2022 (5) TMI 434 - AT - Insolvency and Bankruptcy

Tribunal rules in favor of Appellant on CIRP costs and possession dispute

Mack Star Marketing Pvt. Ltd. Versus Ashish Chawchharia Resolution Professional of Jet Airways (India) Pvt. Ltd.,

The Tribunal ruled in favor of the Appellant, holding that the monthly fees payable under the Service Agreements during the CIRP period should be treated ... Termination of Leave and License Agreement - refund of security deposit to the Respondent after deducting the license fee payable - HELD THAT:- It is clearly stipulated that if the amount is not paid within 30 days, the Appellant will have the right to terminate the Leave and License Agreement. Thus, the Appellant by the notice reserved their right to terminate the Leave and License Agreement and by the said Notice has not expressly terminated the Leave and License Agreement. Further Notice dated 28.11.2019, by which the Respondent was asked to vacate the premises by 31.12.2019 can also not be said to be the notice terminating the License Agreement. Learned Counsel for the Respondent has relied on Clause 19.5 to submits that since Notice dated 30.04.2019 gave a cure period of 30 days to the Respondent to deposit the payment which having not been done, there shall be automatic termination of Leave and License Agreement. In the present case, from the facts and materials on record, it is clear that at no point of time, the Respondent handed over possession of the premises to the Appellant or asked the Appellant to take possession of the premises - Admittedly, the monthly rent of the premises is Rs.28 Lakhs and odd. No amount has been paid towards the license fee after March, 2019 on the ground that security amount of Rs.82 lakhs and odd is payable by the Appellant. The Respondent is continuing in the premises occupying the same for last more than three years whereas the security lying with the Appellant at best is avail to cover the license fee for about three months only. The Respondent has no right or entitlement to continue in the premises on the ground that security deposit has not yet been refunded without giving any opportunity to the licensor to determine whether as to any security is refundable or not. When we read Clauses 21.1, 21.2 and 21.3 conjointly, it is clear that the licensee is under obligation to handover the possession within 30 days of the date of termination and licensor has time of 30 days thereafter to refund the security deposit. When the licensee has not handed over possession, there is no occasion to determine whether any amount is to be given back to the licensee or not. Present is a case where the Resolution Professional has continued in the possession of the premises and exposed the Corporate Debtor for liabilities to pay license fees during the CIRP period which could be CIRP costs. The mere fact that CIRP has triggered and Moratorium has been imposed does not absolved the Corporate Debtor to pay for premises and facilities which is being enjoyed by the Corporate Debtor during the CIRP period. Sufficient ground has been made out by the Appellant in this Application to treat the license fees of the premises to be treated as CIRP costs - the Resolution Plan with regard to Corporate Debtor has been approved by the Adjudicating Authority by order dated 22.06.2021. By approval of the Resolution Plan, the CIRP period has come to an end and after 21.06.2021 still the premises are in occupation of the monitoring professional. No direction in this Appeal can be given for payment of leave and license fees to the Appellant during the CIRP period even though we are satisfied that the Appellant was entitled for determination that monthly fees payable to the Appellant under the Service Agreement should have been treated as part of the CIRP costs - the impugned order dated 18.03.2021 is set aside. It is held that no monthly fees shall be payable to the Appellant during the CIRP period - Respondent is directed to handover the vacant possession of the premises within 15 days from today - appeal disposed off. Issues Involved:1. Whether the monthly fees payable to the Appellant under the Service Agreements during the CIRP period should be treated as part of the CIRP costs.2. Whether the Leave and License Agreement was terminated by the Notice dated 30.04.2019.3. Whether the Respondent is entitled to retain possession of the licensed premises until the security deposit is refunded.4. Whether the Appellant is entitled to any payment with respect to license fees after 31.05.2019.Issue-wise Detailed Analysis:1. Treatment of Monthly Fees as CIRP Costs:The Appellant contended that the Adjudicating Authority erred in rejecting the application to treat the license fee obligation of the Corporate Debtor during the CIRP period as CIRP costs. The Corporate Debtor was in use and occupation of the premises and never offered to handover the possession. The Appellant argued that the Corporate Debtor, being in possession of the premises, was liable to pay monthly license fees as CIRP costs. The Tribunal agreed that the occupation of the premises by the Corporate Debtor during the CIRP period should be treated as CIRP costs, as the Corporate Debtor continued to enjoy the premises and facilities.2. Termination of Leave and License Agreement by Notice Dated 30.04.2019:The Appellant argued that the Notice dated 30.04.2019 did not terminate the Leave and License Agreement but reserved the right to terminate it. The Tribunal noted that the Notice gave a cure period of 30 days and stated that the Appellant would have the right to terminate the Agreement if the amount was not paid within 30 days. The Tribunal concluded that the Notice did not expressly terminate the Agreement. The Tribunal also noted that the Respondent's initial claim was that the Corporate Debtor had terminated the Agreement, but later claimed that the Appellant had terminated it. The Tribunal found that the Agreement was not automatically terminated by the Notice dated 30.04.2019.3. Entitlement to Retain Possession Until Security Deposit is Refunded:The Respondent argued that under Clause 21.3 of the Agreement, they were entitled to retain possession of the licensed premises until the security deposit was refunded. The Tribunal examined Clauses 21.1, 21.2, and 21.3 of the Agreement and concluded that these clauses must be read conjointly. The Tribunal found that the initial burden of handing over vacant possession within 30 days of termination was on the licensee, and the licensor had 60 days thereafter to refund the security deposit. The Tribunal held that the Respondent had no right to continue in the premises on the ground that the security deposit had not been refunded without giving the licensor an opportunity to determine whether any security was refundable.4. Entitlement to Payment of License Fees After 31.05.2019:The Adjudicating Authority had held that the Appellant was not entitled to any payment with respect to license fees after 31.05.2019. The Tribunal disagreed, noting that the Respondent continued to occupy the premises and the Appellant was deprived of the use of the premises for a long period without any justifiable reason. The Tribunal found that the Respondent's interpretation of Clause 21.3 was erroneous and that the Appellant was entitled to claim license fees for the period of occupation. However, the Tribunal noted that the Resolution Plan approved by the Adjudicating Authority did not contemplate any payment to the Appellant for the leave and license fees of the premises.Conclusion:The Tribunal set aside the impugned order dated 18.03.2021 and directed the Respondent to hand over vacant possession of the premises within 15 days. The Tribunal also held that no monthly fees shall be payable to the Appellant during the CIRP period and that the Appellant is at liberty to take appropriate steps for its claim of license fees subsequent to 22.06.2021 (end of the CIRP period). The Appellant was directed to communicate within 30 days to the Respondent regarding the refund of the security deposit, if any, after possession of the premises is handed over. The parties were directed to bear their own costs.