2020 (10) TMI 868 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - unpaid License Fee - Operational Creditor - existence of debt and dispute or not. Whether the unpaid Licence Fee arising out of Licence Agreement with regard to immovable property falls under the definition of Operational Debt as defined under the provisions of the Insolvency and Bankruptcy Code, 2016? - HELD THAT - Only if the claim by way of debt falls within one of the three categories as listed above can such a claim be categorized as an operational debt. In case if the amount claimed does not fall under any of the categories mentioned as above, the claim cannot be categorized as an operational debt and even though there might be a liability or obligation due from one person, namely Corporate Debtor to another, namely Creditor other than the Government or local authority, such a creditor cannot categorize itself as an operational creditor as defined under Section 5(21) of IBC, 2016 unless it is established that such goods or services has direct relationship to input-output operations of the Corporate Debtor and hence disentitles such a person from maintaining an application for CIRP against the corporate debtor as an Operational Creditor. There seems to be some rationale in restricting only to Operational Creditors for Initiating a CIRP against a Corporate Debtor other than a Financial Creditor, Default committed to operational creditors in relation to payment of their debt definitely connotes that the Corporate Debtor is not even in a position to service their dues and run the day to day operations of the Corporate Debtor which is a clear pointer to its commercial insolvency warranting the process of insolvency being initiated and restructuring process being put in place. This Tribunal is refraining from going into the aspect where the immovable property in itself constitutes stock-in-trade of the corporate person and has a direct nexus to its input-output and being an integral part of the operation, In the instant case no such specific pleading to support such a contention has been placed on record by the petitioner, In fact even the Memorandum and Articles of Association of the Corporate Debtor has not been filed from which atleast the object for which the Corporate Debtor has been incorporated can be gathered, Thus, this Tribunal is of the view that lease of immovable property cannot be considered as a supply of goods or rendering of any services and thus cannot fall within the definition of operational debt'. In the present Application the claim of the Applicant has arisen out of a Licence Agreement whereby the Applicant had granted, to the Respondent, the right to use its immovable property to carry out business. It can be concluded that the claim arising out of grant of licence to use immovable property does not fall in the category of goods or services including employment and is also not a debt for the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government, or any Local Authority, as defined under Section 5(21) of IBC, 2016. Thus, the amount claimed in the present petition is not an unpaid operational debt and therefore the Application cannot be allowed. Application dismissed without costs.

Summary

Issues Involved:
1. Whether the unpaid License Fee arising out of a License Agreement with regard to immovable property falls under the definition of Operational Debt as defined under the Insolvency and Bankruptcy Code, 2016?

Issue-wise Detailed Analysis:

1. Definition of Operational Debt:
The primary issue revolves around the classification of unpaid license fees as "Operational Debt" under the Insolvency and Bankruptcy Code (IBC), 2016. The Applicant, a Private Limited Company, sought to initiate Corporate Insolvency Resolution Process (CIRP) against the Respondent for non-payment of license fees. The Applicant argued that the license fee qualifies as an operational debt because it constitutes a supply of service as per Section 2(a) & 2(b) of the Central Goods and Services Tax, 2017. The Applicant cited the Supreme Court judgment in Mobilox Innovations Pvt. Ltd. v. Kirusa Software (P) Ltd., which recognized lessors as operational creditors.

2. Respondent's Objection:
The Respondent contended that the Applicant is not an operational creditor as defined under IBC, 2016. The Respondent argued that the claim is based on license fees, not goods or services, and thus does not fall within the definition of "Operational Debt" under Section 5(21) of the IBC. The Respondent also highlighted that there was a pre-existing dispute, evidenced by a legal notice and a pending injunction suit.

3. Pre-Existence of Dispute:
The Respondent emphasized that the cheques issued were meant as a security deposit and were contingent on the Applicant fulfilling certain obligations, which were allegedly not met. The Respondent also pointed out that an injunction order was issued by the Additional Civil Court, Jaipur, prohibiting the Applicant from evicting the Respondent or obstructing the use of the premises.

4. Applicant's Rejoinder:
The Applicant refuted the Respondent's claims, asserting that the legal notice was never served and that the civil proceeding had no bearing on the present application. The Applicant maintained that the license fee constitutes an operational debt and relied on Supreme Court judgments to support their position.

5. Tribunal's Analysis:
The Tribunal examined the definitions under the IBC, including "claim," "debt," and "operational debt." It referred to previous judgments, including Mrs. Pramod Yadav v. Divine Infracon Private Limited and Jindal Steel and Power Limited v. DCM International Limited, which clarified that claims arising from immovable property transactions do not fall under the definition of operational debt unless directly related to the input-output operations of the corporate debtor.

6. Conclusion:
The Tribunal concluded that the claim arising from the license agreement does not qualify as an operational debt under Section 5(21) of the IBC, 2016. The unpaid license fee does not fall within the categories of goods or services, employment, or dues payable to governmental authorities. Consequently, the application was dismissed without costs, and the Tribunal clarified that the order would not prejudice any other proceedings between the parties in other judicial forums.

Final Order:
The Application bearing IB No. 176/9/JPR/2019 was dismissed without costs. The order was made in terms of Section 9(5)(ii) of IBC, 2016, based on the facts and pleadings submitted by the parties, and shall not prejudice any other proceedings between the parties in other courts or tribunals.