AI Drafter 
TaxTMI 
TaxTMI 
2017 (10) TMI 1066
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....ules, 2016 which has been duly delivered to the 'Corporate Debtor' demanding the payment of the 'operational debt'. Brief facts of the case necessary for disposal of the controversy raised in this application is that the applicant-operational creditor and the respondent-corporate debtor had entered into a Leave and License Agreement dated 11.04.2014 leasing the constructed area situated at CS No. 360 of Vile Parle Division, Old Military Road, Marol, Andheri East, Mumbai-400059. The lease was for a period of two years and was to expire on 10.04.2016. The case of the applicant is that in case of overstay beyond the period of two years, clause 17.5.6 of the Leave and License Agreement has specifically provided for payment of double the amount of license fee/rent payable by the Corporate Debtor to the Operational Creditor. It has also been pointed out that by virtue of clause 21.1 of the Leave and License Agreement the Corporate Debtor was obliged to vacate and hand over vacant possession of the licensed premises on the expiration of the license by efflux of time. There is stipulation in clause 34.3 that no modification, amendment or waiver of any of the provisions of this agreement....
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.... second, third and fourth floor of the said premises on 11.04.2016. A request in terms thereof was sent to the applicant to take possession as the requirement for space has come down drastically. It required only two floors i.e. ground floor and first floor w.e.f. 12.04.2016. After various emails the applicant refused to accord its approval to the proposal sent by email dated 07.04.2016 along with draft agreement and the applicant vide letter dated 01.06,2016 called upon the Corporate Debtor to vacate the entire premises and hand over its possession. The respondent also sought penal rent as per the stipulation under section 24 of the Maharashtra Rent Control Act, 1999. The offer of the Corporate Debtor for amicable settlement were not accepted and it is claimed that basement, second, third and fourth floor of the premises had already been vacated on 11.04.2016 and only ground floor and first floor were retained. The Corporate Debtor has also disputed the status of the applicant and has claimed that it is not an Operational Creditor and the amount due cannot be considered as operational debt. Objection have also been taken to the legality of demand notice dated 03.04.2017 allegin....
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.... dispute" alone is mentioned. Even otherwise, the word "and" occurring in Section 8(2)(a) must be read as "or" keeping in mind the legislative intent and the fact that an anomalous situation would arise if it is not read as "or". If read as "and", disputes would only stave off the bankruptcy process if they are already pending in a suit or arbitration proceedings and not otherwise. This would lead to great hardship; in that a dispute may arise a few days before triggering of the insolvency process, in which case, though a dispute may exist, there is no time to approach either an arbitral tribunal or a court. Further, given the fact that long limitation periods are allowed, where disputes may arise and do not reach an arbitral tribunal or a court for upto three years, such persons would be outside the purview of Section 8(2) leading to bankruptcy proceedings commencing against them. Such an anomaly cannot possibly have been intended by the legislature nor has it so been intended. We have also seen that one of the objects of the Code qua operational debts is to ensure that the amount of such debts, which is usually smaller than that of financial debts, does not enable operational cre....
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....e the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application." (emphasis added) A perusal of the aforesaid para shows that Adjudicating Authority-NCLT must reject the application under Section 9 (5) (2) (d) of the Code if notice of dispute has been received by the Operational Creditor or there is a record of dispute in the information utility. Such notice must bring to the attention of the Operational Creditor the 'existence' of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. The Adjudicating Authority is to examine at this stage whether there is a plausible contention which requires further investigation and that the "dispute" is not patently feeble legal argument or an assertion of fact unsupported by evidence. A spurious defence which is mer....
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....also requested our client to refund the proportionate security deposit amount of Rs. 72,10,456.50 (Seventy Two Lakh Ten Thousand Four Hundred Fifty Six and Fifty Paisa) at the time of taking vacant possession of the Premises. 12. In response to your letter dated June 30, 2016 our clients through their advocates' letter dated July 22, 2016 reiterated their stand finally called upon to handover possession of the entire Premises and pay the statutory damages, falling which the same shall be adjusted from the security deposit lying with our clients, 13. Our clients state even after addressing the aforesaid letter dated July 22, 2016 you failed and neglected to vacate the Premises and continued to remain in illegal possession thereof. Finally on November 19, 2016 possession of the entire Premises was taken by our clients subject to all their rights under the Leave and License Agreement. 14. In view of the foregoing, admittedly you have failed and neglected to handover possession of the Premises on April 10, 2016 thereby rendering you liable and entitling our clients to claim agreed statutory damages being a sum double of the license fee. Thus, our clients are ....
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....pril' 2016 at about 5 PM. You are requested to come and take possession, of the premises on this date & time". (italics in original) (ii) Moreover, it is also pertinent to take note that at this point of time, my client had also shortlisted an alternate premises for continuation of its business operations and was in advance negotiations with the owner of such property to finalize the business engagement. As such, in light of the aforesaid, it is abundantly clear that my client was at all times ready and willing to vacate the entire Premises, and was in the process of ensuring the same to honour its contractual obligations. (e) At this point of time, Mr. Assar of PEPL had a telephonic discussion with my client wherein it was communicated to my client that your client was internally discussing the possibility of extension of the Initial Term of the Leave and License Agreement; and my client was also invited by Mr. Assar for a meeting; to discuss the same. Pursuant thereof, my client sent an e-mail to Mr. Assar on February 8, 2016, seeking confirmation of the said meeting. It is significant to note that even in the aforesaid e-mail of my client, it ....
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.... business engagement with the owner of the alternate premises in light of the existing business relations between PEPL and my client and for the continuation of ., existing business operations. (i) It is pertinent to note that as stated hereinabove, the Oral Assurance for Extension was given by your client on the meeting held on February 17, 2016, and the same was recorded in my client's e-mail dated February 19, 2016. However, your client, despite the Oral Assurance for Extension and with the complete knowledge of the fact that my client (as evidenced by the conduct of my client, which is irrefutably recorded in the correspondences) was acting on such assurance and representation of your client, conveniently and with a well-planned, unethical an hideous design to intently mislead my client and to gain unjust monetary gains under the garb of contractual provisions (by seeking statutory damages at double the rate of license fees in terms of the Leave and License Agreement), remained conveniently silent and only on April 7, 2016 (vide e-mail of Mr. Vipul Ambani, President-Finance & Corporate Development ofPEPL), i.e. after a period of 50 (fifty) days from the date of the mee....
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....ner and to settle the dispute amicably, in consideration of past business relationship, and despite the fact that except the ground floor of the Premises, the entire Premises was vacated and handed over much prior to November 19, 2016, vide letter dated November 28, 2016, offered the rental for the entire Premises for the period from April 12, 2016 to November 19, 2016. However, despite the generous and bonafide conduct of my client the aforesaid one-time settlement proposed by my client was rejected by your client and accordingly the said offer for amicable one-time settlement by my client lapsed as such. 3. That, in light of the correct and irrefutable factual position stipulated in paragraph 2 hereinabove, it is abundantly clear that - (a) my client has always acted in a bonafide manner in consonance of the contractual arrangement under the Leave and License Agreement; (ii) my client was willing and ready to vacate the entire Premises on the expiry of the Initial Term; (iii) my client acted on the Oral Assurance for Extension and the representation provided by your client, and any delay in vacating the Premises is directly and solely attributable to the unethical conduc....
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....ssession of the Licensed Premises to the Licensors on expiry of the License Period or earlier termination thereof and on failure of the Licensee to do so, the Licensors shall be entitled to recover possession of the Licensed Premises from the Licensee by making an application, to the Competent Authority under the provisions of Chapter VIII of the said Rent Act. The Licensee shall be liable to pay statutory damages at double the rate of the Licensee Fee for the Licensed Premises fixed under this Agreement and the Licensee agrees and confirms that this Agreement is subject to the rights of the Licensors as provided under Section 24 of the said Rent Act and the provisions of Chapter VIII of the said Rent Act which are applicable to this Agreement. This is an Important condition of this Agreement." The aforesaid clause is the sheet anchor of the claim made by the applicant-Operational Creditor for claiming double the rate of the license fee for the license premises. A perusal of the aforesaid clause would show that the leave and license have been given in pursuance of Section 24 and chapter VIII of the Maharashtra Rent Control Act, 1996. It provides that the Licensee is to deliver p....
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....esidential premises on the expiry of the period of licensee and continues in possession of the licensed premises then he is liable to pay damages at double the rate of the licence fee or charge of the premises fixed under the agreement of licence. On the one hand there is a serious dispute whether the Corporate Debtor-respondent has vacated the premises comprised of basement, second, third and fourth floor of the licensed premises on 11.04.2016 or it has retained possession of the whole till November, 2016. The property in dispute is commercial in character which is an admitted fact. Therefore, there is a serious dispute with regard to the application of Section 24 to the commercial premises because Section 24 applies only to residential premises as expressly provided. The parties have agreed to abide by the provisions of Section 24 but the Operational Creditor has not invoked any such provision by moving appropriate application before the Competent authority under the Rent Act. Moreover, these disputes have been in existence as the details of dispute are placed on record which date back to 13.01.2017 (Annexure-14), a notice sent by the Operational Creditor to the Corporate Debtor ....