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TMI Blog2022 (6) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... e of 18% p.a. 3. The case of the Operational Creditor is as under: a) The Operational Creditor is the Proprietor of Amar Properties. Amar Properties is the owner of the premises comprising of Ground plus 2 Floors admeasuring about 3000 Sq. Ft. situated at Amar Enterprises Business Complex, CTS No. 116, Kala Marg, Kurla, Mumbai-400070. The said premises were given on Lease to the Corporate Debtor on Leave and License basis for a period of 55 months starting from 01.07.2014 and ending on 30.12.2018. b) By way of a letter dated 19.09.2018 the Operational Creditor, called upon Corporate Debtor to vacate the said premises thereby terminating the aforesaid mentioned Agreement. On 16.11.2018, the operational creditor raised an invoice on corporate debt for views of the terrace space admeasuring around 10,000 Sq. Ft. in the said premises. The Said terrace space was allowed to be used by Corporate Debtor for its Automobile Service Workshop. Based on such mutual understanding, the lease rent was decided based on a rate of Re. 1/- per Sq. Ft. per day, which was far lower than the prevailing market rate at that time. The said terrace space was used for storage of good and ancillary works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Creditor sent a reminder letter seeking payment of the two invoices dated 16.11.2018 and 08.01.2019 and rents at double the rate i.e. Rs.24,31,1000/- (Rupees twenty-three lakh thirtyone thousand only) per month along with applicable interest at 18% p.a. on and from February, 20189. An Email was also sent by the Operational Creditor along with the reminder letters to the Corporate Debtor seeking payment of the dues. h) In the letter sent by the Corporate Debtor, it was stated by the Corporate Debtor that possession was already handed over to the Operational Creditor. However, no formal documents/evidence has been stated clearly mentioning the date of handing over of the possession by the Corporate Debtor. 4. The Corporate Debtor has issued Demand Notice dated 09.10.2019 to the Corporate Debtor in Form 4 under section 8 of the Code claiming the total outstanding of Rs.3,58,55,270/- (Rupees three crore fifty-eight lakh fifty-five thousand two hundred seventy only). The Corporate Debtor has replied to said Demand Notice vide its letter dated 16.10.2019 denying the liability to pay the debt but without denying their actual use and occupation of the said premises based on Leave and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.10.2019 by a rejoinder on dated 16.11.2019 clarifying the matter and requesting for refund of the balance amount of the aforesaid security deposit. The claim of the Operational Creditor is disputed by the Corporate Debtor. 6. The Operational Creditor has filed Affidavit in Re-joinder and submits as under: a) The bet has arisen on account of Leave and License Agreement between the Operational Creditor and the Corporate Debtor. The Corporate Debtor has not denied that the Corporate Debtor actually occupied the premises of the Operational Creditor even beyond the period of termination, or even beyond the Leave and License Agreement, and the Corporate Debtor is suggesting a remedy according to its own preference, which it is humbly prayed is beyond domain of the Corporate Debtor and in any case uncalled for. b) The Corporate Debtor has purposely not mentioned that of the total claim of Rs.3,58,55,270/-, a sum of Rs.1,98,17,347/- is in respect of occupation of the premises even after the termination of the Agreement, Rs.1,35,37,398/- is in respect of excess use of the terrace of 10000 sq. ft. and Rs.25,00,125/- is in respect of excess use of parking spaces. c) The Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the world "Operational" means "connected with the way in which a business, machine, system etc works". The word operation in turn means "a business transaction". b) With these facts, the Operational Creditor submits that the issue as to whether license fee/rent is in the nature of Operational Debt and whether an application for initiation of Corporate Insolvency Resolution Process is maintainable for non-payment of the said license fee/rent is already decided in favour of the Operational Creditor here in the following judgments: Anup Sushil Dubey Vs. National Agriculture Co-operative Marketing Federation of India Ltd (insolvency) 229/2020. [Vide order dated 07.10.2020 after considering M. Ravindranath Reddy Vs. G. Kishan, (Company Appeal (AT) (Ins) No.331 of 2019] Wherein it is held as follows: "10. Heard both sides at length. The main issues which fall for consideration in this Appeal are; (a) Whether dues, if any, arising from the 'Leave and Licence Agreement' is construed as an 'Operational Debt'? (b) Whether there is any 'Pre-Existing Dispute' prior to the issuance of the Demand Notice? 11. In order to prove a 'Debt' as an 'Operational Debt' the criteri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of lease rent, because it requires further investigation" (Emphasis Supplied) 14. Learned Counsel for the Respondent relied on Judgements of this Tribunal in Sarla Tantia V/s. Nadia Healthcare Pvt. Ltd. [Company Appeal (AT) (Ins) No. 513 of 2018] and in Jindal Steel and Power Pvt. Ltd. V/s. DCM International Ltd. [Company Appeal (AT) (Ins) 288 of 2017. 15. In Sarla Tantia V/s. Ramaanil Hotels & Resorts Pvt Ltd., this Tribunal while dealing with dues arising from the terms of the Leave and Licence Agreement held and observed it to be an 'Operational Debt'. This Tribunal in Citycare Super Specialty Hospital V/s. Vighnaharta Health Visionaries Pvt. Ltd. has also observed that there is an admission of rent of certain periods to be due and payable which are reflected in the Books of Accounts, but subsequently, dismissed the 'Appeal' on the ground of 'Pre-Existing Dispute'. 16. The law has not gone into defining goods or services - hence, one has to rely on general usage of the terms so used in the law, with due regard to the context in which the same has been used. Simultaneously, it is also relevant to understand the intention of the lawmakers. The Bankruptcy Law Reforms C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not fall within the meaning of 'Operational Debt' as defined under Section 5 (21), is untenable, having regard to the fact that Regulation 32 read with Section 14 (2) only mentions essential goods and services whose supply cannot be terminated during the course of CIRP. The Code does not anywhere specify that the goods so mentioned under Regulation 32 are the same as those which fall within the ambit of the definition of Section 5 (21). Annexure 1D of the Leave and Licence Agreement stipulates that the cold storage with the machinery and equipment has been designed for storage of all agricultural commodities. The Lessee being in need of a cold storage participated in the tender floated by the Lessor and sought for grant for the use and occupation of the cold storage unit. It is apparent from the material on record and the terms and conditions of the Leave and Licence Agreement that the Appellants have leased out the premises for 'Commercial Purpose', which comes within the meaning of 'Service' for the purpose of sub-Section (21) of Section 5 of the I&B Code, 2016. 20. At this juncture, we find it relevant to refer to the definition of 'Service' as defined under Section 2 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mprising of three members of the Hon'ble National Company Law Appellate Tribunal ("the Appellate Tribunal") held by a majority that license Fee/Rent is in the nature of Operational Debt and an Application for initiation of CIRP can be instituted against nonpayment of the said license fee treating the same as Operational Debt U/s 5(21) of the Code [Ref. para 9 & 20 of the said Judgement]. This Judgement is the latest 3-member Bench Judgment of the Hon'ble Appellate Tribunal after considering various Judgements of the said Tribunal and it is therefore prayed that the same be applied in the present application. d) In View of the above, it is quite clear that the Hon'ble NCLAT in its latest Judgment on the basis issue in the case of Sanjeev Kumar Vs. Aithent Technologies (P) Ltd. Company Appeal (AT) (Insolvency) No.474 of 2020 Vide order dated 05.11.2022 comprising of Hon'ble three Members has held that license Fee/rent is an Operational Debt as per section 5(21) of the Code. The said judgment is the latest judgment comprising of three members on the said issue and is therefore binding. Further even in the dissenting opinion, the Hon'ble Member dissenting from the said majority view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Creditor are pending before Hon'ble Supreme Court of India vide Civil Appeal No. (S) 4237 of 2020, Promila Taneja Vs. Surendri Design Pvt. Ltd. Findings/Observations: 9. We have heard the arguments of Learned Counsel for Operational Creditor and Corporate Debtor and perused the records. 10. The Operational Creditor had given the premises on lease to the Corporate Debtor vide Leave and License Agreement dated 20.06.2014 for period of 55 months starting from 01.07.2014 to 30.12.2018. The lease was terminated by the Operational Creditor vide its E-mail dated 19.09.2018. The Operational Creditor raised Invoices dated 16.11.2018 and dated 08.01.2019. 11. The Corporate Debtor contended that there is no Operational Debt as the dues are arising out of non-payment of lease rent. The Corporate Debtor has relied upon Judgment of Hon'ble NCLAT in Company Appeal (AT) (INS) No. 1066 of 2019, Aurora Accessories Pvt. Ltd. Vs. Ace Acoustics & Audio Video Solutions Pvt. Ltd. wherein the Hon'ble NCLAT held that if any debt arising out of non-payment of lease rent, it does not fall under the definition of Operational Debt as defined under section 5 (21) of the Code. 12. To find out whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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