2022 (3) TMI 362 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT - The Adjudicating Authority in the Impugned Judgment after noticing that claim of the Appellant arises out of a License Agreement under which Respondent has right to use immovable property, held that the claim arising out of grant of licence to use immovable property does not fall in the category of goods and services - the agreement clearly proves that immovable property was taken on license by the Corporate Debtor with effect from 1st June, 2017 for payment of license fee of ₹ 4 Lacs per month. The premises were obtained by the Corporate Debtor for commercial purposes for running an Educational Institute. The Application was filed by the Appellant due to outstanding dues arising out of License Agreement dated 15th April, 2017. Apart from the part payment for license fee for few months, the Corporate Debtor defaulted in making the payment of license fee. Tow cheques which were issued 20 Lacs each by the Corporate Debtor on 07th May, 2018 and 08th October, 2018 were dishonoured. The Adjudicating Authority in its Order had stated that since the Appellant has allowed the Respondent to use its immovable property to carry out business, it does not fall in the category of goods and services including employment. The claim of the Appellant under Section 9 of the Code arising out of liability which fell on the Corporate Debtor to make the payment of License Fee as agreement dated 15th April, 2017 when the License Fee having not been paid it was clearly debt which was in default. There being two divergent opinions of this Tribunal, it is necessary that an authoritative pronouncement be made with regard to the issues which has been raised i.e. whether License Fee pertaining to immovable premises taken by Licensee from Licensor for running commercial activity i.e. Educational Institute fall within the definition of Operational Debt - the matter needs to be placed before the Hon ble Chairperson on administrative side for constitution of a Larger Bench to resolve the conflict. Let the matter be placed before the Hon ble Chairperson on administrative side to constitute a Larger Bench for an authoritative Pronouncement - following two questions are framed for consideration before the Larger Bench i. Whether the Judgment of this Tribunal in Company Appeal (AT) (Ins.) No. 331 of 2019 in the matter of Mr. M. Ravindranath Reddy Vs. Mr. G. Kishan Ors. Lays down the correct law. ii. Whether claim of the Licensor for payment of License Fee for use and occupation of Immovable Premises for commercial purposes is a claim of Operational Debt within the meaning of Section 5(21) of the Code.

Summary

Issues Involved:
1. Whether the Appellant qualifies as an 'Operational Creditor' under the Insolvency and Bankruptcy Code, 2016.
2. Whether the claim arising from the License Agreement for immovable property constitutes an 'Operational Debt' under the Code.

Issue-wise Detailed Analysis:

1. Whether the Appellant qualifies as an 'Operational Creditor' under the Insolvency and Bankruptcy Code, 2016.

The Appellant filed an appeal against the judgment of the Adjudicating Authority (National Company Law Tribunal, Jaipur Bench) which rejected the Appellant's application under Section 9 of the Insolvency and Bankruptcy Code, 2016, holding that the Appellant is not an 'Operational Creditor'. The Appellant had entered into a 'Licence Agreement' with the Respondent for premises to run an Educational Establishment. The Respondent defaulted in paying the license fee, leading the Appellant to issue a Demand Notice under Section 8 of the Code and subsequently file an application under Section 9. The Adjudicating Authority rejected this application, stating that the Appellant does not fall under the category of 'Operational Creditor' as the claim did not arise from goods or services.

2. Whether the claim arising from the License Agreement for immovable property constitutes an 'Operational Debt' under the Code.

The Adjudicating Authority reasoned that the claim arising from the License Agreement does not fall under the category of goods or services, and therefore, the amount claimed is not an unpaid operational debt. The Tribunal examined the nature of the License Agreement dated 15th April 2017, which allowed the Respondent to use the premises for commercial purposes, specifically for running an Educational Institute. The Tribunal noted that the definition of 'Operational Debt' under Section 5(21) of the Code includes liabilities arising from transactions on operations. The Tribunal referenced the Hon'ble Supreme Court's judgment in "Mobilox Innovations (P) Ltd. Vs. Kirusa Software (P) Ltd." and the Bankruptcy Law Reforms Committee's report, which states that a lessor renting out space is considered an operational creditor.

The Tribunal also considered a previous judgment in "Anup Dubey Vs. National Agricultural Cooperative Marketing Federation of India Ltd. & Ors." where lease rentals for commercial purposes were deemed as 'Operational Debt'. However, there was a conflicting judgment in "Mr. M. Ravindranath Reddy Vs. Mr. G. Kishan & Ors." where enhanced lease rent was not considered as 'Operational Debt'.

Given the conflicting opinions, the Tribunal decided that an authoritative pronouncement was necessary to resolve the issue. The matter was referred to the Hon'ble Chairperson for the constitution of a 'Larger Bench' to address the following questions:
i. Whether the judgment in "Mr. M. Ravindranath Reddy Vs. Mr. G. Kishan & Ors." lays down the correct law.
ii. Whether the claim of the Licensor for payment of License Fee for the use and occupation of Immovable Premises for commercial purposes is a claim of 'Operational Debt' within the meaning of Section 5(21) of the Code.

Conclusion:
The Tribunal highlighted the need for a Larger Bench to resolve the conflict regarding whether the claim for license fees for immovable property used for commercial purposes constitutes 'Operational Debt' and whether the Appellant qualifies as an 'Operational Creditor' under the Insolvency and Bankruptcy Code, 2016.