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TMI Blog2023 (3) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of monthly rent etc., operational debt and default is established and on this ground admitted the Section 9 petition. This finding of the Adjudicating Authority is erroneous and one-sided having not taken cognizance of the fact that the operational debt claimed by the Operational Creditor was never admitted at any stage by the Corporate Debtor. The series of correspondences make it amply clear that both the parties were at loggerheads on the issue of both rental and service charges in respect of the said premises and that this dispute also pre-dated the issue of Section 8 demand notice on 11.08.2021. It has also not escaped our attention that in their reply to Section 9 application, the Corporate Debtor has categorically mentioned that there is total absence of any enforceable debt outstanding against the Corporate Debtor as placed at page 199 of APB. The reply notice thus clearly amounted to a notice of dispute having unequivocally opposed the claim of the Operational Creditor s amount due. If the debt is disputed, the application of the Operational Creditor for initiation of CIRP must be dismissed. It is an undisputed fact that Clause 13 of the LLA and Clause 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echnical ) ] The present appeal filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 ( IBC in short) by the Appellant arises out of the order dated 12.05.2022 (hereinafter referred as Impugned Order ) passed by the Adjudicating Authority (National Company Law Tribunal, Cuttack Bench), in CP(IB) No. 61/CB/2021. By the impugned order, the Adjudicating Authority has admitted the petition under Section 9 of the IBC and allowed the initiation of Corporate Insolvency Resolution Process ( CIRP in short) of the Corporate Debtor. Aggrieved by this impugned order, the present appeal has been preferred by the suspended director of the Corporate Debtor. 2. The brief factual matrix of the case which is necessary to be noted for deciding this appeal is as follows: - The Appellant is the erstwhile director of the Corporate Debtor/Respondent No.2, namely, Coppertun Brewing Pvt. Limited, which is engaged in the business of restaurant/micro-brewery. The Respondent No.1/Operational Creditor, namely, Pardesi Construction Private Limited is the owner of the premises which has been given on rental basis to the Corporate Debtor/Respondent No.2 for carrying out its business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental dues and service charges for possession of the said premises by the Corporate Debtor. The Corporate Debtor sent reply to the Demand notice on 24.08.2021 denying liability to pay any amount towards license fee, service charge or any other charges on the ground that necessary compliances/permissions have not been fulfilled by the Operational Creditor which prevented the Corporate Debtor from procuring the requisite license and permission to start business on the said premises. The Operational Creditor thereafter filed a Section 9 petition of IBC before the Adjudicating Authority on 10.09.2021 leading to the impugned order dated 12.05.2022 admitting the Corporate Debtor to the rigours of CIRP. The impugned order has been challenged by the suspended Director of the Corporate Debtor on the ground that there is no admitted claim and that there is a genuine pre-existing dispute. 3. Making his submissions, the Learned Senior Counsel for the Appellant stated that relying on an assurance given by the Operational Creditor that it owns a building with all requisite sanctions in place for commercial business purposes, the Corporate Debtor took physical possession of the said p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute between the two parties relating to requisite approvals/compliances from concerned competent authorities. 6. It was further stated by the Learned Senior Counsel for the Appellant, that though the Operational Creditor was unable to secure the necessary compliances/sanctions from the competent authorities thus preventing the Corporate Debtor from running its business operations, yet it sent a notice to the Corporate Debtor on 12.12.2016 to vacate the premises on the ground that they had not paid the rentals and other charges. The notice to vacate was replied to by the Corporate Debtor on 16.02.2017 stating that the Corporate Debtor was never able to use the said premises for which LLA and SA had been entered into, hence it was not obligated to make any payments under the said agreements. The Operational Creditor issued further notices on 16.05.2017 and 19.05.2017 to the Corporate Debtor seeking payment of the outstanding dues along with interest or to vacate the premises. These two notices were also replied by the Corporate Debtor on 13.06.2017 stating that the Operational Creditor had misrepresented the facts relating to requisite sanctions/approvals and for having fraudulent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than seven years, beyond the expiry term of five years stipulated under the LLA read with SA, without making payment of rentals and other charges. Thus operational debt had become due and payable and the Operational Creditor was denied their legitimate claims of rentals and other charges. It has also been submitted that the contention of the Corporate Debtor that rental dues from lease agreements do not qualify as operational debt is not tenable in view of the orders of this Tribunal in the matter of Jaipur Trade Expocentre Pvt. Ltd. V. Metro Jet Airways Training Pvt. Ltd. in Company Appeal (AT) (Ins.) No. 423 of 2021 wherein it has been held that the claim of the licensor for payment of license fee for use of premises for business purpose is an operational debt. 11. It has been further contended that there was no pre-existing dispute prior to the issue of demand notice since the Operational Creditor had been issued an Occupancy Certificate dated 22.01.2016 and NoC from Fire Department dated 03.08.2016. Moreover, the Corporate Debtor had executed the LLA and SA after inspecting the said premises and only after having satisfied themselves had occupied the said premises. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has encashed a cheque or otherwise received payment from the corporate debt [Section 8(2) (b)]. It is only if, after the expiry of the period of the said 10 days, the operational creditor does not either receive payment from the corporate debtor or notice of dispute, that the operational creditor may trigger the insolvency process by filing an application before the adjudicating authority under Sections 9(1) and 9(2) ****** ***** ***** 51. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the existence of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the dispute is not a patently feeble legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their contention, the Learned Senior Counsel for the Appellant adverted attention to Clauses 4 and 5 of the LLA which is as reproduced below: - 4. The Licensor(s) declare/s that the user of the said Premises has been sanctioned for commercial purposes and that the Licensor has/have all the requisite permissions/sanctions to grant the license in respect of the said Premises to the Licensee for running its business. 5. Based on the aforesaid representations the Licensee has agreed to take the Licensed Premises on Leave and License basis from the Licensor(s) for the purpose of carrying on the Business in accordance with the Term, payment of the License Fee and Security Deposit and upon the terms and conditions herein specified. (Emphasis supplied) It has been contended that these sanctions had actually not been received from the competent authorities and consequentially the Corporate Debtor could not obtain the BRL License for manufacturing of beer which was essential for running the microbrewery. Hence, as the Corporate Debtor could not use the premises for the purpose for which the LLA and SA were entered into, the question of payment of license fees and service/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the Corporate Debtor had rejected the invocation of arbitration clause and since no arbitrator was ever appointed, the arbitration proceedings had never commenced. We note that the Adjudicating Authority having considered these submissions has held that as the Corporate Debtor did not mention about pending arbitration in their reply to the Section 8 Demand Notice has therefore not viewed it as a point of dispute between the two parties. We are reluctant to agree with the Adjudicating Authority on this score for reasons elucidated in the succeeding paragraphs. 19. It is an undisputed fact that Clause 13 of the LLA and Clause 17 of SA provide for resolution of disputes by mutual negotiation failing which by arbitration. It is also clear from the facts on record that a notice invoking arbitration under Clause 17 of SA was invoked by the Operational Creditor on 06.08.2020 as seen at page 157 of APB and this has not been controverted by the Respondent. It would be useful at this stage to extract relevant portions from this notice of arbitration as under:- ..We have not received any amount of license charges, penal damages or service charges in respect of our two agreements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rating further on the issue of disputes, it has also been submitted by the Learned Senior Counsel for the Appellant that the Corporate Debtor had sent emails on 10.12.2015, 19.12.2015, 25.02.2016, 26.02.2016, 04.03.2016, 21.03.2016, 04.08.2016 and 05.12.2016 to the Operational Creditor seeking documents like Fire NoC, revised sanction plan of the building, etc. so as to get requisite licenses to run the restaurant/brewery. Mention was also made of NMC having informed the Operational Creditor on 29.01.2014, 05.11.2015 and 19.07.2018 to seek formal approval of the revised building map after fulfilling certain prescriptions including fire safety as placed at page 82, 122 and 155 of the APB respectively. Mention was made of a letter dated 13.01.2017 issued by the Excise Department to the Corporate Debtor rejecting issue of Beer manufacturing license for the reason that certificate from the Fire Department was not available. This has been countered by the Learned Counsel for the Respondent as frivolous and baseless by stating that the Operational Creditor was in possession of Occupancy Certificate dated 22.01.2016 and NoC from Fire Department dated 03.08.2016 and Revised/First NOC on 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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