TaxTMI 
TaxTMI 
2026 (5) TMI 444
X X X X Extracts X X X X
X X X X Extracts X X X X
....Juhu in Mumbai and the business of the appellant was badly hit during the Covid - 19 Pandemic and thereafter due to certain defaults occurred during Covid - 19 Pandemic the appellant is facing multiple insolvency petitions and as the appellant is working with the very limited staff the documents required for refiling could only be provided to the Counsel only on 03.10.2023 and thus the delay which has occurred in refiling is not due to any deliberate act of the appellant and may kindly be condoned. 4. Ld. Counsel for the appellant submits that the appeal was filed by the CD however during the pendency of the appeal the appellant had gone into insolvency and the management of the CD was taken by the IRP appointed by the Tribunal and thus the defects which were highlighted by the Registry could not be condoned within the time stipulated. 5. It is further submitted that the appeal was also filed with some delay and this Appellate Tribunal vide order dated 29.07.2024 passed in IA No. 5137 of 2023 has condoned the delay in filing the appeal and since the proceeding of this appeal are running ex-parte the application for condonation of refiling may kindly be allowed. 6. Having h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....u Mumbai on which a hotel comprising hotel facility, food and beverages outlets, retail outlets and offices was constructed and a registered leave and license agreement (agreement) dated 06.03.2018 was entered into between the operational creditor/appellant and Corporate Debtor (CD) Respondent No.1 for license of a unit bearing no. 4 admeasuring 3500 sq. feet carpet area situated on the 3rd floor of the C wing of the said hotel for running restaurant under the name of Wine Villa for 5 years and as per the terms of the said agreement the OC agreed to grant license to the CD for the use and occupation of the license unit on leave and license basis for a period of 5 years commencing from 21.02.2018 and ending on 20.02.2023. 12. It is further contended that as per clause 4.1 of the agreement the CD was under an obligation to pay to the appellant the higher of the following amounts referred in the agreement as license fees on a monthly basis for the use and occupation of the license unit; a. Fixed License fee shall be paid on monthly basis by the License to the Licensor in the following manner; S. No. TERM FIXED LICENSE FEE 1. Throughout the first year of Lice....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... lakhs was agreed out of which only a part payment of Rs. 5 lakhs has been made and the invoice towards the remaining amount was raised by the appellant. 17. It is also contended that as per clauses 4.7,5.7, 6.1 (h), 6.2 (b), 6.3 (b) the CD had agreed to pay interest on delayed payment of license fee and for other charges @ 24% p.a. pertaining to which the two invoices of date 31.03.2019 of Rs. 11,52,201/- and of date 05.12.2019 amounting to Rs. 3,010,344/- in total Rs. 4,162,545/- were raised. 18. It is further contended that the Respondent CD had admitted liability by way of the TDS deposit under Form 26 AS and also by making part payments under agreement to the appellant and also in August 2018 the Respondent CD and in February, 2019 the CD through its subsidiary Vino Villa Ventures Pvt. Ltd. acknowledged its liability by making TDS payments under the provisions of the Income Tax Act towards the heads of rent and payment under Contractual Services and has also deducted TDS from the license fees payable to the OC between the period July 2018 to February 2019 and illegally retained the same. 19. It is further contended that CD also acknowledged its liability under the sai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....23. It is pertinent to mention here that despite service of the notice the Respondent CD did not appear before this Appellate Tribunal and vide order dated 09.03.2026, the proceedings of this appeal were drawn ex-parte against the Respondent and there is no reply to the appeal filed by the Respondent. In this background we are constrained to take the help from the reply filed by the CD before the Ld. Adjudicating authority a copy of which has been placed on record by the appellant. 24. The CD in his reply filed before the Ld. Adjudicating Authority has denied all the claims of the appellant admitting only that vide leave and license agreement dated 06.03.2018 the aforesaid premises admeasuring 3500 sq. feet were taken under the said agreement. 25. It is further stated therein that the operational creditor has lured the CD to enter into this agreement on the pretext that he is going to construct a 4-5-star category hotel and it is on this pretext the CD had invested Rs. 2 Crore 50 lakhs amount of money and entered into the agreement and also payed a sum of Rs. 60 lakhs as security deposit and Rs. 8,40,000/- as CAM deposit and Rs. 5 lakhs as HVAC installation charges to the OC.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 29.01.2019 and could come out of it only upon settlement with its creditors vide order dated 07.02.2021 passed by NCLAT. In other words, the control of the Applicant was vested in the Resolution Professional during that period. 13. From the analysis of facts placed before us by both the parties, we find that dues till February 2019 have mostly been cleared by the Corporate Debtor and only amount charged on account of GST on such dues is withheld in the absence of cross verification of payment of such GST by the Applicant to the Government. We also find that a sum of Rs. 68.40 lakh was with the Applicant in form of Security Deposit, the appropriation of which was denied by the Resolution Professional in control of Applicant even though the same was specifically requested. by the Corporate. From the facts, it emerges that an issue whether Corporate Debtor could exploit the licensed premises commercially for its intended use in the background of admission of Operational Creditor into CIRP from 29.01.2019 for the period from March, 2019 to September, 2019. This issue acquires importance in wake of nature of business the Corporate Debtor was engaged in. Since, we are not appr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er, 2019 and even if according to the CD the premises are rendered unfit, the lessee could only avoid its liability to pay if it has vacated the premises. Reliance in this regard has been placed on Section 108 of the Transfer of Property Act and following case laws: (i) Sangeet Batra vs. M/s VND Foods & Ors., 2015 SCC Online Del 101. (ii) The Chamber of Colours and Chemicals vs. Trilok Chand Jain, 1973 SCC Online Del 142. (iii) Gandavalla Munuswamy vs. Marugu Muniramiah, 1964 SCC Online AP 20. 32. It is further submitted that Ld. Adjudicating Authority has committed error in holding that Rs. 60 lakhs were paid by the CD as security deposit had not been appropriated despite the request of the CD while it is not clear as to whether the Ld. Adjudicating Authority treated the non-appropriation of the security deposit by the appellant as the pre-existing dispute and any question of appropriation of such security deposit is a right provided to the licensor which could only be exercised at its discretion and this security deposit could not be taken into cognizance to determine whether the operational debt is beyond the prescribed threshold. Therefore, the imp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ises was left in a estate of complete neglect and was rendered unfit for commercial exploitation. 37. It is also the defense of the CD that soon after the CIRP initiation water supply to the premises was completely ceased and operating restaurant was not possible and CD has to arrange water tankers the payment of which is to be compensated by the OC and the Central Air Conditioning Services were also breakdown for want of service and maintenance and routine maintenance of the complex was completely stopped as well as the service staff, security etc. was also ceased and when the grievances of the CD were not addressed by the IRP of the OC (CD) the Respondent CD filed an application before the Ld. Adjudicating Authority on which certain directions were passed for restoration of electricity and water connection and the direction for police aid was also passed as according to the CD the appellant has forcefully taken control of all furniture, equipment's etc. of the CD worth Rs. 3.5 Crore. 38. At this juncture, it is also fruitful to recall that the CD had taken the license for running a restaurant in the premises in the name of Wine Villa and it is also admitted to the CD that h....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reproduced as under: "1. The Learned Representatives for both sides are present. 2. MA-2011/2019 Through this M.A. the Applicant has made a prayer for Restoration of Water Supply, Operation of Central Air Conditioner and not to obstruct the total business. Evidences are on record. Perused. 3. The Learned Representative for the R.P. has informed that the R.P. in person is not present, therefore seeking time. 4. The reason for the disconnection stated to be that certain dues have not been paid by the Licensee, however, licensee has already lodged its claim of 3.23 Crores vide Form-F dated 04.04.2019 before the Learned R.P. 5. As a consequence the R.P. is directed that, if there are any dues to be recovered from the Licensee the same can be adjusted against the said lodgement of claim as reflected on Form-F. 6. Meanwhile the R.P. is directed to restore the Water Supply, Operation of Central Air Conditioner and alleged bouncers immediately, henceforth, on receiving a copy of this Order. 7. This Order shall be effective till the date of next hearing, by that time R.P. shall place on record the Reply a copy in advance to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of the bills. With these directions MA-1657/2019 is allowed and disposed of. 5. Since substantive time has already lapsed the incoming Resolution Professional shall complete the CIRP process expeditiously and report the progress by 22.08.2019. Matter is adjourned to 27.08.2019". 42. It is further reflected that on 27.08.2019 following order was passed by the Ld. Adjudicating Authority on IA No. 2011 of 2019: "1. This is an Application submitted on 23.06.2019 and the main prayers as raised before this bench are reproduced below: - "(a) Forthwith commence and sustain regular water supply to the Premises of the Applicant; (b) Forthwith commence and sustain regular running of the air-conditioning chiller plant providing air-conditioning to the Premises; (e) Forthwith ensure the eviction of the goon/bouncers placed outside the Premises and continually ensure that no anti-social/detrimental activity is being permitted in the Premises; (k) Forthwith prevent the mala fide interference of the Ex-Directors from the working of the Applicant from its Premises in the Complex;" 2. In the past vide an Order dated 29.01.2019 a Pet....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rate the difficulty in entering into the premises in question. This Bench is hopeful that the respected Commissioner shall look into the matter and issue necessary directions. 5. The Applicant shall furnish all the Orders of this bench passed earlier for ready reference to the respected Police Commissioner. Thereafter, a compliance report by the Applicant be submitted to this Court on the next date of hearing. 6. Listed for 09.09.2019". 43. It is also reflected that on 18.09.2019, the Ld. Adjudicating Authority has observed that directions has already been given to the Police Authorities and they are again instructed that directions be complied with and thereafter the matter was to be reported to the Ld. Adjudicating Authority about due compliance on 09.10.2019. 44. It is also pertinent to mention here that CIRP initiation order against OC of date 29.01.2019 was assailed before this Appellate Tribunal by filing CA (AT) (Ins) No. 177 of 2019, and vide order dated 05.09.2019 this appeal was dismissed. The Judgement of this Appellate Tribunal was challenged before Hon'ble Supreme Court by filing Civil Appeal No. 7673 of 2019 and by passing an order dated 30.09.....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 47. It is also highlighted in the aforesaid application that certain bad elements were deployed by the Ex-Director of the Company at the site of the complex who began interfering with the ingress and egress of persons with the intent of creating complete havoc in the premises pertaining to which a police complaint was filed at Police Station Juhu Mumbai on 30.04.2019. It is also stated that temporary air conditioners were installed by the applicant in an attempt to commence its business however the Ex-Directors again placed some bad elements outside the premises of the applicant which was also brought to the notice of the IRP while email date 05.05.2019 and also by email dated 08.05.2019 and thereafter a notice was issued to the IRP on 10.05.2019 stating therein that the usage of the premises has become impossible for the CD and other users. 48. It is also highlighted in the aforesaid application that the entire complex has become in a dilapidated condition and in this background the reliefs herein mentioned were requested by the CD and the orders were passed thereon by the Ld. Adjudicating Authority. 49. It appears to be an admitted position that from 29.01.2019 till 07....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, as the case may be. In case the unpaid operational debt has been repaid, the corporate debtor shall within a period of the self- same 10 days send an attested copy of the record of the electronic transfer of the unpaid amount from the bank account of the corporate debtor or send an attested copy of the record that the operational creditor has encashed a cheque or otherwise received payment from the corporate debtor [Section 8(2)(b)]. It is only if, after the expiry of the period of the said 10 days, the operational creditor does not either receive payment from the corporate debtor or notice of dispute, that the operational creditor may trigger the insolvency process by filing an application before the adjudicating authority under Sections 9(1) and 9(2). This application is to be filed under Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 in Form 5, accompanied with documents and records that are required under the said form. Under Rule 6(2), the applicant is to dispatch by registered post or speed post, a copy of the application to the registered office of the corporate debtor. Under Section 9(3), along with the application, the statut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ice of an existing dispute that received, as it must be read with Section 8(2)(a) Also, if any disciplinary proceeding is pending against any proposed resolution professional, the application may be rejected [Section 9(5) (ii)(e). 34. Therefore, the adjudicating authority, when examining an application under Section 9 of the Act will have to determine: (i) Whether there is an "operational debt" as defined exceeding Rs 1 lakh? (See Section 4 of the Act) (ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? and (iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? If any one of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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 pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate 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 supurious, hypothetical or illusory, the adjudicating authority has to reject the application". The perusal of the above paragraphs would reveal that the prior dispute which is alleged to be existing between the parties must be having some substance and must not be a moonshine dispute or the dispute which has been crafted only for the purpose of defeating the....