TaxTMI 
TaxTMI 
2021 (6) TMI 113
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....o. 317(part) of S.S. III and CTS Nos. 1754, 1754/1 to 1754/12, Municipal No. 32 (21), Municipal Ward No. M (West), situate lying and being at V.N. Marg, Opp. Diamond Garden within village limits of Chembur, Dist. Mumbai-400071 by way of Leave and License Agreements dated 18.02.2016 & dated 21.04.2014. The outstanding amount is comprised of the following: The amount so claimed has been due from 31.03.2015. 2) The learned Counsel Mr. Pratik Thakkar appeared on behalf of the Operational Creditor and drew our attention to Annexure-B of the paper-book (ref. page Nos. 17 to 24) comprising details of all outstanding sums period wise as well as due debt of such payment. 3) Our attention was also drawn to relevant Clauses of Leave and License Agreements Particularly Clause No. 5(A) to show that the provisions of this Clause were absolutely clear and wrong interpretation thereof had been made by the Corporate Debtor. 4) Our attention was also drawn to the various correspondences exchanged between the parties as regards to the payment of the outstanding dues and in particular to E-mail sent by the Corporate debtor on 13.01.2018 and 31.01.2018, wherein the C....
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....r notice that the Corporate Debtor was evicted and the Corporate Debtor had also filed a Criminal Complaint on 17.07.2018. 8) It was further submitted that claims relating to compensation for Common Area Maintenance Charges were not debt due in terms of provisions of Insolvency & Bankruptcy Code, 2016 as Operational Creditor was required to prove first remaining breach, its entitlement towards compensation in a suit. Consequent loss and resultant damages and only then it could be awarded compensation for breach of contract. The Corporate Debtor in this regard relied on the case of E-City Media v. Sadhtra Retail Ltd., order dated 20.11.2019 in Company Petition 367 of 2009. As regards to the unpaid electricity bill dues, water charges and telephone charges, it was claimed that charge had already been paid and electricity charges is an additional charge for Common area which was supposed to be covered within the Common Area Maintenance Charges. In this regard, reliance was placed on Article 8 of the Leave and License Agreement to show that such Clause had already capped these charges and any additional charges, if, incurred had to be borne by the Operational Creditor. ....
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.... not be applicable herein as the present case not for recovery of amount as a question in that case. Similarly, Company Petition No. 367 of 2009, it appears to the damages which were to be calculated and claimed in the winding up proceedings. Whereas, in the present case there is an Agreement and there is no uncertainty involved as regards to the quantum of outstanding debt, hence, said decision was also not applicable. 14) The Learned Counsel for the Corporate Debtor was posed a question as regards to the nature of these charges on the basis of its decision relied upon with a view to recent decisions of Hon'ble NCLAT, wherein, view had been taken that such charges would fall within decision of operational debt. Learned Counsel showed ignorance about such decisions, however, conceded that a view could be taken on merit considering the submissions made by him. 15) We have considered the submissions made and material available on record. It is admitted that Corporate Debtor is Licensee in the premises/Mall owned by the Operational Creditor. The Corporate Debtor has got numbers of units on Leave and License based by virtue of Leave and License Agreement dated 21.....
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....'ble NCLAT in two recent decisions (i) Anup Sushil Dubey v. National Agriculture Co-operative Marketing Federation of India Ltd., wherein it has taken view that lease rent would be the nature of the Operational debt in terms provisions of Section 5(21) of the Insolvency & Bankruptcy Code, 2016. In the second decision i.e. Mr. Sanjeev Kumar v. Aithent Technologies Private Limited & Anr. (Supra.) where are member had different view. It is noted that his view based ultimately on the fact that there was a pre-exiting dispute and not on the point of nature of lease rent of the operational debt. In any case majority decisions is binding on us. 18) We also consider it pertinent to mention that this Bench in the case of The Press Trust of India Ltd. (PTI) vs. Axiom Estates Advisory Services Pvt. Ltd., CP (IB) No. 616/KB/2018 order dated 01.10.2019 had occasion to deal with scheme of Code as well relevant provisions thereof as regards to debt and operational debt and after taking into consideration BLRC report and the decision of Hon'ble Supreme Court in the case of Mobilox innovations Private Ltd. vs. Kirusa Software Private Ltd. on 21 September, 2017 held as under: ....
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....13. The initiation of discussion is done with the definition of the term "debt". From bare perusal of such definition following points emerge:- a. Debt means a liability or obligation in respect of claim. b. It includes financial debt and operational debt. c. Legislature in its wisdom has given this term an inclusive meaning and that too with reference to nature of debts i.e. financial debt and operational debt. It means that the debt can also be of a different nature other than the financial debt and operational debt. 14. To further draw support for our view that there could be debts other than financial debt or operational debt. We take a look at Regulation 9A of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 which provides for submission of claim by other creditors. In this regulation, it has been expressly mentioned that any person claiming to be a creditor, other than those covered under Regulation 7, 8 or 9 shall submit its claim with proof to the Insolvency Resolution Professional or Resolution Professional in Form F of the schedule. Regulation 7, 8 and 9 deal with claims by....
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.... corrective measures to secure the interest of various stakeholders. As per provisions of Section 7(1), Insolvency Resolution Process can be initiated against a Corporate Debtor when a default has occurred and the Financial Creditor files evidence of default along with the application. As per section 3(12) of I & B Code, 'default' means non-payment of a debt which has become due and payable and is not paid by the Corporate Debtor. 'Debt' as per clause 3(11) means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt This takes us to look at the meaning of 'claim' which is defined in section 3(6) of the I & B Code, 2016 and reads as under:- "3(6) "claim" means- (a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured, or unsecured; (b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured." ....
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....ult into non-enforceability of contracts in civil laws such as legal incapacity of the person executing a contract or insufficiency of stamp duty paid on the instrument or lack of valid licence, registration, authorisation or Board resolution or other technical breach/defects etc. which would not absolve the corporate debtor under IBC, 2016 from facing CIR Process. It is further noteworthy that enforceability subject to limitations of Public Policy and agreement being void ab initio has not been made a pre-condition in IBC, 2016 as Financial Creditor as per section 5(7) means only person to whom a financial debt is owed. Financial debt as per section 5(8) means a debt along with interest, if any, which is disbursed against time value of money and includes different kinds of transactions and whenever such transactions take place that by-itself is suffice to create an event or conduct which may give birth to claim subsequently. Further, we are of the considered view that obligation to pay loan is not created by the instrument, but it arises from promise to repay such loan which law always implies when money is borrowed. Hairing said so, the legal infirmities regarding initiation of C....
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....y declare and state as follows:- 1. [Name of corporate debtor], the corporate debtor was, at the insolvency commencement date, being the.................day of..............20......., actually indebted to me for a sum of Rs. [insert amount of claim]. 2. In respect of my claim of the said sum or any part thereof, I have relied on the documents specified below: [Please list the documents relied on as evidence of claim]. 3. The said documents are true, valid and genuine to the best of my knowledge, information and belief and no material facts have been concealed therefrom. 4. In respect of the said sum or any part thereof, neither I, nor any person, by my order, to my knowledge or belief, for my use, had or received any manner of satisfaction or security whatsoever, save and except the following: [Please state details of any mutual credit, mutual debts, or other mutual dealings between the corporate debtor and the creditor which may be set-off against the claim]. 5. I am/I am not a related party of the corporate debtor, as defined under section 5 (24) of the Code. 6. I am eligible to join committee of creditors by virtue o....
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....ng a party from asserting a legal claim or defence that is contrary or inconsistent with his or her prior action of conduct. Our this view can further be supported on the basis of application of doctrine of approbate and reprobate, which means that a person cannot approbate and reprobate at the same time, that is, no party can accept or reject the same instrument and cannot say at one time that the transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn around and say it is void for the purpose of securing some other advantage. In the instant case, it is the Corporate Debtor who has purchased the stamp paper for the execution of said MoU, meaning thereby that stamp duty for execution of MoU has been borne by the Corporate Debtor. It is settled judicial proposition that insufficiency of a stamp duty is a curable defect which can be cured by making up for the deficiency, hence, if the Corporate Debtor wishes to pay the stamp duty not paid, then nobody can stop but, at this stage, the Corporate Debtor being a wrongdoer at one end cannot be allowed to take advantage of its own wrong. For this reason also ....
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....se the defences available to them; we only say how we have to deal with administration of justice when substratum is admitted by the assailing party. 4. Courts normally will not go into the advantages and disadvantages of the parties, we can't get into subjective perceptions of anybody/or even of us, law is set out how to deal with it, parties apply their wisdom when they enter into binding covenants they enter into contracts, Parliament applies its wisdom when a legislation is brought in, therefore discretion in between left to this Bench is judicial discretion, not to wedge into any other perception into it. Why conventional method of trial has been taken out from IBC proceedings is one - obviously to expedite the process and two - perhaps on the reason that parties cannot deny at least the entries showing in the records of companies. (xi) From the above discussion, it can be fairly said that where Corporate Debtor has obtained a loan having time value of money or on interest, enjoyed it on the basis of subject Moll, it is both a legal and equitable obligation of a Corporate Debtor and, simultaneously, legal and equitable right of the Financial Creditor to i....
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....e cannot be a dispute that the corporate debtor is liable to pay the consideration for use of such facilities and, therefore, the lessor has got a claim to receive such payment as creditor irrespective of its classification as operational creditor or other creditor. Accordingly, we reject the contention that the outstanding sum is not a claim within the meaning of Sec. 3(6) of Insolvency & Bankruptcy Code, 2016. 17. Further, based upon the meaning of term "debt" and "claim", the inevitable conclusion is that the Insolvency & Bankruptcy Code, 2016 recognises three types of debts giving birth to three different types of creditors i.e. financial creditors, operational creditors and other creditors who have been given different rights, powers and treatment under the Insolvency & Bankruptcy Code, 2016. Therefore, classification of debt as financial, operational or other debt is extremely important, for example, CIRP can be initiated only by financial creditors or operational creditors or corporate debtor itself as per Sec. 6 of the Code whereas other creditors have been given right to lodge their claims during CIRP only. This has been structured in this manner because most of t....
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....slation where time lines are given supreme importance, in our most humble view, a call has to be taken by each and every Bench to decide the issue at the earliest but, applying judicial wisdom in a most pragmatic manner to give effect to objects of the Code. Having stated so, now we proceed further. 21. It is also an established principle of judicial propriety that a later decision which after considering the earlier decision takes a view on the same matter, that later view would have higher persuasive value. Thus, the decision of the NCLT Kolkata Bench in the case of Sarala Tantia vs. Nadia Health Care Pvt. Ltd. in CP(IB) No. 108/KB/2018 order dated 5/10/2018 wherein, after considering a divergent view expressed by NCLT Bench Delhi in the case of Promod Yadav and Ors. vs. Divine Infracom Pvt. Ltd. IB/209/ND/2017, order dated 28/9/2017 it has been held that outstanding lease rent would fall within the definition of operational debt needs to be followed. It is further noteworthy that in the case of Sarala Tantia (supra), the Tribunal drew support from the decision of the Hon'ble Apex Court in the case of Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd. order ....
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....of the provision of goods or services including employment or a debt in respect of the repayment of dues arising under the law for the time being in force and payable to the Central Government, any State Government by way of rent, lease from time to time, licence fees for letting out the premises would fall under the purview of providing services and the consideration that is recoverable becomes operational debt. In view of these facts on record, I hold that recovery of arrears of rent is operational debt within the meaning of section 5(21) of the I & B Code." 22. We are further of the view that in fact, the decision of the NCLT Delhi Bench in the case of Promod Yadav & Ors. (supra) support our view for the reason that in the present case operations of the corporate debtor are being carried from the leased premises only, hence, the output is produced from the said premises. Having said so, with all humility we submit that the ratio that services should be of the nature of input to output directly needs reconsideration for the reason that no such requirement exists in Sec. 5(21) of Insolvency & Bankruptcy Code, 2016 and services referred to in Sec. 14(2) read with Regulatio....
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....ity. While the identities of counterparties should remain private, the existence of all financial contracts along with the terms and conditions, is relevant for all financial analysis related to the health and status of the entity. Liabilities fall into two broad sets: liabilities based on financial contracts, and liabilities based on operational contracts. Financial contracts involve an exchange of funds between the entity and a counterparty which is a financial firm or intermediary. This can cover a broad array of types of liabilities: loan contracts secured by physical assets that can be centrally registered; loan contracts secured by floating charge on operational cash flows; loan contracts that are unsecured; debt securities, that are secured by physical assets, cash flow or are unsecured. Operational contracts typically involve an exchange of goods and services for cash. For an enterprise, the latter includes payable for purchase of raw materials, other inputs or services, taxation and statutory liabilities, and wages and benefits to employees". 23. From perusal of these comments/observations it is apparent that rental obligation are to be considered as oper....
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....and circumstances of the case, applicable legal provisions and recent judicial precedents as well, we are of the view that there is no merit in any of the claims made by the Corporate Debtor. 20) The application filed by the Operational Creditor is otherwise complete and defect free and this application also complies with all requirements of the Code and Regulations made thereunder. 21) The name of the IRP has not been proposed as the same is not mandatory in case of application filed under Section 9 of the Insolvency & Bankruptcy Code, 2016, hence, we shall appoint IRP, whose name appears in the approved list of the IBBI and against whom disciplinary proceedings are not pending. 22) In the result, the application filed under Section 9 of the Insolvency & Bankruptcy Code, 2016 stands allowed and disposed of in terms of following order: ORDER 1. The application is admitted and the moratorium is declared for prohibiting all of the following in terms of Section 14(1) of the Code. (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or o....
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....ce to the Corporate Debtor Company, it continuing, shall not be terminated or suspended or interrupted during moratorium period. 7. The IRP shall be under duty to protect and preserve the value of the property of the 'Corporate Debtor Company' and manage the operations of the Corporate Debtor Company as a going concern as a part of obligation imposed by Section 20 of the Insolvency & Bankruptcy Code, 2016. The Operational Creditor is directed to pay an advance of Rs. 1,00,000/- (Rupees One Lakh Only) to the IRP within two weeks from the date of receipt of this order for the purpose of smooth conduct of Corporate Insolvency Resolution Process (CIRP) and IRP to file proof of receipt of such amount to this Adjudicating Authority along with First Progress Report. 8. The Registry is directed to communicate a copy of this order to the Operational Creditor, Corporate Debtor and to the Interim Resolution Professional and the concerned Registrar of Companies, after completion of necessary formalities, within seven working days and upload the same on website immediately after pronouncement of the order. Accordingly, TP/MP/30 OF 2019 [CP (IB) No. 510/9/NCLT/AHM/20....