TaxTMI 
TaxTMI 
2020 (2) TMI 56
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....essors and the Corporate Debtor - M/s. Walnut Packaging Private Limited is the Licensee of Industrial Premises consisting of land measuring about 1667 sq. Yards, situated at Kukatpally, Hyderabad. 4. That tenancy of the Appellant was yearly, and the rent payable for the period from July 2011 to June 2017 was Rs. 85,67,290/- and the Corporate Debtor/Appellant is stated to be making part payments of lease rent from July 2011 until December 2016, totalling to Rs. 49,96,728/-, after deduction of Rs. 5,55,192/- as TDS. The aggregate credit to the Corporate Debtor's account was Rs. 55,51,920/-. The Corporate Debtor stopped making the payment from January 2017, after the last part payment was made, which was adjusted towards rental dues. The dues against the Corporate Debtor at the end of June 2017 was Rs. 30,15,370/-. After that, the Respondent /Petitioner issued a legal notice dated 15-06-2017 to handover the property back to the Petitioners, but the Corporate Debtor failed to vacate the property. After that, an eviction suit was filed against the Corporate Debtor before the jurisdictional Civil Court. 5. The learned counsel for the Respondent/Petitioner further submitted that....
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....nt of rent @10 % per year, over and above the last paid rent. 9.A. The Corporate Debtor has been regular in paying the rent in terms of lease deed with a 10% increase per annum. The original lease expired in 2006, and after that, for the period, i.e. 2011 to 2017 (disputed period) there was no agreement for enhancement of rent. The rent claimed by the Respondents from the Corporate Debtor Company from July 2011 to June 2017 was Rs. 85,66,290/- and the Respondent paid a sum of Rs. 55,51,920/- and therefore the Corporate Debtor was in arrears of rent amounting to Rs. 30,15,270/-. 10. The Respondent/Operational Creditor further contends that a notice under Section 106 of the Transfer of Property Act 1882 was issued against the corporate debtor on 15-06-2017, to terminate the lease, and was asked to vacate the premises. The respondent also stated that he had claimed arrears of lease rent as well as mesne profits. 11. After that Operational Creditor issued Demand Notice under Section 8 of the I&B Code, 2016 raising a demand of Rs, 49,51,605/- i.e. 39,98,926/-towards rent( from July 2011 to December 2017) and interest at 18% per annum is Rs. 9,52,679/- in January 2018, and after....
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.... Bankruptcy Process under Section 9 of the 'I&B Code'" 16. Relying on the judgment above of NCLAT, C.P. No.567/IB/2018 Citicare Super Speciality Hospital v. Vighnaharta Health Visionaries Pvt. Ltd. Dated 11th March 2019, NCLT, Mumbai Bench dismissed the petition, which was about arrears of license fee. 17. NCLT, New Delhi, in Parmod Yadav &Anr v. Divine Infracon (P) Ltd., 2017 SCC OnLine NCLT 11263 observed that the word "operational" or for that matter "operation" has not been defined anywhere in the Code. The General Clauses Act, 1897, also do not define the term. Hence, the term has to be given a meaning as ordinarily understood. The dictionary meaning of 'operational' is given as 'of or relating to operation' (Merriam Webster). Similarly, the meaning of 'operation' is given as 'ready for use or able to be used'. 18. Further, from the usage of the term "goods or services" as given under Section 14(2) of the Code, provides that "essential goods or services", of the corporate debtor shall not be terminated or suspended or interrupted during the moratorium. What constitute essential goods and services are provided under Regulation 32....
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....egories as mentioned above, the claim cannot be categorised as an operational debt, even though there may be a liability or obligation due from the corporate debtor to the creditor, and hence, such a creditor disentitled from maintaining an application for initiation of corporate insolvency resolution process (CIRP) of the corporate debtor. 23. There seems to be some rationale in restricting only to operational creditors for initiation of CIRP, other than financial creditors. Default committed to operational creditors about payment of their debt connotes that the corporate debtor is not even in a position to service the regular payments and operational expenses, as required in the day-to-day functioning of the corporate debtor, which provides a clear indication to its insolvency, warranting the resolution process being put in place. 24. The law has not gone into defining goods or services - hence, one has to rely on general usage of the terms so used in the law, with due regard to the context in which the same has been used. Simultaneously, it is also relevant to understand the intention of the lawmakers. The Bankruptcy Law Reforms Committee (BLRC), in its report dated Novemb....
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....n force and payable to the Central Government, any State Government or any local authority; 26. The Legislature did not include here the reference to rent dues of property. Thus, it is clear that a claim in respect of the provision of goods or services is covered under the operational debt. This petition has been filed for recovery of enhanced rent as per lease agreement; this is not about the goods or services or in respect to goods or services. 27. This Appellate Tribunal has also held on 28-11-2017 in Company Appeal (AT) (Insolvency) No. 288 of 2017 is given below: - 'Admittedly, the Appellant is a tenant of Respondent-'Corporate Debtor'. Even if it is accepted that a Memorandum of Understanding has been entered between the parties regarding the premises in question, the Appellant being a tenant, having not made any claim in respect of the provisions of the goods or services and the debt in respect of the repayment of dues does not arise under any law for the time being in force payable to the Central Government or State Government, we hold that the Appellant tenant do not come within the meaning of 'Operational Creditor' as defined under sub-s....
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....erty cannot be considered as a supply of goods or rendering of any services and thus, cannot fall within the definition or 'Operational Debt. 35. In case of lease of immovable property, Default can be determined, on the basis of evidence. While exercising summary jurisdiction, the Adjudicating Authority exercising its power under Insolvency and Bankruptcy Code 2016, cannot give finding regarding default in payment of lease rent, because it requires further investigation. In the present case itself the Corporate Debtor' in its reply to the Demand Notice dated 9th February 2018, stated in paragraph 6 that: - "With regard to the allegations in paragraph no. 5 of the notice under reply, it is true that your clients got a legal notice dated 15.06.2017 issued under Section 106 of the Transfer of Property Act, 1882 calling upon my client to vacate the premises within six months ending with 31st December 2017. It is also true that your clients had demanded rental amount at Rs. 1,63,926/- (Rupees one lakh sixty three thousand nine hundred and twenty-six only) per month besides demanding alleged arrears of rents amounting to Rs. 30,15,370/- (Rupees thirty lakhs fifteen....
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.... by the competent court having jurisdiction. But the Adjudicating Authority admitted the petition U/S 9 of the Code, without considering the fact, that there was a pre-existing dispute regarding enhancement of rent, much before the issuance of demand notice. 38. Thus, it is clear that the landlord, who filed an application for recovery of alleged enhanced lease rent, can not be treated as an operational creditor within the meaning of Section 5(20 )read with Section 5(21) of the Insolvency and Bankruptcy Code, 2016. 39. That Hon'ble Supreme Court also held in Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd. reported in 2018 (1) SCC 353 has held that: - 51. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the "existence" of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pe....