2017 (10) TMI 1066 - Tri - Insolvency and Bankruptcy

Corporate insolvency procedure - whether there is an existing dispute between the parties before the issuance of notice under Section 8 of the Code? and whether the dispute is substantial or it is merely an illusory defence raised by the Corporate Debtor to defeat the process? - Held that - The licensor has been held entitled to recover possession of such premises from the licensee on the expiry of the period of licensee by making an application to the Competent authority. In accordance with sub section 2 of Section 24 if a licensee fails to deliver possession of residential premises on the expiry of the period of licensee and continues in possession of the licensed premises then he is liable to pay damages at double the rate of the licence fee or charge of the premises fixed under the agreement of licence. On the one hand there is a serious dispute whether the Corporate Debtor-respondent has vacated the premises comprised of basement second third and fourth floor of the licensed premises on 11.04.2016 or it has retained possession of the whole till November 2016. The property in dispute is commercial in character which is an admitted fact. Therefore there is a serious dispute with regard to the application of Section 24 to the commercial premises because Section 24 applies only to residential premises as expressly provided. The parties have agreed to abide by the provisions of Section 24 but the Operational Creditor has not invoked any such provision by moving appropriate application before the Competent authority under the Rent Act. Moreover these disputes have been in existence as the details of dispute are placed on record which date back to 13.01.2017 (Annexure-14) a notice sent by the Operational Creditor to the Corporate Debtor which was duly replied on 06.02.2017 (Annexure-15). There are again notices dated 16.03.2017 and 31.03.2017 (Annexure-16 and then vacation of a substantial part of leased premises would need further investigation. We cannot conclude that there is no dispute. Therefore we are unable to persuade ourselves to accept the contention that the defence raised by the Corporate Debtor is illusory and moonshine. There in fact exists a real and serious dispute which may have to be resolved at an appropriate forum. Thus this application fails and the same is dismissed.

Summary

Issues Involved:
1. Existence of a Dispute: Whether there was an existing dispute between the parties before the issuance of notice under Section 8 of the Insolvency and Bankruptcy Code, 2016.
2. Operational Creditor Status: Whether the applicant qualifies as an Operational Creditor and if the amount due can be considered as operational debt.
3. Application of Section 24 of the Maharashtra Rent Control Act, 1999: Whether the provisions of Section 24 apply to the commercial premises in question.

Detailed Analysis:

1. Existence of a Dispute:
The core issue for determination was whether there was an existing dispute between the parties before the issuance of the notice under Section 8 of the Insolvency and Bankruptcy Code, 2016, and whether the dispute was substantial or merely an illusory defense raised by the Corporate Debtor to defeat the process. The Tribunal referred to the Supreme Court's decision in Mobilox Innovations Private Limited v. Kirusa Software Private Limited, which clarified that the dispute is not confined only to arbitration or civil suit as expressly provided in Section 8 (2) of the Code. The Supreme Court observed that the dispute might arise even a few days before the date of admission of the petition, and the adjudicating authority must reject the application if there is a plausible contention requiring further investigation and that the dispute is not patently feeble or an assertion of fact unsupported by evidence.

In the present case, the Tribunal found that there was a substantial dispute between the parties. The Corporate Debtor had raised several issues, including the existence of an oral agreement for the extension of the lease and the partial vacation of the premises, which required further investigation. Therefore, the Tribunal concluded that there was a real and serious dispute that needed to be resolved at an appropriate forum.

2. Operational Creditor Status:
The Corporate Debtor disputed the status of the applicant as an Operational Creditor and claimed that the amount due could not be considered as operational debt. The Tribunal did not explicitly address this issue in detail but focused on the existence of a dispute, which was sufficient to reject the application under Section 9 of the Code.

3. Application of Section 24 of the Maharashtra Rent Control Act, 1999:
The applicant relied on clause 17.5.6 of the Leave and License Agreement, which provided for the payment of double the license fee in case of overstay beyond the lease period. The Corporate Debtor argued that this clause could not apply as it pertains only to residential premises, whereas the premises in question were commercial. The Tribunal examined Section 24 of the Maharashtra Rent Control Act, which applies to residential premises and entitles the landlord to recover possession and claim double the license fee as damages for overstay.

The Tribunal found that there was a serious dispute regarding the application of Section 24 to the commercial premises. The Operational Creditor had not invoked the provisions of Section 24 by moving an appropriate application before the Competent Authority under the Rent Act. Furthermore, the dispute regarding the vacation of the premises and the alleged oral agreement for lease extension required further investigation. Therefore, the Tribunal concluded that the defense raised by the Corporate Debtor was not illusory or moonshine.

Conclusion:
The Tribunal dismissed the application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, due to the existence of a real and substantial dispute between the parties, which required resolution at an appropriate forum. The defense raised by the Corporate Debtor was considered plausible and not merely an attempt to defeat the insolvency process.