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2019 (10) TMI 454 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor committed default towards arrears of rent - existence of dispute or not? - HELD THAT - It is settled position of law that proceedings under provisions of Code are summary in nature and disputed questions fact and law cannot be gone into under it - In the instant case the terms and conditions as per the Lease Deed in question are not complied with by the Petitioner especially with regard statutory permission occupancy Certificate etc. to claim any rent under the Deed. Therefore whether the Petitioner is entitled to claim rents on the leased property itself is in dispute and the Respondent has also raised prior dispute. Therefore proceedings initiated by the Petitioner under the Code are misconceived and the Petitioner also failed to make out any case that the outstanding amount is free from dispute and the claimed amount is also varying and not correlated as detailed supra. Therefore the petition is liable to be dismissed. Petition dismissed.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016. 2. Default in payment of rent by the Corporate Debtor. 3. Compliance with lease deed terms and conditions. 4. Alleged misrepresentations and statutory non-compliance by the Petitioner. 5. Existence of a prior dispute. 6. Appropriateness of invoking IBC provisions. Issue-wise Detailed Analysis: 1. Initiation of CIRP under Section 9 of IBC, 2016: The Petitioner, M/s. Pleasant Valley Development Private Limited, sought to initiate CIRP against M/s. Spaine Hospitality Private Limited under Section 9 of the IBC, 2016, for a default amounting to ?1,60,67,240, inclusive of interest at 24% per annum, towards arrears of rent. 2. Default in Payment of Rent by the Corporate Debtor: The Petitioner claimed that the Corporate Debtor failed to pay the agreed rent as per the lease deed, despite several requests and legal notices. The rent for the first year was ?2,70,000 per month, with subsequent increases. The Corporate Debtor was issued a demand notice on 25.10.2018, claiming unpaid rent dues of ?52,78,500 for 17 months. 3. Compliance with Lease Deed Terms and Conditions: The lease deed dated 10.12.2015 included several terms and conditions, such as a lock-in period of 36 months, a monthly rent of ?2,70,000, and an interest-free refundable security deposit of ?26,00,000. The lease could be terminated if the lessor defaulted on its obligations or if the lessee failed to pay rent for three consecutive months. 4. Alleged Misrepresentations and Statutory Non-Compliance by the Petitioner: The Corporate Debtor contended that the Petitioner misrepresented the compliance status of the leased premises, claiming it was fit for commercial use. The Corporate Debtor discovered that the building lacked necessary statutory approvals, such as an occupancy certificate from the Bruhat Bengaluru Mahanagara Palike (BBMP). Despite investing substantially in the premises, the Corporate Debtor could not commence operations due to the Petitioner's failure to provide the required documentation. 5. Existence of a Prior Dispute: The Corporate Debtor raised substantial disputes regarding the Petitioner's compliance with the lease deed, alleging that the building was constructed illegally and lacked necessary approvals. The Petitioner failed to address these issues, which were highlighted in the Corporate Debtor's reply to the demand notice. 6. Appropriateness of Invoking IBC Provisions: The Tribunal noted that proceedings under the IBC are summary in nature and cannot address disputed questions of fact and law. The Petitioner did not fulfill its obligations under the lease deed, particularly regarding statutory permissions and occupancy certificates. The Tribunal found that the Petitioner had alternative remedies, such as eviction and recovery proceedings, which were not pursued. The existence of a prior dispute and the Petitioner's failure to substantiate its claims led to the conclusion that the proceedings under the IBC were misconceived. Conclusion: The Tribunal dismissed the petition (C.P. (IB) No. 134/BB/2019) filed by the Petitioner, stating that the proceedings under the IBC were not appropriate due to the existence of substantial disputes and the Petitioner's failure to comply with the lease deed terms. The Tribunal emphasized that the Petitioner could seek other remedies available under the law to address its grievances. No order as to costs was made.
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