2022 (5) TMI 203 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Rental Dues or Lease Payment - operational debt or not - Section 5(21) of IBC, 2016 - HELD THAT - The Hon'ble Appellate Tribunal in the matter of M. RAVINDRANATH REDDY VERSUS G. KISHAN 2020 (2) TMI 56 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI , held that dues in the nature of rent of immovable property do not fall under the head of Operational Debt as defined under Section 5(21) of IBC. The Tribunal further held that an Operational Debt is essentially a claim in respect of (a) provision of goods; (b) provision of services, including employment; or (c) a debt arising under any statute and payable to Government/local authority. If the claim by way of debt does not fall under any of these three categories, the claim cannot be categorised as an operational debt, even though there may be a liability or obligation due from the corporate debtor to the creditor and, hence, such a creditor disentitled from maintaining an application for initiation of corporate insolvency resolution process of the corporate debtor. The case of PROMILA TANEJA W/O SHRI RAJESH TANEJA VERSUS SURENDRI DESIGN PVT. LTD. THROUGH ITS DIRECTOR SHRI YOGESH CHAUDHARY 2020 (11) TMI 545 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI is subject matter of appeal before the Hon'ble Supreme Court wherein the judgment of the Hon'ble NCLAT is under challenge. The judgment of Hon'ble Supreme Court is awaited in this regard however no stay has been granted by the Apex Court in the appeal and only notice was ordered on 28.01.2021. Being the latest judgment, and since no stay was granted by the Hon'ble Apex Court, Promila Taneja decision is binding on this Tribunal, as on date. This Tribunal is of the considered opinion that the rental dues arising from the use of office space cannot be treated as an 'operational debt' under Section 5(21) of IBC, 2016 - petition dismissed.

Summary

Issues:
- Whether Rental Dues or Lease Payment constitute 'Operational Debt' under Section 5(21) of IBC, 2016.

Analysis:
1. The petition filed under section 9 of the Insolvency and Bankruptcy Code, 2016 sought to initiate Corporate Insolvency Resolution Process against the Corporate Debtor due to default in payment of rental dues amounting to Rs. 1,81,02,961.96.

2. The Service Agreements between the Operational Creditor and the Corporate Debtor outlined the terms of workspace provision, termination clauses, and notice periods for termination, emphasizing the importance of adhering to the agreement terms.

3. The Operational Creditor issued a Demand Notice under Section 8 of the IBC, 2016, demanding payment of unpaid dues, which was denied by the Corporate Debtor, leading to the initiation of the insolvency resolution process.

4. The main issue revolved around whether rental dues or lease payments could be classified as 'Operational Debt' as per Section 5(21) of the IBC, 2016, which necessitated a detailed legal analysis.

5. The Tribunal referenced various judicial precedents, including conflicting decisions by different benches of the Appellate Tribunal, to determine the classification of lease rentals as operational debt.

6. The Tribunal highlighted the divergent views expressed in different cases, such as 'M. Ravindranath Reddy v. G. Kishan' and 'Anup Sushil Dubey v National Agriculture Co-operative Marketing Federation of India Ltd.', regarding the classification of lease rentals as operational debt.

7. The Tribunal considered the judgment in 'Promila Taneja v Surendri Design Private Limited' and its relevance in determining whether lease of immovable property could be considered a supply of goods or services falling within the scope of operational debt.

8. The Tribunal acknowledged the pending appeal of 'Promila Taneja v Surendri Design Private Limited' before the Supreme Court, awaiting a final decision, but emphasized that as of the current date, the decision in 'Promila Taneja' was binding on the Tribunal.

9. Based on the observations and legal interpretations derived from the 'Promila Taneja' case, the Tribunal concluded that rental dues arising from the use of office space did not qualify as operational debt under Section 5(21) of the IBC, 2016.

10. Consequently, the Company Petition seeking initiation of Corporate Insolvency Resolution Process was dismissed, allowing the Petitioner to pursue alternative legal remedies if deemed appropriate, with no specific order as to costs.