs. 3,23,474.00.3. Legal Definitions and Precedents:The judgment references the definitions of 'Operational Debt' and 'Operational Creditor' under the IBC. It cites a precedent where the classification of an amount as operational debt is outlined, emphasizing the criteria for a claim to be considered as such. The judgment clarifies that for a claim to be categorized as operational debt, it must strictly align with the definitions provided in the IBC.4. Decision and Rationale:The Tribunal found that in this case, the jural relationship between the Operational Creditor and the Corporate Debtor was not established. The claim did not pertain to the provision of goods or services but rather to licensing rights for public performance and broadcast of songs. As this did not meet the criteria of 'Operational Debt' as defined under the IBC, the Operational Creditor could not be considered as such. Consequently, the petition under section 9 of the IBC was rejected.5. Final Orders and Observations:The Tribunal clarified that the rejection of the petition should not prejudice the Operational Creditor's rights before any other judicial forum. The order was communicated to the parties as per the provisions of the IBC. The judgment emphasized that the dismissal of the petition did not reflect any opinion on the merits of the case, preserving the Operational Creditor's recourse to other legal avenues.