2024 (7) TMI 389 - AT - Insolvency and Bankruptcy

Corporate Debtor's appeal against insolvency proceedings dismissed as lease rent defaults constitute operational debt under Section 9

Vaibhav Aggarwal Versus Mr. Sunil Sachdeva, Haldiram Fincap Pvt. Ltd.

NCLAT Principal Bench dismissed an appeal challenging CIRP initiation under Section 9 of IBC. The Corporate Debtor defaulted on lease rent payments ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - rent to the Operational Creditor/Respondent No. 1 as per lease deed - operational debt - whether a default has been committed by the Corporate Debtor in respect of payment of such operational debt having already become due and payable and whether the said operational debt exceeds an amount of Rs. 1 lakh and is an undisputed debt? HELD THAT:- The Operational Creditor had been consistently pressing for release of their outstanding amount while there is nothing on record to show that the Corporate Debtor objected or controverted the claims raised by the Operational Creditor prior to the issue of Section 8 Demand Notice. Respondent No.1 agreed upon that in accordance with the judgement of this Tribunal in Jaipur Trade Expo Centre [2022 (7) TMI 241 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI], it is well settled that payment of license fee for use of leased premises for business purposes is clearly an operational debt. A conjoint reading of Sections 5(20) and 5(21) of IBC also clearly establishes that tenancy and lease rent dues fall in the category of operational debt as defined under Section 5(21) of IBC. It was the sole responsibility of the Lessee to pay the conversion charges. In view of the above, the contention of the Corporate Debtor that in their email of 18.01.2018 they had raised the omission committed on the part of the Operational Creditor does not stand to reason. There are no cogent reasons to disagree with the Adjudicating Authority that this email constitutes a feeble ground to establish a pre-existing dispute - prima facie it is an undisputed fact that the legal notice dated 22.10.2019 was served after the filing of the Section 9 application and therefore cannot qualify as a pre-existing dispute. This lends credence to the contention of the Operational Creditor that this legal notice was served as an after-thought with mala fide intention to raise a spurious defence to evade the liability to clear the outstanding rentals. Pre-existing dispute or not - HELD THAT:- Since the matter became a ‘Non-Starter’, the mediation application stood closed. In such circumstances, the claim made by the Corporate Debtor that the commercial civil suit was pending in the Tis Hazari Court lacks foundation. Furthermore, when HFPL on their own accord refused to participate in the mediation process, it cannot now embark on the argument that the mediation application signifies pre-existing dispute. Therefore, neither of the two commercial suits can be construed to be a pre-existing dispute. The Corporate Debtor has defaulted in the payment of operational debt above the prescribed threshold level which amount had clearly become due and payable, and further in the absence of any pre-existing dispute, it is found that no error has been committed by the Adjudicating Authority in admitting the application under Section 9 of IBC and initiating CIRP. The interim stay on the CIRP process granted by this Tribunal on 16.03.2023 stands vacated. There is no merit in the appeal - appeal dismissed. Issues Involved:1. Whether the payment of rent to the Operational Creditor constitutes an operational debt.2. Whether there was a default in the payment of such operational debt by the Corporate Debtor.3. Whether there existed a pre-existing dispute between the parties.Issue-wise Detailed Analysis:1. Whether the payment of rent to the Operational Creditor constitutes an operational debt:The Tribunal examined whether the rent payment as per the lease deed qualifies as an operational debt under the Insolvency and Bankruptcy Code, 2016 (IBC). The Respondent No. 1 argued that the payment of license fee for the use of leased premises for business purposes is an operational debt, as established in the Jaipur Trade Expo Centre Pvt Ltd Vs M/s Metro Jet Airways Training Pvt Ltd case. The Tribunal agreed, citing Sections 5(20) and 5(21) of IBC, which define operational debt to include tenancy and lease rent dues. The Tribunal also considered the registered wills dated 09.10.2013 and 24.08.2016, which supported Respondent No. 1's claim as the legitimate Operational Creditor.2. Whether there was a default in the payment of such operational debt by the Corporate Debtor:The Tribunal noted that Respondent No. 1 issued a notice for default of payment on 05.02.2019, which mentioned that the Corporate Debtor had been irregular in rent payments since 10.03.2017 and had not paid rent and GST since 30.08.2018. The total outstanding amount was Rs. 52.64 lakhs. The operational debt claimed in Part-IV was Rs. 94.66 lakhs, including arrears of rent, GST, interest, and user and occupation charges. The Tribunal found no evidence that the Corporate Debtor disputed these claims before the Section 8 Demand Notice was issued. Thus, the Tribunal concluded that the operational debt exceeded Rs. 1 lakh, was due and payable, and had not been paid.3. Whether there existed a pre-existing dispute between the parties:The Tribunal examined whether any genuine and real pre-existing dispute existed. The Corporate Debtor argued that the lease had been assigned to Haldiram Bhujiawala Inc (HBI) and that Respondent No. 1 had failed to provide necessary documentation for commercial conversion charges, leading to business losses. However, the Tribunal found that the lease deed clearly stated that the lessee (HFPL) was responsible for paying conversion charges. The Tribunal also noted that the email dated 18.01.2018 from the Corporate Debtor did not indicate a pre-existing dispute but merely mentioned issues with obtaining an MCD Health Licence. The Tribunal found no evidence of a pre-existing dispute in the legal notice dated 22.10.2019, which was served after the Section 9 application was filed. The Tribunal also dismissed the Corporate Debtor's claim of pre-existing disputes based on commercial suits filed after the Section 9 application, as these could not be considered pre-existing disputes.Conclusion:The Tribunal concluded that the Corporate Debtor defaulted in the payment of operational debt above the prescribed threshold, which had become due and payable. The Tribunal found no real pre-existing disputes and upheld the Adjudicating Authority's decision to admit the Section 9 application and initiate the Corporate Insolvency Resolution Process (CIRP). The appeal was dismissed, and the interim stay on the CIRP process was vacated. The Tribunal directed the Registry to refund the amount deposited by the Appellant and instructed the Interim Resolution Professional (IRP) to proceed with the CIRP as per law.