2019 (11) TMI 619 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of outstanding amount - scope of 'Operational Debt' - HELD THAT - The definition of the term operational debt has four components, namely (1) goods; (ii) services; (iii) employment; and (iv) government dues - On the facts of our case, we would be concerned with the first two, that is provision of goods or services. We are of the view that supply of goods or services would mean such supply as is the input for either manufacturing or trading, in a business context, and that there should be a direct nexus between such input and output, for example and illustratively speaking, supply of raw material for manufacturing or goods for trading; or such services as are inextricably linked to the business as in supply of labour or maintenance services. The debt arising out of non-payment of lease rent does not fall under the definition of operational debt as defined u/s 5(21) of the Code of 2016 (even though it may otherwise be a debt), and the petitioner cannot be termed as an Operational creditor within the meaning of section 5(20) and for the purpose of the Code of 2016. The matter does not require interference - petition dismissed.

Issues Involved:
1. Whether the petitioner qualifies as an "Operational Creditor" under the Insolvency & Bankruptcy Code, 2016.
2. Whether the debt arising from non-payment of lease rent can be considered an "Operational Debt" under the Code.
3. Whether the petition is maintainable in light of the alleged pre-existing dispute regarding development costs.
4. Timeliness of the respondent's reply to the statutory notice under Section 8(2) of the Code.

Issue-wise Detailed Analysis:

1. Whether the petitioner qualifies as an "Operational Creditor" under the Insolvency & Bankruptcy Code, 2016:
The Tribunal examined whether M/s. Aurora Accessories Pvt. Ltd. could be considered an "Operational Creditor" under the Code. According to Section 5(20) of the Code, an "Operational Creditor" is defined as a person to whom an operational debt is owed. The Tribunal referenced previous judgments, including Parmod Yadav v. Divine Infracon (P.) Ltd. and Citicare Super Speciality Hospital v. Vighnaharta Health Visionaries (P.) Ltd., which emphasized that the provision of goods or services must have a direct nexus to the business operations of the debtor. The Tribunal concluded that the lease of immovable property does not qualify as the provision of goods or services, and therefore, the petitioner does not meet the definition of an "Operational Creditor."

2. Whether the debt arising from non-payment of lease rent can be considered an "Operational Debt" under the Code:
Section 5(21) of the Code defines "Operational Debt" as a claim in respect of the provision of goods or services, including employment or government dues. The Tribunal noted that the definition includes four components: goods, services, employment, and government dues. The Tribunal held that the lease of immovable property does not fit into any of these categories, as it does not constitute a direct input to the output produced or supplied by the corporate debtor. Therefore, the debt arising from non-payment of lease rent cannot be considered an "Operational Debt."

3. Whether the petition is maintainable in light of the alleged pre-existing dispute regarding development costs:
The respondent argued that there was a pre-existing dispute involving development costs of ?60,00,000, which should render the petition not maintainable. The Tribunal found no evidence to substantiate this claim and did not consider it a pre-existing dispute significant enough to affect the petition's maintainability. The Tribunal also dismissed the respondent's claim that the petitioner was not the owner of the property, as the petitioner was the lessor under the tenancy agreement.

4. Timeliness of the respondent's reply to the statutory notice under Section 8(2) of the Code:
The petitioner contended that the respondent's reply to the statutory notice was delayed beyond the period prescribed under Section 8(2) of the Code. The Tribunal held that the provision is directory rather than mandatory and that a delay in response does not invalidate the substantive legal issue at hand.

Conclusion:
The Tribunal concluded that the debt arising from non-payment of lease rent does not fall under the definition of "Operational Debt" as defined in Section 5(21) of the Code. Consequently, the petitioner cannot be considered an "Operational Creditor" under Section 5(20) of the Code. The petition was dismissed, with no costs awarded.

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