2018 (6) TMI 973 - AT - Insolvency and Bankruptcy

Corporate insolvency process - whether appeal under Section 9 of the I & B Code was not maintainable against the second respondent, who was not the lessee or tenant of the Mahesh Madhavan (Operational Creditor)? - Held that - Mr. Mahesh Madhavan (Operational Creditor) had not entered into any agreement with M/s. Black N. Green Mobile Solutions Pvt. Ltd. (Corporate Debtor). The Agreement dated 3rd December, 2012 was reached between Mr. Mahesh Madhavan (Operational Creditor) with one M/s. Universal Power Systems Pvt. Ltd. and not with the Corporate Debtor in question. M/s. Black N. Green Mobile Solutions Pvt. Ltd. (Corporate Debtor) is not in the occupation of the premises on the basis of aforesaid agreement dated 3rd December, 2012. A separate lease dated 27th March, 2015 was entered into between Mrs. Kaneez Fathima Khader and four others (Lessor) and M/s. Black N. Green Mobile Solutions Pvt. Ltd. (Lessee). Merely because sub-tenant is occupying the premises does not mean of landlord tenant that Mr. Mahesh Madhavan is Operational Creditor of M/s. Black N. Green Mobile Solutions Pvt. Ltd.. Sub-tenant has no liability to pay the rent to the original owner of the premises, but to the tenant with which it has executed the agreement. If part of the payment was made directly by the sub-tenant to Mr. Mahesh Madhavan (Operational Creditor) it will not create the relationship of Operational Creditor and the Corporate Debtor between the aforesaid two persons. The Adjudicating Authority having failed to notice the aforesaid fact wrongly admitted the application and in absence of any relationship between Mr. Mahesh Madhavan (Operational Creditor) and M/s. Black N. Green Mobile Solutions Pvt. Ltd. as Corporate Debtor, the petition under Section 9 was not maintainable and was fit to be rejected.

Summary

Issues:
1. Maintainability of appeal under Section 9 of the Insolvency and Bankruptcy Code against a sub-tenant.
2. Whether a sub-tenant can be treated as a Corporate Debtor of the owner of the premises.
3. Interpretation of lease agreements and their implications on insolvency proceedings.

Issue 1:
The appellant contended that the appeal under Section 9 of the Insolvency and Bankruptcy Code was not maintainable against the second respondent, who was not the lessee or tenant of the Operational Creditor. The main plea was based on the lack of direct agreement between the Operational Creditor and the Corporate Debtor.

Issue 2:
The question raised was whether a sub-tenant could be considered a Corporate Debtor of the owner of the premises. The Tribunal analyzed the lease agreements to determine the legal relationship between the parties involved, emphasizing that the sub-tenant's occupation did not establish a direct liability towards the Operational Creditor.

Issue 3:
The Tribunal scrutinized the lease agreements executed between the parties to ascertain the obligations and liabilities under the agreements. It was highlighted that the sub-tenant's payment directly to the Operational Creditor did not establish a creditor-debtor relationship between the Operational Creditor and the Corporate Debtor.

The Tribunal found that the Operational Creditor had not entered into any agreement with the Corporate Debtor directly. The separate lease agreement between the original lessors and the Corporate Debtor indicated that the sub-tenant's payments to the Operational Creditor did not create a creditor-debtor relationship between them. Consequently, the Tribunal set aside the impugned order, declaring the application under Section 9 of the I&B Code as not maintainable.

In conclusion, all orders related to the appointment of a Resolution Professional, declaration of moratorium, freezing of accounts, and other actions were deemed illegal and set aside. The Corporate Debtor was released from the insolvency proceedings, allowing it to function independently. The Tribunal directed the Adjudicating Authority to determine the fees of the Resolution Professional, to be borne by the Corporate Debtor, with no order as to costs in the appeal.