2021 (2) TMI 443 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - unpaid operational Debt due from M/s Web Date Systems Private Limited - Application under section 9 of the IBC before the NCLT, wherein it is mentioned in Part-IV for Particulars of Operational Debt is due - As per ANANT BIJAY SINGH, JUDICIAL MEMBER HELD THAT - The Ld. Adjudicating Authority has rightly distinguished the facts of the case from Judgment in M. RAVINDRANATH REDDY VERSUS G. KISHAN 2020 (2) TMI 56 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI of this Appellate Tribunal. In as much as this is not a simple case where the rent is due which is part of the rent. The Respondent No. 1 has provided different type of services to the Appellant which has been referred hereinabove. There are dues of electricity, diesel, sewer and water charges which are undisputed by the Corporate Debtor which is more than ₹ 1 Lac. We are of the considered view that the Ld. Adjudicating Authority has rightly admitted the Application filed under section 9 of IBC. Thus there are no merit in this Appeal. The Appellant has failed to demonstrate that the impugned order suffers from any legal infirmity. The Appeal being devoid of merit is dismissed. Interim orders, if any, stand vacated. As per V.P. SINGH, TECHNICAL MEMBER HELD THAT - In this case, the dispute relates to the deemed continuation of lease deed. The Corporate Debtor claims that lease of the ground floor was terminated after notice, and part of the premises was vacated. Per contra, the Operational Creditor claims that vacation of part premises was not permissible and therefore, lease rent for whole premises is recoverable as an operational debt. Thus, even if the Lease Rent is considered as an operational debt U/S 5(21) of the Code, in case of pre-existing dispute, such operational debt is beyond the scope of Sec 9 of the Insolvency Bankruptcy Code, 2016. Based on the demand notice, it is clear that the alleged operational debt is related to the lease rent of Ground Floor and Basement Floor of the said premises. In response to the demand notice dated 27th September 2018, the Corporate Debtor submitted its reply on 08th October 2018 - thus, it is clear that in reply to the demand notice, the Corporate Debtor had contended that there was a pre-existing dispute between the parties. The Corporate Debtor emphasised our attention towards mail dated 13th September 2018. It is clear that dispute between AITHENT and WDS existed till the date of issuance of demand notice, i.e. 27th September 2018. Since the provision of Section 9 can only be invoked for the realisation of the undisputed operational debt, the petition u/s 9 is thus, not maintainable - The Operational Creditor's contention is that since the basement floor and ground floor were part of the same lease deed, therefore, part vacation of the property and subsequent termination of lease for the said portion is not permissible. Therefore, the request made by the Corporate Debtor through an email dated 23rd March 2018 was not accepted. The Operational Creditor further wrote that in case the Corporate Debtor surrenders basement floor, new lease deed could be executed after full payment of ₹ 40,27,179/- - there was pre-existing dispute from the time before issuance of demand notice dated 27th September, 2018. The Adjudicating Authority has admitted the petition under section 9 without giving any finding on the pre-existing dispute, even though the Corporate Debtor has raised the plea in its reply to the demand notice. On perusal of the record of the case, I am satisfied that there is sufficient evidence to show that there was pre-existing dispute between the parties - Adjudicating Authority has admitted the petition ignoring the fact that the alleged dues are relating to the outstanding Lease Rent. In contrast, there is sufficient evidence to show that pre-existing dispute existed regarding vacation of part of the leasehold premises, i.e. Basement Floor only, despite there being a Joint lease Agreement for Ground Floor and Basement. Such questions cannot be decided in summary jurisdiction exercised by the Adjudicating Authority under the Code u/s 9 of the Code. The Application preferred by 1st Respondent under section 9 of the 'I B Code' is dismissed. The appellant 'Corporate Debtor' (company) is released from all the rigours of 'Moratorium' and is allowed to function through its Board of Directors with immediate effect. The 'Interim Resolution Professional'/'Resolution Professional' will provide and intimate the fees for the period he has functioned and costs of 'Corporate Insolvency Resolution Process' incurred by him to the Appellant/'Corporate Debtor' and amount, if any, already received. The 'Interim Resolution Professional' will hand over the assets and records to the Board of Directors of the Corporate Debtor. However, it is to be clarified that the view taken by me is in the minority. Hence, it shall not come into effect, and the view taken by the Hon'ble co-Members of the Bench shall prevail - application dismissed.

Summary

Issues Involved:
1. Whether the landlord providing lease qualifies as an operational creditor under Section 5(20) read with Section 5(21) of the Insolvency and Bankruptcy Code, 2016.
2. Whether the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 is maintainable in the presence of a pre-existing dispute.

Issue-wise Detailed Analysis:

1. Whether the landlord providing lease qualifies as an operational creditor:

The Appellant argued that the lease rent does not constitute an operational debt as defined under the Insolvency and Bankruptcy Code (IBC). They relied on the judgment in *Mr. M. Ravindranath Reddy v. Mr. G. Kishan & Ors.*, where it was held that lease of immovable property does not fall within the definition of operational debt. The Tribunal noted that operational debt is defined under Section 5(21) of the IBC as a claim in respect of the provision of goods or services, including employment, or a debt in respect of 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. The Tribunal held that lease rent does not fall under the categories of operational debt.

2. Whether the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 is maintainable in the presence of a pre-existing dispute:

The Appellant contended that there was a pre-existing dispute regarding the lease rent, which makes the petition under Section 9 of the IBC not maintainable. The Appellant pointed out various correspondences and meetings between the parties from March 2018 to September 2018, indicating disputes over the lease terms and rent payments. The Tribunal referred to the Supreme Court judgment in *Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd.*, which mandates that if there is a pre-existing dispute, the petition under Section 9 must be rejected. The Tribunal found that there was sufficient evidence of a pre-existing dispute regarding the lease agreement and rent payments.

Separate Judgment by the Technical Member:

The Technical Member dissented from the majority view, emphasizing that the petition under Section 9 should be dismissed due to the pre-existing dispute. The Technical Member referred to the email correspondences and meetings between the parties, indicating ongoing disputes about the lease terms and rent payments. The Technical Member concluded that the existence of a pre-existing dispute makes the petition under Section 9 of the IBC not maintainable.

Conclusion:

The majority judgment affirmed the order of the National Company Law Tribunal, Kolkata Bench, admitting the application under Section 9 of the IBC. The Tribunal held that the dues for electricity, diesel, sewer, and water charges, which were undisputed and exceeded the threshold limit, constituted operational debt. The Tribunal distinguished the facts of the case from the *Mr. M. Ravindranath Reddy* judgment and concluded that the application under Section 9 was maintainable. The appeal was dismissed, and the impugned order was affirmed. The Technical Member's dissenting opinion highlighted the pre-existing dispute and argued for the dismissal of the petition under Section 9.