License fees for commercial premises constitute 'Operational Debt' under Insolvency and Bankruptcy Code

The larger Bench found that the judgment in Company Appeal (AT) (Ins.) No.331 of 2019 did not lay down the correct law regarding the definition of 'Operational Debt' under the Insolvency and Bankruptcy Code. It held that the claim for payment of license fees for the use of commercial premises constitutes 'Operational Debt' under Section 5(21) of the IBC. The Bench directed the Adjudicating Authority to admit the Application under Section 9 of the IBC, allowing the Operational Creditor to proceed with the insolvency process.

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Issues Involved:
1. Whether the Judgment in Company Appeal (AT) (Ins.) No.331 of 2019 lays down the correct law.
2. Whether the claim of the Licensor for payment of License Fee for use and occupation of immovable premises for commercial purposes is a claim of 'Operational Debt' within the meaning of Section 5(21) of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

Issue 1: Correctness of the Judgment in Company Appeal (AT) (Ins.) No.331 of 2019
The larger Bench was constituted to consider the correctness of the judgment in Company Appeal (AT) (Ins.) No.331 of 2019, specifically in the case of Mr. M. Ravindranath Reddy vs. Mr. G. Kishan & Ors. This judgment held that the claim for enhanced lease rent does not fall within the definition of 'Operational Debt' under Section 5(21) of the Insolvency and Bankruptcy Code (IBC), 2016. The Tribunal in this case relied on Section 14(2) of the IBC, which deals with essential goods and services, and concluded that there must be a direct nexus to the output produced or supplied by the corporate debtor for a debt to be considered operational.

The larger Bench found that this interpretation was too narrow and not supported by the scheme of the IBC. The Bench emphasized that 'Operational Debt' as defined in Section 5(21) has a much wider meaning than just essential goods and services. The Tribunal concluded that the judgment in Mr. M. Ravindranath Reddy's case does not lay down the correct law.

Issue 2: License Fee as 'Operational Debt'
The second issue was whether the claim for payment of license fees for the use of immovable premises for commercial purposes constitutes 'Operational Debt' under Section 5(21) of the IBC. The Appellant argued that the license fee for the use of premises, which included fittings, fixtures, and other services, should be considered as 'Operational Debt'. The Respondent contended that such claims are purely civil matters and do not fall within the ambit of 'Operational Debt'.

The larger Bench examined the definitions and provisions under the IBC, including Section 5(20) and (21), and Section 3(33) and (37). The Bench also referred to the Bankruptcy Law Reforms Committee's report, which differentiates between financial creditors and operational creditors. The report suggests that lessors of commercial premises are operational creditors.

The Bench noted that the Agreement between the parties included provisions for the payment of GST, which is applicable only to goods and services. This indicated that the license fee was indeed for services rendered. The Tribunal also referred to various judgments, including Mobilox Innovations (P) Ltd. vs. Kirusa Software (P) Ltd., which supported the broader interpretation of 'Operational Debt'.

The Bench concluded that the license fee for the use of commercial premises falls within the definition of 'Operational Debt' under Section 5(21) of the IBC. The Tribunal directed the Adjudicating Authority to admit the Application under Section 9 of the IBC, allowing the Operational Creditor to proceed with the insolvency process.

Conclusion
1. The judgment in Company Appeal (AT) (Ins.) No.331 of 2019 does not lay down the correct law.
2. The claim of the Licensor for payment of license fees for the use of commercial premises is an 'Operational Debt' within the meaning of Section 5(21) of the IBC, 2016.

The larger Bench allowed the appeal, set aside the impugned judgment, and directed the Adjudicating Authority to admit the Application under Section 9 of the IBC within one month, providing an opportunity for settlement if any.

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