2021 (6) TMI 113 - Tri - Insolvency and Bankruptcy

Tribunal Admits Insolvency Application, Declares Moratorium & Appoints IRP for Corporate Resolution Process

The Tribunal admitted the application under Section 9 of the Insolvency & Bankruptcy Code, 2016, declaring a moratorium and appointing an IRP to ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditor - arrears of lease rent - Operational debt or not - existence of debt and dispute or not - HELD THAT:- The corporate debtor has taken the premises on lease based upon the lease agreement executed between the corporate debtor and the operational creditor. The lease agreement provides for payment of lease rent for the use of premises and other services rendered by the operational creditor, hence, there cannot be a dispute that the corporate debtor is liable to pay the consideration for use of such facilities and, therefore, the lessor has got a claim to receive such payment as creditor irrespective of its classification as operational creditor or other creditor. Accordingly, we reject the contention that the outstanding sum is not a claim within the meaning of Sec. 3(6) of Insolvency & Bankruptcy Code, 2016. It is apparent that rental obligation are to be considered as operational debt and consequently claim of operational creditor. Secondly, observation in para 4.3.3 make it absolutely clear that raw material and other inputs cannot be sole criterion to define the scope of term 'services' - if a restricted meaning is given then the amount payable to consultancy, adviser etc. who play an important role in running of organisation will not be able to initiate CIRP and which cannot surely be an intention of legislature - the arrears of lease rent are operational debt. Accordingly, this contention of the corporate debtor is rejected. Thus, in this view of the matter, the provision of Regulation 32 of the Corporate Insolvency Resolution Process could not be pressed into service to interpret provision of Section 5(21) of the Code. Thus, considering the facts and circumstances of the case, applicable legal provisions and recent judicial precedents as well, we are of the view that there is no merit in any of the claims made by the Corporate Debtor - The application filed by the Operational Creditor is otherwise complete and defect free and this application also complies with all requirements of the Code and Regulations made thereunder. Application admitted - moratorium declared. Issues Involved:1. Whether the rent under Leave and License Agreements constitutes an 'Operational Debt' under Section 9 of the Insolvency & Bankruptcy Code, 2016.2. Whether there was a pre-existing dispute between the parties.3. Whether the claim was barred by limitation.4. Whether the application was complete and defect-free.Issue-Wise Detailed Analysis:1. Whether the rent under Leave and License Agreements constitutes an 'Operational Debt' under Section 9 of the Insolvency & Bankruptcy Code, 2016:The Operational Creditor argued that the rent due under the Leave and License Agreements should be considered as an operational debt. The Tribunal referred to various clauses in the agreements and the invoices raised for rent, which clearly mentioned the nature of the claim as license fee. The Tribunal noted that the Hon'ble NCLAT in recent decisions, such as Anup Sushil Dubey v. National Agriculture Co-operative Marketing Federation of India Ltd., held that lease rent falls within the definition of operational debt under Section 5(21) of the Insolvency & Bankruptcy Code, 2016. The Tribunal also cited the case of The Press Trust of India Ltd. (PTI) vs. Axiom Estates Advisory Services Pvt. Ltd., where it was held that arrears of lease rent are operational debt. Thus, the Tribunal concluded that the rent under the Leave and License Agreements constitutes an operational debt.2. Whether there was a pre-existing dispute between the parties:The Corporate Debtor claimed there was a pre-existing dispute, citing correspondences and a police complaint filed on 17.07.2018. However, the Tribunal found that the outstanding rent for Units 6A and 6B, as per invoices from February 2018 to June 2018, was undisputed and exceeded the threshold limit for initiating Corporate Insolvency Resolution Process (CIRP). Therefore, the Tribunal determined that the alleged disputes would not affect the resolution of the application.3. Whether the claim was barred by limitation:The Corporate Debtor argued that the claim was time-barred, asserting that the debt fell due on 31.03.2015 and the application was filed in September 2018. The Tribunal clarified that the debt fell due from 31.03.2015, not on 31.03.2015, and noted that invoices for various charges were raised in 2016-17 and 2017-18. Therefore, the Tribunal concluded that the claim was not barred by limitation.4. Whether the application was complete and defect-free:The Tribunal reviewed the application and found it to be complete and defect-free, complying with all requirements of the Insolvency & Bankruptcy Code, 2016, and the regulations made thereunder. The Tribunal also noted that the name of the Interim Resolution Professional (IRP) was not proposed, which is not mandatory for applications filed under Section 9.Conclusion:The Tribunal admitted the application under Section 9 of the Insolvency & Bankruptcy Code, 2016, and declared a moratorium prohibiting various actions against the Corporate Debtor. The Tribunal appointed an IRP to manage the Corporate Insolvency Resolution Process and directed the IRP to make a public announcement and call for submission of claims. The Tribunal also ordered the Operational Creditor to pay an advance of Rs. 1,00,000 to the IRP for the smooth conduct of the CIRP. The matter was listed for further consideration on 12.03.2021.