Appellate Tribunal deems lock-in period debt as operational under I&B Code, orders admission of Section 9 Application
M/s SMARTWORKS COWORKING SPACES PRIVATE LIMITED Versus M/s TURBOT HQ INDIA PRIVATE LIMITED
M/s SMARTWORKS COWORKING SPACES PRIVATE LIMITED Versus M/s TURBOT HQ INDIA PRIVATE LIMITED - TMI
Issues Involved:1. Whether the amount claimed by the petitioner for the lock-in period amounts to operational debt.
2. Whether the agreement dated 17th August, 2018 is a compulsorily registerable instrument under the Registration Act 1908.
3. Whether the agreement dated 17th August, 2018 was originally engrossed on an unstamped paper.
Summary:Issue 1: Operational DebtThe Appellant, an Operational Creditor, challenged the rejection of their Section 9 Application under the I&B Code, 2016, which sought payment for a lock-in period under a 'Services Providers Agreement' with the Respondent-Corporate Debtor. The Adjudicating Authority initially held that the claimed amount was not operational debt. However, the Appellate Tribunal found that the debt for the lock-in period, arising from the breach of contract, qualifies as a claim under Section 3(6)(b) of the IBC and is thus an operational debt. The Tribunal referenced the larger bench judgment in Jaipur Trade Expocentre Pvt. Ltd. v. Metro Jet Airways Training Pvt. Ltd., which overruled the earlier judgment in M. Ravindranath Reddy v. G. Kishan & Ors., affirming that unpaid license fees are operational debts.
Issue 2: Compulsory RegistrationThe Adjudicating Authority had determined that the agreement required compulsory registration under Section 17(b) of the Registration Act, 1908. The Appellate Tribunal disagreed, noting that the agreement did not create any right, title, or interest in immovable or movable property for the Corporate Debtor. Consequently, the agreement was not subject to compulsory registration.
Issue 3: Unstamped PaperThe Adjudicating Authority had also found that the agreement was originally engrossed on an unstamped paper. The Appellate Tribunal observed that despite the lack of stamping, the agreement was executed, acted upon, and the Corporate Debtor had taken possession of the premises and paid the monthly office fee up to July 2019. Therefore, the unstamped nature of the agreement did not invalidate the claim of the Operational Creditor.
Conclusion:The Appellate Tribunal allowed the appeal, set aside the order dated 08th April, 2022, and directed the Adjudicating Authority to pass an order of admission of the Section 9 Application within one month, allowing the parties an opportunity to settle during this period.