2021 (5) TMI 321 - Tri - Insolvency and Bankruptcy

Tribunal Admits Company Petition for Insolvency Process with Moratorium Orders

The Tribunal admitted the Company Petition, initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for defaulting on ... Operational debt - operational creditor - claim - default - admission under Section 9 of the Insolvency and Bankruptcy Code - initiation of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratoriumOperational debt - operational creditor - claim - Arrears of license fee / lease rent payable for use and occupation of premises constitute an 'operational debt' and the lessor/licensor qualifies as an 'operational creditor' under the Code. - HELD THAT: - The Tribunal examined the statutory definitions of 'claim', 'debt', 'default' and 'operational debt' as set out in the Code and concluded that consideration receivable for letting out premises by way of lease rent or license fee falls within the ambit of providing services and therefore constitutes an 'operational debt' under section 5(21). The Tribunal relied on earlier decisions of this Bench and the NCLAT to the like effect, including the decision in Anup Sushil Dubey vs National Agriculture Co-operative Marketing Federation of India Ltd. and the Bench's own reasoning in Indiabulls Real Estate Company Private Limited v. Crest Steel & Power Private Limited , to hold that subject lease rentals/arrears of rent are operational debts. On this basis, the creditors who rented out premises were held to be operational creditors for the purposes of proceedings under the Code. [Paras 8, 9, 10]Arrears of license fees for occupation of premises are 'operational debt' and the claimants are 'operational creditors' under the Code.Default - admission under Section 9 of the Insolvency and Bankruptcy Code - initiation of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratorium - The petition under Section 9 is maintainable and is admitted because debt and default have been established on the material on record; consequent initiation of CIRP, appointment of IRP and imposition of moratorium were ordered. - HELD THAT: - On the admitted facts and documentary record the Tribunal found that the corporate debtor had defaulted in payment of license fees and related liquidated damages claimed by the operational creditors; cheques issued were returned marked 'Funds Insufficient' and the demand notice was acknowledged without reply. The Tribunal held that the documents filed by the operational creditors sufficiently established the existence of a claim and a default exceeding the monetary threshold, thereby satisfying the statutory conditions for admission under Section 9. Accordingly the Company Petition was admitted, the Corporate Insolvency Resolution Process was ordered, Mr. S. Gopalkrishnan was appointed as Interim Resolution Professional as proposed in Form 2, and statutorily mandated consequences including moratorium and public announcement were directed to follow. [Paras 7, 11, 12]The Section 9 petition is admitted; CIRP is initiated, an Interim Resolution Professional is appointed and the moratorium and ancillary directions follow from admission.Final Conclusion: The Tribunal admitted the Company Petition under Section 9, holding that arrears of license fee/lease rent constitute operational debt and that default stood established on the material; consequently CIRP was initiated, an Interim Resolution Professional appointed and moratorium and other statutory directions were imposed. Issues:1. Initiation of Corporate Insolvency Resolution Process (CIRP) against Corporate Debtor based on default in payment of dues.2. Dispute regarding whether the claim amount constitutes operational debt under the Insolvency and Bankruptcy Code.3. Admissibility of the petition under Section 9 of the Code based on the nature of the debt and default.Issue 1: Initiation of CIRPThe Company Petition was filed by Operational Creditors seeking to initiate CIRP against the Corporate Debtor due to default in payment of dues. The Operational Creditors alleged that a significant sum was due against arrears of license fees and liquidated damages as per the agreement. The Corporate Debtor issued cheques to clear the outstanding fees, but they were returned due to insufficient funds. The Operational Creditors terminated the agreement and served a Demand Notice under Section 8 of the Code, which was acknowledged but not responded to within the stipulated period.Issue 2: Nature of Claim as Operational DebtThe Corporate Debtor disputed that the claim amount did not constitute operational debt as per the provisions of the Code. They argued that the petition was for the recovery of arrears of license fees and damages under the agreement. However, the Tribunal referred to relevant definitions in the Code and previous judgments to establish that rent/license fees fall under operational debt. Citing judgments, the Tribunal concluded that the contentions of the Corporate Debtor were incorrect, and the debt was an admitted liability.Issue 3: Admissibility of the PetitionAfter considering submissions and relevant definitions, the Tribunal found that all requisite conditions for admission of the petition under Section 9 were fulfilled. The debt amount exceeded the threshold, and the documents submitted by the Operational Creditors established the debt upon the Corporate Debtor. The Tribunal also noted that an Interim Resolution Professional was proposed, and the necessary conditions for admission were met. Consequently, the petition was admitted, and CIRP was ordered against the Corporate Debtor.In conclusion, the Tribunal admitted the Company Petition, initiated CIRP against the Corporate Debtor, and appointed an Interim Resolution Professional. Various orders were issued to ensure the smooth resolution process, including a moratorium period, prohibition on certain actions against the Corporate Debtor, and management vesting in the IRP/RP during the CIRP period. The public announcement of the process was also mandated, and necessary communications were directed to relevant authorities and parties involved.