TaxTMI 
TaxTMI 
2020 (9) TMI 940
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.... 2. In seeking the above reliefs, the Petitioner has, in brief, mentioned the following facts in its application: (1) The Applicant/Petitioner Mr. B.S. Ashok Kumar is an Operational Creditor having PAN: ACSPA0672J and is residing at No. 61, 8th 'A' Main Road, 3rd Block, Jayanagar, Bangalore-560011. (2) M/s. Bangalore Institute of Gastroenterology Pvt. Ltd. (hereinafter referred to as 'Respondent/Corporate Debtor') is a Private Limited Company incorporated on 11.10.2012 under the Companies Act, 1956 with CIN: U85100KA2012PTC066247 and having its Regd. Office situated at 34, 100 Feet Road, 2nd Block, Jayanagar, Bangalore-560011. The Authorised Share Capital of the Company is Rs. 4,00,00,000/- divided into 40,00,000 Equity Shares of Rs. 10/- each and the Paid-up Capital is Rs. 3,00,00,000/- divided into 30,00,000 Equity Shares of Rs. 10/- each. (3) It is stated that the Operational Creditor and the Corporate Debtor had entered into Lease Deed on 16th April, 2015 for a lease period of 19 years 7 months commencing from 1st June, 2015 and expiring on 30th April, 2035. As per the Agreement, the Corporate Debtor shall pay rent for the month on or ....
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....ise was not used for any personal or private activities. (2) The debt due to him constitutes to be an Operational Debt. Letting out premises on rent for a commercial purpose has an element of service with respect of the same and the consideration there to can be regarded as an 'Operational Debt'. (3) As per the provision of Central Goods and Services Tax Act, 2017 giving premises on lease is a Service. Section 2(a) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the 'CGST Act') states that, "any lease, tenancy, easement, license to occupy land is a supply of services. Further, Section 2(b) of the CGST Act makes it clear that, "any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services". Keeping in view the aforesaid, arrears of rent are in the nature of 'Operational Debt' within the meaning of definition of operational debt defined under Section 5(21) of the Code. (4) Further, the recommendations of the Bankruptcy Law Reforms Committee in its report at Para 5.2.1 Vol. I (2015), elucidates th....
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....n force and payable to the Central Government, any State Government or any local authority." 7. It is clear from the definition of the term 'operational debt' that it has four components, namely: (i) goods; (ii) services; (iii) employment; and (iv) government dues. On the facts of our case, we would be concerned with the first two that is provision of goods or services. We are of the view that supply of goods or services would mean such supply as is the input for either manufacturing or trading in the hands of the receiver, in a business context, and that there should be a direct nexus between such input and output, for example and illustratively speaking, supply of raw material for manufacturing of goods or for trading; or such services as are inextricably linked to manufacturing or trading, such as supply of labour or maintenance services. 8. Different Benches of this Tribunal have been consistently holding that letting out property on lease/rent does not constitute provision of goods or services and hence cannot give rise to an Operational Debt. All the issues arising in dealing with the matter have been considered therein. Further, the Hon'ble NCLAT has affirm....
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....m which is sought to be made cannot be considered as an Operational Debt. 11. The Hon'ble NCLAT concurred with the above views. In its order dated 28.11.2017, when this matter came up in appeal in the case of Jindal Steel (supra) it concluded that in this case there was no claim in respect of the provision of 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, and hence does not come within the meaning of 'Operational Creditor', for triggering the Insolvency and Bankruptcy Process under Section 9 of the Code of 2016. 12. The view expressed in the above referred cases was again confirmed in the very recent case decided by Hon'ble NCLAT in its order in the case of Mr. M. Ravindranath Reddy Vs. Mr. G. Kishan & Ors. in Company Appeal (AT) (Insolvency) No. 331 of 2019, order dated 17.01.2020. In the earlier cases as well as this case, the issues regarding the inclusion of lease for premises as service under the Central Goods and Services Tax Act, 2017, as well as the mention of the same in the Bankruptcy Law Reforms Committee in its report ....
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....ead with sub-Section (21) of Section 5 of the Insolvency and Bankruptcy Code, 2016..." Even otherwise, the definition assigned to the words Goods and Services under the Central Goods and Services Tax Act, 2017, which is a taxing statute is for serving an entirely different objective, one which requires a wide coverage, and the same meaning cannot be automatically transported to the I&B Code, 2016. 16. As regards the Petitioner's contention that the recommendations of the Bankruptcy Law Reforms Committee that rental obligations also form part of operational debt, the same is also not tenable. In Mr. M. Ravindranath Reddy Vs. Mr. G. Kishan & Ors. (supra), the Hon'ble NCLAT held that: "Hence, the BLRC recommends the treatment of lessors/landlords as operational creditors. However, the Legislature has not completely adopted the BLRC Report, and only the claim in respect of goods and services are kept in the definition of operational creditor and operational debt u/s Sec 5(20) and 5(21) of the Code. The definition does not give scope to interpret rent dues as operational debt................The Legislature did not include here the reference to rent dues of propert....