2022 (6) TMI 920 - Tri - Insolvency and Bankruptcy

Petition to Initiate Insolvency Process Dismissed for Rent Non-Payment

The Company Petition seeking to initiate Corporate Insolvency Resolution Process against the Corporate Debtor was dismissed by the Tribunal. The Tribunal ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - pendency of suit before the Small Cause Court with respect to the same claim - HELD THAT:- The Operational Creditor had given the premises on lease to the Corporate Debtor vide Leave and License Agreement dated 20.06.2014 for period of 55 months starting from 01.07.2014 to 30.12.2018. The lease was terminated by the Operational Creditor vide its E-mail dated 19.09.2018. The Operational Creditor raised Invoices dated 16.11.2018 and dated 08.01.2019 - The Corporate Debtor contended that there is no Operational Debt as the dues are arising out of non-payment of lease rent. The Operational Creditor stated that the Operational Creditor raised invoice for the use of additional car parking space even after the termination of the Leave and License Agreement. This Bench is of view that the provision for use of additional space by the Corporate Debtor was not incorporated in the Leave and License Agreement and hence the Operational Creditor cannot raise invoice against the Corporate Debtor for the use of additional space without the consent of the Corporate Debtor. Further, it was observed by this Bench that the L.D. Suit is pending before the Small Cause Court with respect to the same claim. The Corporate Debtor has filed Suit for Permanent Injunction and raised issues with respect to claim prior to issue of Demand Notice by the Operational Creditor. The Corporate Debtor has replied to the said Demand Notice denying and disputing the claims of the Operational Creditor. Hence, this Bench is of the view that the claim of the Operational Creditor cannot be admitted being there is pre-existing dispute between the Corporate Debtor and the Operational Creditor. Petition dismissed. Issues Involved:1. Whether the non-payment of rent arising out of a Leave and License Agreement constitutes an Operational Debt under Section 5(21) of the Insolvency and Bankruptcy Code (IBC).2. Whether there exists a pre-existing dispute between the Operational Creditor and the Corporate Debtor.3. Whether the claim of the Operational Creditor can be admitted under the IBC.Issue-wise Detailed Analysis:1. Non-payment of Rent as Operational Debt:The primary issue was whether the non-payment of rent under a Leave and License Agreement qualifies as an Operational Debt under Section 5(21) of the IBC. The Tribunal referred to multiple judgments, including M. Ravindranath Reddy V. G. Kishan, Aurora Accessories Pvt. Ltd. V. Ace Acoustics & Audio Video Solutions Pvt. Ltd., and Promilla Taneja V. Surendri Design Pvt. Ltd., which held that debts arising from lease rentals do not fall within the ambit of 'Operational Debt' as defined under Section 5(21) of the Code. The Tribunal concluded that the debt arising out of rent and lease cannot be considered as Operational Debt under the IBC.2. Pre-existing Dispute:The Tribunal noted that the Corporate Debtor had filed a suit for Permanent Injunction in the Small Causes Court, challenging the claims of the Operational Creditor before the issuance of the Demand Notice. The Corporate Debtor had also replied to the Demand Notice, denying and disputing the claims. The Tribunal observed that the existence of a pre-existing dispute between the parties was evident, which is a crucial factor in determining the maintainability of the petition under Section 9 of the IBC.3. Admissibility of the Claim:Given the findings on the first two issues, the Tribunal held that the claim of the Operational Creditor could not be admitted. The Tribunal emphasized that the provision for the use of additional space by the Corporate Debtor was not incorporated in the Leave and License Agreement, and thus, the Operational Creditor could not raise invoices for the use of additional space without the Corporate Debtor's consent. Furthermore, the Tribunal noted that the L.D. Suit was pending before the Small Causes Court, and the issues raised therein were directly related to the claims made in the present petition.Conclusion:The Company Petition filed under Section 9 of the IBC by the Operational Creditor seeking to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor was dismissed. The Tribunal made it clear that the observations in the order should not prejudice the rights of the Operational Creditor in any other judicial forum.