2020 (1) TMI 180 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - alleged default due to the operational creditor by the corporate debtor - operational debt within the meaning of Section 5(21) of the Code or not - pre-existing dispute between the parties even before issuance of the Section 8 demand notice or not - HELD THAT - There is no evidence on record showing that the petitioner-operational creditor had ever agreed to adjust the rent from the Security Deposit which has an entirely different purpose. The corporate debtor is assuming on its own that the lease deed would extend to August, 2019 whereas it is determinable in June, 2019. Therefore, there is no plausible defence set up and there is no pre-existing dispute between the parties. The default stands established and there is no reason to deny the admission of the petition. It is needless to say that if any payment has been made that would be looked into by the Resolution Professional. In view of the above this Tribunal is inclined to admit this petition and accordingly initiate the process of CIRP of the Respondent-Corporate debtor. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Whether the debt claimed is an 'operational debt' within the meaning of Section 5(21) of the Insolvency and Bankruptcy Code, 2016.
2. Whether there is a pre-existing dispute between the parties before the issuance of the Section 8 demand notice by the Petitioner.

Detailed Analysis:

1. Whether the debt claimed is an 'operational debt' within the meaning of Section 5(21) of the Insolvency and Bankruptcy Code, 2016:
The petitioner, an operational creditor, filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against the respondent, Direct News Private Limited. The petitioner leased premises to the respondent, and the lease terms were modified through deeds dated 12.09.2016 and 14.06.2018. The respondent issued post-dated cheques for rent, which were dishonored, leading to a claimed default amounting to ?43,94,564.

The tribunal examined whether the debt qualifies as an 'operational debt' under Section 5(21) of the Code. The term 'Operational Debt' includes claims for the provision of goods or services. The tribunal noted that leasing premises for the respondent's operations constitutes providing infrastructure services, thus qualifying as the supply of services. The Bankruptcy Law Reforms Committee's report supported this view, stating that lessors renting out space are operational creditors. Consequently, the tribunal concluded that the petitioner is an 'Operational Creditor' within the meaning of Section 5(21) of the Code.

2. Whether there is a pre-existing dispute between the parties before the issuance of the Section 8 demand notice by the Petitioner:
The respondent argued that the claimed debt does not qualify as 'operational debt' and that there was a pre-existing dispute regarding the claimed amount. The respondent claimed to have communicated this dispute before the petition was filed and provided evidence of a reply to the demand notice under Section 8 of the Code. The respondent also cited correspondence about adjusting rent from the security deposit.

The tribunal reviewed the evidence, including emails and the lease agreement. An email dated 01.05.2019 indicated the respondent's intention to vacate the premises and requested adjustments from the security deposit. However, subsequent emails and dishonored cheques suggested that the lease was to expire on 30.06.2019, and the respondent was to vacate the premises by then. The tribunal found no evidence that the petitioner agreed to adjust rent from the security deposit, which had a different purpose per the lease agreement.

The tribunal referenced a judgment by the Hon'ble Appellate Tribunal, which held that dishonored cheques imply an acknowledgment of debt, not a dispute. Therefore, the tribunal concluded that there was no pre-existing dispute and no plausible defense from the respondent.

Judgment:
The tribunal admitted the petition, initiating the CIRP against the respondent. The name of Mr. Sanjeev Gupta was proposed as the Interim Resolution Professional (IRP). A moratorium was declared under Section 14 of the Code, and the IRP was directed to make a public announcement of the CIRP admission. The petitioner was instructed to deposit ?1 Lakh with the IRP for expenses, subject to adjustment by the Committee of Creditors. The ex-management was directed to provide all necessary documents and information to the IRP within a week. The tribunal also addressed general complaints about financial creditors' claims and emphasized the role of Resolution Professionals in settling such issues. The office was directed to communicate the order to all relevant parties and the Registrar of Companies for updating records.