2019 (4) TMI 939 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - Operational Creditor - Operational Debt - section 9 of the I B Code - Held that - Arrears of rent arising out of the Agreement to licensee no where exclude from its purview - the objection that the claim of the applicant is not an operational debt is not sustainable under the provisions of the Code and is found devoid of any merit. Admittedly, the agreement for license has been executed on 1st day of January 2016 and the letter dated 04.09.2017 i.e. Annexure-A shows that they have not obtained legal permission to rent out the premises from the Urban Development Department and they have proposed to rent out the space limited to 1665 Sqft. carpet area and not 2281 Sqft. of super built up area. No valid explanation forthcoming as to why there is a difference in the reduction of sq. ft. in the letter for permission sent by the applicant to the authority which would have send before leasing out the premises to the respondent. It is an indication that there was a deliberation in between the applicant and the respondent in respect of the area in use by the respondent. It is a circumstance strengthening that there was a mutual understanding for reduction of the area in use by the respondent. The respondent being established per-existing dispute comes under Section 5(6) of the Code, an application of this nature is not found maintainable - this petition is liable to be rejected.

Summary

Issues Involved:
1. Whether the applicant is an operational creditor and the amount claimed is an operational debt.
2. Whether there arises bona fide dispute in respect of the claim of arrears of rent as alleged.
3. Reliefs and costs.

Detailed Analysis:

1. Whether the applicant is an operational creditor and the amount claimed is an operational debt:

The applicant, a landlady, licensed a portion of her premises to the respondent under a License Agreement for a period of nine years. The respondent occupied the premises, running a restaurant, and paid rent until November 2016, after which defaults occurred. The applicant claimed arrears of rent amounting to ?40,96,295/- inclusive of 18% interest per annum.

The respondent contended that the applicant does not fall within the meaning of an operational creditor and that the debt claimed is not an operational debt. However, the Tribunal referred to Section 5(21) of the Insolvency & Bankruptcy Code 2016, which defines "operational debt" to include claims arising from the provision of goods or services, including rent. The Tribunal also cited the judgment in Mobilox Innovations (P) Ltd., which clarified that a lessor who rents out space is an operational creditor to whom the entity owes monthly rent. Therefore, the Tribunal concluded that the claim for arrears of rent is an operational debt, and the applicant is an operational creditor.

2. Whether there arises bona fide dispute in respect of the claim of arrears of rent as alleged:

The respondent argued that there was a pre-existing dispute regarding the actual area of the premises and the rate of electricity charges. The License Agreement mentioned an area of 2,281 Sqft., but the respondent discovered the actual carpet area to be 1,665 Sqft. The respondent claimed there was a mutual understanding to adjust the rent based on the actual carpet area, which the applicant did not honor.

The Tribunal observed that the applicant's letter to the Urban Development Department mentioned renting out 1,665 Sqft., indicating a mutual understanding for the reduced area. Furthermore, the rent bill showed the carpet area as 1,665 Sqft., but the rent was not proportionally reduced. The Tribunal also noted the complaint filed by the applicant under Section 144(2) of the Cr.P.C., which was dismissed by the Executive Magistrate, directing the applicant to approach the Civil Court.

The Tribunal concluded that there was a bona fide dispute regarding the area of the premises and the rate of rent, which required further investigation. The Tribunal referred to the Mobilox Innovations (P.) Ltd. judgment, which emphasized that the adjudicating authority must reject the application if there is a plausible contention requiring further investigation.

3. Reliefs and costs:

The Tribunal found that the existence of a bona fide dispute was established, and the application was not maintainable under Section 9 of the Insolvency & Bankruptcy Code. The Tribunal rejected the petition but did not order any costs.

Conclusion:

The Tribunal concluded that the applicant is an operational creditor and the claim for arrears of rent is an operational debt. However, the existence of a bona fide dispute regarding the area of the premises and the rate of rent required further investigation, making the application not maintainable. The petition was rejected without any order as to costs.