2022 (4) TMI 1448 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - security deposit till the end of the license period - existence of debt and dispute or not - HELD THAT - The payment of Rs.32,43,000/- is contemplated to be payment of interest free deposit towards advance license fee although it was contemplated to be retained as security deposit till the end of the lease period. Present is a case where although Agreement took place between the parties but the project could not take off and it was abandoned. Learned counsel for the Appellant disputes the fact that the project was abandoned. He says that it is matter of dispute. Be it as it may. It is for the Appellant to take remedies out of the Agreement and it is open for the parties to take legal proceedings as permitted in law. In view of the fact that the payment made was initially towards the advance license fee it was an operational debt, the Adjudicating Authority has rightly admitted the application under Section 9. Appeal dismissed.

Summary

Issues involved:
Admission of Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 based on a dispute regarding a sum of Rs.32,43,000 paid as an interest-free deposit towards an advance license fee, which was intended to be a security deposit till the end of the license period.

Analysis:

1. Admission of Application under Section 9:
The judgment revolves around the admission of an Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 by the Adjudicating Authority. The Operational Creditor had filed the application based on a dispute concerning a payment of Rs.32,43,000 as an interest-free deposit towards an advance license fee. The Adjudicating Authority had admitted the application, leading to the appeal before the National Company Law Appellate Tribunal (NCLAT). The Tribunal reviewed the circumstances of the case, where the Operational Creditor had made the payment towards the advance license fee, intended to be retained as a security deposit till the end of the license period.

2. Interpretation of Agreement Clause:
The Tribunal delved into the interpretation of Clause 5 of the Agreement dated 15.05.2019, which was a focal point of contention. The clause outlined the terms related to the payment of Rs.32,43,000 as an interest-free deposit towards the advance license fee. It specified that the amount would be retained as a security deposit by the licensor until the end of the license period and would be refunded after three years. The Tribunal noted that although the payment was initially meant as an advance towards the license fee, it was considered an operational debt due to the circumstances surrounding the project's abandonment.

3. Dispute Regarding Project Abandonment:
A significant aspect of the case was the dispute raised by the Appellant's counsel regarding the abandonment of the project. The counsel argued that the project's abandonment was a matter of dispute and contested the Adjudicating Authority's decision to admit the application under Section 9. However, the Tribunal emphasized that regardless of the project's status, the payment made towards the advance license fee constituted an operational debt, justifying the Adjudicating Authority's decision to admit the application.

4. Final Decision and Dismissal of Appeal:
After considering the arguments presented by the Appellant's counsel and examining the Agreement's terms, the Tribunal concluded that the payment made by the Operational Creditor was indeed towards the advance license fee, qualifying as an operational debt. Therefore, the Tribunal found no merit in the appeal and dismissed it, upholding the Adjudicating Authority's decision to admit the application under Section 9 of the Insolvency and Bankruptcy Code, 2016.

This detailed analysis of the judgment highlights the key issues surrounding the admission of the application under Section 9 and the interpretation of the Agreement's clause, ultimately leading to the dismissal of the appeal by the National Company Law Appellate Tribunal.