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2020 (10) TMI 331 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - dues arising from the Leave and Licence Agreement - Operational Debt or not - existence of Pre-Existing Dispute prior to the issuance of the Demand Notice or not - HELD THAT - The subject lease rentals arising out of use and occupation of a cold storage unit which is for Commercial Purpose is an Operational Debt as envisaged under Section 5 (21) of the Code. Further, in so far as the facts and attendant circumstances of the instant case on hand is concerned, the dues claimed by the First Respondent in the subject matter and issue, squarely falls within the ambit of the definition of Operational Debt as defined under Section 5 (21) of the Code. Pre-existing dispute or not - HELD THAT - It is evident that the communication relied upon by the Counsel for the Appellant does not establish any substantial Pre-Existing Dispute . Applying the test of existence of a dispute it is evident that without going into merits of the disputes, the argument raised by the Appellant cannot be construed as a plausible contention requiring further investigation or an assertion of facts supported by evidence. The defence is spurious, mere bluster and not a tenable one in the eye of law, in the considered opinion of this Tribunal. A dispute does not truly exist in fact between the Parties and, therefore, this Tribunal holds that the communication on record specifically the letter dated 19.09.2018, addressed by the Appellant themselves prior to the issuance of the Demand Notice clearly establishes that there is a Debt due and payable and there is no Pre-Existing Dispute . This Tribunal holds that there is no illegality or infirmity in the Impugned Order of the Adjudicating Authority in admitting the Application - Application admitted - appeal dismissed.
Issues Involved:
1. Whether dues arising from the 'Leave and Licence Agreement' are construed as 'Operational Debt'. 2. Whether there is any 'Pre-Existing Dispute' prior to the issuance of the Demand Notice. Detailed Analysis: Issue 1: Whether dues arising from the 'Leave and Licence Agreement' are construed as 'Operational Debt'. The Tribunal first examined if the dues from the 'Leave and Licence Agreement' qualify as 'Operational Debt' under Section 5(21) of the I&B Code. The criteria for 'Operational Debt' include claims in respect of provisions for goods and services, employment, or debt in respect of dues under any law in force. The Tribunal referred to various definitions under the Code, including 'claim', 'debt', 'default', 'operational creditor', and 'operational debt'. The Tribunal noted that the First Respondent, NAFED, provided cold storage facilities under a commercial agreement, which constitutes a service. This interpretation aligns with the Supreme Court's observation in Mobilox Innovations Private Limited v. Kirusa Software Private Limited, which stated that lease rentals for commercial purposes fall within the ambit of 'Operational Debt'. Additionally, the Tribunal referenced the Consumer Protection Act and the Central Goods and Services Tax Act, which classify leasing of commercial property as a service. The Tribunal concluded that the lease rentals arising from the use and occupation of a cold storage unit for commercial purposes qualify as 'Operational Debt' under Section 5(21) of the Code. Issue 2: Whether there is any 'Pre-Existing Dispute' prior to the issuance of the Demand Notice. The Tribunal examined whether there was a 'Pre-Existing Dispute' that would invalidate the Demand Notice issued under Section 8 of the Code. The definition of 'dispute' includes suits or arbitration proceedings relating to the existence of the debt, the quality of goods or services, or a breach of representation or warranty. The Tribunal reviewed the correspondence between the parties, including a letter dated 01.06.2017, which acknowledged outstanding rents and electricity charges. Despite the termination of the agreement on 23.08.2017, the Corporate Debtor continued to occupy the premises and sought an extension of the agreement, as evidenced by a letter dated 19.09.2018. The Tribunal found that the Corporate Debtor's communication prior to the issuance of the Demand Notice indicated an acknowledgment of the debt and a request for an extension of the lease. This undermined the argument of a 'Pre-Existing Dispute'. The Tribunal emphasized that a dispute must be genuine and supported by evidence, not merely a spurious or feeble legal argument. The Tribunal held that there was no substantial 'Pre-Existing Dispute' and that the debt was due and payable. The Tribunal dismissed the appeal, affirming the Adjudicating Authority's decision to admit the application for initiating the Corporate Insolvency Resolution Process (CIRP). Conclusion: The Tribunal concluded that the dues from the 'Leave and Licence Agreement' qualify as 'Operational Debt' and that there was no 'Pre-Existing Dispute' prior to the issuance of the Demand Notice. The appeal was dismissed, and the application for initiating CIRP was upheld.
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