2022 (9) TMI 171 - Tri - 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 - whether the outstanding lease rental will be considered as operational debt under the Code or not? - HELD THAT - Hon ble National Company Law Appellate Tribunal (NCLAT) in the case of Anup Sushil Dubey vs. National Agriculture Co-operative Marketing Federation of India Ltd. and Ors. 2020 (10) TMI 331 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI where it was held that 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 . Thus, this Tribunal, therefore, is satisfied that the outstanding lease rental in case of a property so leased for commercial purposes, as in the instant case, will be covered under operational debt within the meaning of section 5(21) of the Code. In the instant matter, the Corporate Debtor has established that there were existing disputes in relation to the debt before the receipt of the demand notice by the Corporate Debtor. Further, the Operational Creditor was notified of such pre-existing disputes by the Corporate Debtor in its reply to the said demand notice - In the instant matter, the Operational Creditor has failed to satisfy the Adjudicating Authority regarding the insolvency of the Corporate Debtor and therefore the need to initiate insolvency resolution process against it. This Adjudicating Authority is satisfied that the instant petition is liable to be rejected - petition dismissed.

Issues Involved:

1. Whether the outstanding lease rental qualifies as an operational debt under the Insolvency and Bankruptcy Code, 2016.
2. The admissibility of the lease agreement as evidence due to it being insufficiently stamped.
3. Existence of pre-existing disputes regarding the debt.
4. Determination of the date of default.
5. Timeliness of the Corporate Debtor's reply to the demand notice.

Issue-wise Detailed Analysis:

1. Whether the outstanding lease rental qualifies as an operational debt under the Insolvency and Bankruptcy Code, 2016:

The Tribunal referred to the decisions of the Hon'ble National Company Law Appellate Tribunal (NCLAT) in *Anup Sushil Dubey vs. National Agriculture Co-operative Marketing Federation of India Ltd. and Ors.* and *Jaipur Trade Expocentre Private Limited Vs. Metro Jet Airways Training Private Limited*, which held that lease rentals for commercial purposes qualify as 'operational debt' under Section 5(21) of the Code. Consequently, the Tribunal concluded that the outstanding lease rental in this case is indeed an operational debt.

2. The admissibility of the lease agreement as evidence due to it being insufficiently stamped:

The Corporate Debtor argued that the lease agreement was inadmissible as evidence due to insufficient stamping. The Tribunal relied on the Supreme Court's decision in *Avinash Kumar Chauhan vs. Vijay Krishna Mishra*, which held that an instrument chargeable with duty must be stamped to be admissible in evidence. The Tribunal concluded that the lease agreement, being insufficiently stamped, could not be considered in determining the alleged debt.

3. Existence of pre-existing disputes regarding the debt:

The Corporate Debtor provided evidence of several emails and letters sent to the Operational Creditor between February 2017 and September 2017, highlighting maintenance issues and requesting remedial actions. The Tribunal noted that these communications indicated a pre-existing dispute. The Hon'ble Supreme Court's decision in *Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited* was cited, which clarified that the existence of a genuine dispute precludes the initiation of the insolvency process. The Tribunal found that the Corporate Debtor had established the existence of such a dispute before receiving the demand notice.

4. Determination of the date of default:

The Operational Creditor claimed the debt fell due from 1st September 2017, while the demand notice stated 1st August 2017. The Tribunal noted inconsistencies in the dates provided by the Operational Creditor and observed that the Bank accounts showed cheques deposited on 6th September 2017. Thus, the Tribunal found it challenging to determine a clear date of default based on the documents provided.

5. Timeliness of the Corporate Debtor's reply to the demand notice:

The Operational Creditor argued that the Corporate Debtor's reply was not sent within the prescribed 10-day period. The Tribunal referred to the NCLAT's decision in *Subhash Chandra Goyal Sole vs. K B Ispat Private Ltd.*, which held that a delayed reply could be condoned if it was made within a reasonable period. The Tribunal condoned the delay in the Corporate Debtor's reply, noting it was sent shortly after the 10-day period.

Conclusion:

The Tribunal concluded that the Operational Creditor failed to demonstrate the insolvency of the Corporate Debtor and the necessity to initiate the insolvency resolution process. Consequently, the petition was rejected. The Tribunal emphasized that the Operational Creditor could pursue remedies under other laws, and the dismissal of the petition would not hinder such pursuits.

← Previous Next →