Application for Corporate Insolvency Rejected: Unpaid License Fees Not Operational Debt

The Tribunal dismissed the application seeking Corporate Insolvency Resolution Process against the Respondent for non-payment of license fees, ruling that the unpaid fees did not qualify as operational debt under the Insolvency and Bankruptcy Code. The Tribunal emphasized that the fees did not fall within the defined categories of operational debt, such as goods or services, employment, or dues payable to governmental authorities. The application was dismissed without costs, with the order not prejudicing any other proceedings between the parties in other judicial forums.

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Issues Involved:
1. Whether the unpaid License Fee arising out of a License Agreement with regard to immovable property falls under the definition of Operational Debt as defined under the Insolvency and Bankruptcy Code, 2016Rs.

Issue-wise Detailed Analysis:

1. Definition of Operational Debt:
The primary issue revolves around the classification of unpaid license fees as "Operational Debt" under the Insolvency and Bankruptcy Code (IBC), 2016. The Applicant, a Private Limited Company, sought to initiate Corporate Insolvency Resolution Process (CIRP) against the Respondent for non-payment of license fees. The Applicant argued that the license fee qualifies as an operational debt because it constitutes a supply of service as per Section 2(a) & 2(b) of the Central Goods and Services Tax, 2017. The Applicant cited the Supreme Court judgment in Mobilox Innovations Pvt. Ltd. v. Kirusa Software (P) Ltd., which recognized lessors as operational creditors.

2. Respondent's Objection:
The Respondent contended that the Applicant is not an operational creditor as defined under IBC, 2016. The Respondent argued that the claim is based on license fees, not goods or services, and thus does not fall within the definition of "Operational Debt" under Section 5(21) of the IBC. The Respondent also highlighted that there was a pre-existing dispute, evidenced by a legal notice and a pending injunction suit.

3. Pre-Existence of Dispute:
The Respondent emphasized that the cheques issued were meant as a security deposit and were contingent on the Applicant fulfilling certain obligations, which were allegedly not met. The Respondent also pointed out that an injunction order was issued by the Additional Civil Court, Jaipur, prohibiting the Applicant from evicting the Respondent or obstructing the use of the premises.

4. Applicant's Rejoinder:
The Applicant refuted the Respondent's claims, asserting that the legal notice was never served and that the civil proceeding had no bearing on the present application. The Applicant maintained that the license fee constitutes an operational debt and relied on Supreme Court judgments to support their position.

5. Tribunal's Analysis:
The Tribunal examined the definitions under the IBC, including "claim," "debt," and "operational debt." It referred to previous judgments, including Mrs. Pramod Yadav v. Divine Infracon Private Limited and Jindal Steel and Power Limited v. DCM International Limited, which clarified that claims arising from immovable property transactions do not fall under the definition of operational debt unless directly related to the input-output operations of the corporate debtor.

6. Conclusion:
The Tribunal concluded that the claim arising from the license agreement does not qualify as an operational debt under Section 5(21) of the IBC, 2016. The unpaid license fee does not fall within the categories of goods or services, employment, or dues payable to governmental authorities. Consequently, the application was dismissed without costs, and the Tribunal clarified that the order would not prejudice any other proceedings between the parties in other judicial forums.

Final Order:
The Application bearing IB No. 176/9/JPR/2019 was dismissed without costs. The order was made in terms of Section 9(5)(ii) of IBC, 2016, based on the facts and pleadings submitted by the parties, and shall not prejudice any other proceedings between the parties in other courts or tribunals.

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