DATE OF JUDGMENT: 07-10-2020
JUDGES: Justice Venugopal M. and Ms. Shreesha Merla
PARTIES
- Anup Sushil Dubey (Petitioner)
- National Agriculture Co-operative Marketing Federation of India Ltd (Respondent)
OBJECT: Whether the leasing of an immovable or obstinate property comes under the definition of operational debt?
AN OVERVIEW
- NAFED or Operational Creditor and the Corporate Debtor registered into a Leave and a License Agreement for the usage of cold storage facilities for three years.
- It was further stated that in clause 1(14) of the agreement if there is a case of any default in the payment of the monthly fee, the Debtor would be liable to pay interest for the delayed period.
- NAFED specified that the Corporate Debtor defaulted in the payment of monthly rental and it is due and payable along with the interest.
ISSUES
The following issue was analyzed by the court-
- “Can lease rentals rising out of use and occupation of a cold storage unit be classified as ‘operational debt’ under section 5(21) of the Insolvency and Bankruptcy Code, 2016?”
IMPORTANT PROVISIONS
Insolvency and Bankruptcy code-
- Section 5(21) - defines the ‘Operational creditor’- any person to whom an ‘operational debt’ is payable and includes any person to whom such debt has been legally allocated or transferred.
- Section 5(20) - defines the ‘Operational Debt’ – it is a claim in respect of the provisions of goods or of services incorporating employment or a debt in regard of the repayment of dues that are arising under any law for the time being in force and which is payable to the Central Government or any State Government or any local authority.
ANALYSIS OF THE JUDGEMENT
- The Court found force in the Petitioner’s Counsel’s submission that the appellant was in custody during initiation of the proceedings and thus, a minimum delay of 9 days shall be acknowledgeable. It was further observed that letters were received by the Advocate for the corporate debtor which means that the corporate debtor already knew about the ongoing proceedings.
- To determine whether NAFED by providing lease shall be treated as Operational Creditor, it is necessary to notice that whether NAFED is providing any services to Corporate Debtor and whether the claimed dues land within the ambit of Section 5(21) of the Insolvency and Bankruptcy Code, 2016.
- The tribunal noticed that one has to rely on the general usage of the terms which are used in the law as there is no specific definition of goods or services. The Bankruptcy Law Reforms Committee (BLRC) proposes treatment of lessor or landlords as operational creditors, however, the definition only included the claims which are relating to ‘Goods and Services within the ambit of Operational debt.
- However, the Court observed that as per the terms and conditions mentioned in the Leave and License Agreement the petitioners have leased out the premises for the commercial purposes which come under the meaning of Service which serves under the purpose of Section 5(21) of the Insolvency and Bankruptcy Code, 2016.
- The Court noted that although the agreement was terminated, yet the Corporate Debtor continued to be in the possession of the storage facility and sought an extension for a further period of 2 years. The court also said that a prior dispute between the parties does not truly exist.
CONCLUSION
It was held in this case that the corporate debtor already knew of the ongoing proceedings and the claim by appellate counsel that the appellant was in custody during this period is completely baseless. It was further held that NAFED shall be considered as an operational creditor concerning the terms and conditions of the Lease and License Agreement. The debt was due and payable by the Corporate Debtor as he continued to be in the possession of the Storage facility even after the agreement was terminated. The court also held that there is no prior dispute which existed between the parties.
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