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TMI Blog2023 (5) TMI 979X X X X Extracts X X X X X X X X Extracts X X X X ..... e Corporate Debtor demanding payment in respect of unpaid operational debt and ultimately a Demand Notice under Section 8 was issued on 18th August, 2020. Whether the debt claimed by the Appellant was an Operational Debt? - HELD THAT:- The Adjudicating Authority committed error in holding that the debt claimed by the Operational Creditor was not Operational Debt. The debt claimed by the Appellant is clearly a claim within the meaning of IBC and on default being committed by the Corporate Debtor the debt became due and Appellant was fully entitled to initiate proceedings under Section 9 of the Code. Compulsorily registrable agreement - HELD THAT:- The nature of Agreement is where no interest, title or right on property immovable or movable or any other form of right to assert any claim save and except availing services being run by the Appellant. There being no right, title or interest in the agreement created in favour of the Corporate Debtor, the Agreement was not compulsorily registrable under Section 17(b) of the Registration Act - it is clear that agreement does not purport or operate to create, declare, assign, limit or extinguish any right, title or interest in immo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jali Singh, Mr. Mridul Y.Suri, Advocates For the Respondent : Mr. Avijit Patnaik, Ms. Soma Patnik, Mr. Shreyan Das, Ms. Suvra Mahapatra, Advocates JUDGEMENT ASHOK BHUSHAN, J: 1. This Appeal by an Operational Creditor has been filed challenging the Order dated 08th April, 2022 by which order Section 9 Application of I B Code, 2016 filed by the Appellant has been rejected holding that dues claimed by the Appellant are not operational debt, Agreement dated 17th August, 2018 is not a registered agreement and is also not duly stamped document. 2. Brief facts of the case for deciding this Appeal are:- (i) The Appellant is engaged in the business of coworking and/or providing flexi office space i.e. a working arrangement where different corporate bodies come together to work for a single business center run and maintained by the Appellant. The Appellant developed the premises with all required amenities, facilities conducive to run/operate a fully functional office with day to day service/support service as per requirement of each and every client. Appellant makes provision of goods and provision of services as per clients requirements. The Appellant entere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debt. The Agreement dated 17th August, 2018 was originally engrossed on an unstamped paper and was required to be registered. (vii) Appellant aggrieved by the said order, has come up in this Appeal. 3. We have heard Mr. Sanjeev Sen, Sr. Advocate appearing for the Appellant and Mr. Avijit Patnaik, Advocate for the Respondent. 4. Mr. Sanjeev Sen, Sr. Advocate submits that the Agreement dated 17th August, 2018 provided for lock in period of 36 months. It is submitted that Appellant cater to hundreds of clients spread across various cities at its various business centers/coworking office. The Appellant makes provision of goods and provision of services as per client s requirements. The agreement entered with Corporate Debtor had a lock-in period of 36 months. During the lock-in period, the Corporate Debtor had no authority to terminate the agreement and termination of agreement is breach of contract which entitles the Appellant to right to remedy. The right of Appellant is a claim within the meaning of Section 3(6) of the Code. The claim in respect of provision of goods and services is debt. The view of the Adjudicating Authority that license fee is not operational debt is err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te is appended in the Agreement: Note: 1. Client would initially be paying INR 272,000 plus taxes for first 6 months i.e. till March, 2019 onwards they would be paying for the entire fit-out i.e. INR 352,000 plus taxes. 2. Escalation would be applicable @ 5% every year. 3. Lock-in period is 36 months. 8. The above note indicates that lock-in period of agreement was 36 months. Clause 1.1. deals with nature of this agreement which is to the following effect: 1.1 Nature of this agreement: This agreement (hereinafter this Agreement) is a service providers agreement for pay as you go model. This agreement Creates No Right Title or Interest Either in The Property (Immovable or Movable) Nor Any Other Form of Right to Asset Any Claim Save And Except Availing Of Services Being Rendered By Smartwork. This Agreement is in person to the Client and is non-heritable and cannot be transferred or assigned to anyone else. This Agreement is composed of the cover page describing the Service(s), the service charges and the tenure with the escalation (if any), the present Terms and Conditions , the house rules and service price guide as published and made applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der us to make adjustments our advance with you. We are very hopeful to get a positive response from you. . 11. By an Email dated 05th June, 2019, the above email was replied by the Operational Creditor, which is to the following effect: On Wed, Jun 5, 2019 . Dear Mr Mohanty, Thank you for your email. Please note that the current agreement is under lock in till Sept 2021. Hence, mid term cancellation would not be possible. I understand that you have taken up your own space, but the agreement need to be honoured and payment for the balance term to be made as well. I have attached the agreement for your reference. Ward Regards, Surojit Ray Regional Director (East) 12. The Operational Creditor thereafter issued notices to the Corporate Debtor demanding payment in respect of unpaid operational debt and ultimately a Demand Notice under Section 8 was issued on 18th August, 2020. 13. As noted above, the Adjudicating Authority framed three points for determination. The first point which was framed for consideration is as to whether the debt claimed by the Appellant was an Operational Debt. 14. In IBC, Section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee-member bench judgment in the matter of M. Ravindranath Reddy v. G. Kishan Ors. In paragraph 48, following was laid down: 48. We are of the considered opinion that the alleged debt on account of purported enhanced rent of leasehold property does not fall within the definition of the operational debt in terms of Section 5(21) of the Code. On the above basis, it is clear that Appeal deserved to be allowed. 18. The three-member bench judgement in M. Ravindranath Reddy came to be referred to Larger Bench of this Appellate Tribunal and Appellate Tribunal by a Larger Bench Judgement in Jaipur Trade Expocentre Pvt. Ltd. (Supra) has overruled the Judgement of this Tribunal in M. Ravindranath Reddy. In paragraph 39 of the judgement of the larger bench held that debts pertaining to unpaid license fees is fully covered within the meaning of operational debt . Para 39 is as follows: 39. The observation of this Tribunal in the above case in respect of definition of service under Consumer Protection Act, 2019 and Central Goods and Services Tax Act, 2017 are not covered by Section 3(37) of the Code, with regard to which observation, no exception can be taken. However, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 of the Code. 20. Now coming to the second point determined by the Adjudicating Authority that agreement dated 17th August, 2018 was compulsorily registrable agreement. We have already noticed the nature of Agreement where no interest, title or right on property immovable or movable or any other form of right to assert any claim save and except availing services being run by the Appellant. There being no right, title or interest in the agreement created in favour of the Corporate Debtor, the Agreement was not compulsorily registrable under Section 17(b) of the Registration Act. Section 17(b) provides as follows: 17. Documents of which registration is compulsory.- (b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title, or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property; 21. When we look into the agreement as noted above, it is clear that agreement does not purport or operate to create, declare, assign, limit or extinguish any right, title or interest in immovable or movable property. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The said property must be an immovable property. The said property has been described at Page-48 and the exact design is provided at page-49 and hence from the description, it can be safely presumed that the said document is an immovable property as per Section 3 of the Transfer of Property Act, 1882, read with Clause -3, Sub-Clause 26 of the General Clauses Act, 1897. There is a transfer of right to enjoy such property. As per Clause -1.1, 2 and 3 of the lease agreement at Annexure-E; the present deponent had been given the right to enjoy the property. The transfer of the right is made for a certain time. At Page-48 of Annexure-E, the length of agreement has been mentioned from 01.10.2018 to 30.09.2021. The transfer is in consideration of a price paid or promised or of money, a share of crops, service or any other thing of value. At page-48, the total amount payable is Rs. 3,52,000/- which squarely falls under the ambit of money , as provided in Section -105. The consideration is payable periodically or in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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