TaxTMI 
TaxTMI 
2024 (5) TMI 1347
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.... that the Appellant did not qualify as an "Operational Creditor" under the IBC as the claim did not arise from the provision of goods or services to the Respondent. Brief facts of the case : 2. The facts of the case as relevant to decide the matter are noted herein. On 7 May 2019, the Appellant and Respondent entered into a "Without Prejudice" Letter of Intent (WP-LOI) for leasing unit no. 702 in the Silver Metropolis building. The Appellant paid a security deposit of Rs. 25,68,280/. The Appellant discovered that the premises were not eligible for IT/ITES/STPI registration after due diligence, despite the initial representation. Consequently, the Appellant sought to terminate the LOI and requested a refund of the security deposit. The Appellant issued several notices and reminders to the Respondent seeking a refund, including: Email dated 4 June 2019 for cancellation and refund. Reminders on 18 June 2019 and 27 August 2019. Legal notice on 14 November 2019. Demand Notice under Section 8 of the IBC on 10 February 2020. 3. The Respondent replied on 17 February 2020, disputing the Appellant's claims and contending the right to forfeit the s....
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....ppellant was ineligible for the ITES certificate as per the Maharashtra IT/ITES Policy 2015. The premises could not be lawfully licensed by the Respondent. 8. Appellant claims that multiple notices were sent requesting the security deposit refund and the details of the exchange of communication between them are as follows: Email on 04 June 2019 for cancellation and refund of Rs. 25,68,280/- Reminders on 18 June 2019 and 27 August 2019. Notice on 14 November 2019. Reply from Messrs. Narang Law on 03 December 2019, referencing M/s. Optium India Private Limited. Demand Notice under Section 8 of the I & B Code on 10 February 2020 for Rs. 25,68,280/- plus 18% interest of Rs. 3,37,248/- Respondent's reply on 17 February 2020. 9. The Appellant thereafter filed a section 9 petition on 20 February 2020. The Respondent's affidavit-in-reply was filed on 01 September 2020. 10. The Appellant submits that security deposit is an Operational Debt as per the IBC Code and as per various rulings. The claimed amount qualifies as 'operational debt' under Section 5(21) of the I & B Code. The Hon'ble Supreme Court in ....
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....on notes that "[examples given of advance payments being made for turnkey projects and capital goods, where customisation and uniqueness of such goods are important by reason of which advance payments are made, are wholly inapposite as examples visà- vis advance payments made by allottees". Hence, this leaves no doubt that a debt which arises out of advance payment made to a corporate debtor for supply of goods or services would be considered as an operational debt. 52. Similarly, in the present case, the phrase "in respect of" in Section 5(21) has to be interpreted in a broad and purposive manner in order to include all those who provide or receive operational services from the corporate debtor, which ultimately lead to an operational debt. In the present case, the appellant clearly sought an operational service from the proprietary concern when it contracted with them for the supply of light fittings. Further, when the contract was terminated but the proprietary concern nonetheless encashed the cheque for advance payment, it gave rise to an operational debt in favour of the appellant, which now remains unpaid. Hence, the appellant is an operational creditor under ....
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....e designed to revive the Corporate Debtor rather than serve as a means for debt recovery. 15. The amount claimed does not constitute an "operational debt" as defined in Section 5(21) of the Insolvency and Bankruptcy Code, 2016 (IBC). The Appellant seeks a refund of a security deposit paid under a Letter of Intent (LOI), which is a precursor to a leave and licence agreement. This does not pertain to the provision of goods or services, hence it does not qualify as operational debt. 16. A pre-existing dispute invalidates any application filed under Section 9 of the IBC. It is well-settled that if disputes between the parties exist, an application for Corporate Insolvency Resolution Process (CIRP) is not maintainable. In this case, the Appellant's demand notice was responded to by the Respondent, raising and indicating the existence of disputes. The following points highlight the pre-existing disputes: 16.1 There is a dispute regarding whether Annexure A3 at page 47 or Annexure A5 at page 53 is the subsequent LOI. The Corporate Debtor, in its reply to the demand notice and the Affidavit in Reply to the Petition, claimed that Annexure A3 is the subsequently executed docum....
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...., despite being qualified for such use. This was the basis for their claim for a deposit refund. The Respondent argued that the premises were suitable for IT and ITeS services, and the Appellant's inability to obtain certification was their own default. This was recorded in the order dated 14 July 2021. Subsequently, in the Additional Affidavit dated 16 February 2022, the Appellant admitted they did not pursue certification under the IT/ITeS policy. The Appellant deliberately suppressed the additional affidavit filed by the Respondent pursuant to the 14 July 2021 order. 18. On 8 March 2020, the Respondent had inducted M/s Reliance Nippon Life Insurance Co. Ltd as a licensee, who successfully obtained IT/ITES certification under the State of Maharashtra's IT/ITES policy. This demonstrates that even an insurance company could obtain IT/ITES certification, which the Appellant chose not to pursue. CASE LAW 19. As per the Hon'ble Supreme Court in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Ltd., Civil Appeal No. 9405 of 2017, a Section 9 IBC application is not maintainable if a dispute exists. The adjudicating authority must assess whether a plausible contention requir....
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....nd license agreement. The security deposit here is linked to a conditional contractual arrangement and not to the actual provision of any goods or services. Therefore, the claim does not constitute an operational debt under the IBC. 27. We have thoroughly analysed the definition of "operational debt" under Section 5(21) of the IBC. This definition specifies a claim arising from the provision of goods or services. We find that while the LOI contemplated a future license agreement, the security deposit itself was not directly linked to any service rendered by Seaview. 28. We also look into the judicial precedent as cited by the Appellant in Consolidated Construction Consortium Limited v. Hitro Energy Solutions Pvt. Ltd. [supra]. This judgement is only an authority for the proposition that the words "claim in respect of provision of goods or services" includes not only those who supply goods or services to corporate debtor but those who receive goods or services from the corporate debtor and the words "in respect of" must therefore not received a narrow interpretation but the claim must bear some nexus with the provision of goods or services. In the present case the Appellant ha....
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....perational Creditor is not an 'operational debt'. The judgment of this Tribunal in Promila Taneja's case reiterate the law as laid down in Mr. M. Ravindranath Reddy's case. We having held that judgment of Mr. M. Ravindranath Reddy's case does not lay down correct law, the judgment in Promila Taneja's case can also not be followed. 40. In view of the foregoing discussion, we answer the two questions referred to the larger Bench in the following manner : (1) Judgment of this Tribunal in Mr. M. Ravindranath Reddy (supra) as well as judgment in Promila Taneja's case does not lay down the correct law. (2) The claim of Licensor for payment of license fee for use of Demised Premises for business purposes is an 'operational debt' within the meaning of Section 5(21) of the Code." 30. The above-mentioned judgement is only an Authority for the proposition that a claim towards unpaid license fees for an immovable property would constitute an operational debt under the Insolvency and Bankruptcy Code, 2016 (Code). It doesn't support the cause of the Appellant that security deposit is a form of license fee available for adjustment on failure to meet the outstan....
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.... which was to be destroyed. 2. Forfeiture Clause: Both versions of the LOI contained clauses allowing the Respondent to forfeit the security deposit if the Appellant failed to execute the license agreement. The Respondent's assertion of the right to forfeit the deposit is based on these provisions. 3. Efforts to Obtain Certification: The Appellant's claim that the premises were ineligible for IT/ITES certification is contradicted by their actions, including attempts to obtain certification and subsequent communications indicating ongoing efforts to comply with IT/ITES requirements. 4. The conditions in the term sheet were incapable of performance as claimed by the Appellant. The Respondent claims that everything was known to the Appellant and it was its responsibility to obtain all permissions and it tried but later unilaterally cancelled the . 5. Possession and License Fee: The Appellant remained in possession of the premises from 7 May 2019 to 20 June 2019 without executing the final license agreement, thus triggering the Respondent's claim for a license fee for this period. 34. The core of the dispute revolved around two aspects: ....