2019 (1) TMI 1947 - AT - Insolvency and Bankruptcy

Disallowance of payment of rent by CoC - HELD THAT - The landlord cannot negotiate the security amount nor can adjust the payment. With regard to the current rent as Section 14 moratorium is not applicable, the Adjudicating Authority has rightly directed the parties to pay rent w.e.f. 1st December, 2018 or make suitable arrangements in the alternative. The appellant are allowed to pay the rent w.e.f. 1st December, 2018 and onwards i.e. up to the date of moratorium. Rent of December, 2018 be paid by 15th February, 2019. Rent for the month of January, 2019 be paid by 28th February, 2019. Thereafter the rent for each month should be paid by 15th of next month. Appeal disposed off.

Summary

Issues:
- Non-payment of rent by the Corporate Debtor
- Disallowance of rent payment by the Committee of Creditors
- Direction by the Adjudicating Authority to pay rent or make alternative arrangements
- Argument regarding outstanding dues and security with the landlord
- Application of Section 14 moratorium on negotiation of security amount
- Granting of additional time to pay rent by the Appellate Tribunal

Analysis:
The judgment revolves around the issue of non-payment of rent by the Corporate Debtor, which led to the Resolution Professional seeking intervention from the Committee of Creditors. The Committee disallowed the payment of rent despite the Corporate Debtor being situated in rented premises. Upon the matter being brought before the Adjudicating Authority, it directed the Committee of Creditors to pay the rent from 1st December, 2018, or make suitable arrangements. The Adjudicating Authority's decision was based on the fact that Section 14 moratorium did not apply to the current rent, thus justifying the directive to pay the rent.

A crucial argument raised by the appellant, representing the Committee of Creditors, was regarding the outstanding dues amounting to Rs. Two crores and the security deposit of &8377; 3.4 crores held by the landlord. The appellant contended that the security amount should not be negotiable or adjustable against the rent payment. However, the Tribunal rejected this argument citing the order of the moratorium, which restricted such negotiations or adjustments. In light of this, the Tribunal upheld the Adjudicating Authority's decision to direct the parties to pay the rent from 1st December, 2018, onwards.

Furthermore, the Tribunal considered the request for additional time to pay the rent. The appellant sought an extension, which was granted by the Tribunal. The Tribunal allowed the appellant to pay the rent from 1st December, 2018, up to the date of the moratorium in installments. The rent for December 2018 was to be paid by 15th February 2019, and subsequent rents were to be paid by specific deadlines each month. The Tribunal also condoned a five-day delay in the appeal process and disposed of the appeal with the mentioned observations and directions, without imposing any costs.