A claim for license fees for the unexpired term of a lock-in period in a leave and license agreement is a debt within the meaning of Section 433(e) of the Companies Act, 1956.

G.S. Patel, J.

1. The respondent-company, Treasure World Developers Pvt. Ltd (“Treasure World”) took premises on leave and license from the petitioning-creditor, Indiabulls Properties Pvt. Ltd. (“Indiabulls”). The leave and license agreement has what is commonly known as a ‘lock-in period’, a contractually agreed minimum tenure. Treasure World vacated the premises before the end of that lock-in period. Indiabulls claims it is entitled to claim the license fee for the remainder of that lock-in term. It says this is a ‘debt’ within the meaning of Sections 433 and 434 of the Companies Act, 1956. Treasure World contends that it is not; that the claim, if there is one, is only in damages; that, therefore, needs adjudication, absent which there can be said to be no ‘debt’ due to Indiabulls from Treasure World. This is the matter in issue.

2. The facts are largely undisputed. Indiabulls owns a substantial property of some 39,000 and odd sq mts in Lower Parel, now a significant business hub in Mumbai. This was once Jupiter Mills, one of Mumbai’s many textile mill lands. Indiabulls has constructed two towers on this land. Tower 1 is ground and 18 floors; Tower 2 (with two wings 2A and 2B) is ground and 20 floors. Together, these towers are known as “One Indiabulls Center”.

3. On 14th June 2011, Treasure World took premises on leave and license from Indiabulls. These are commercial premises on the 11th floor of wing 2B of One Indiabulls Center’s Tower 2. The area of the premises is 6,209.89 sq ft. The leave and license agreement was dated 14th June 2011. It was registered. It provided for a monthly license fee of Rs.10,86,731/-, plus maintenance and electricity charges on actuals. The term of the leave and license agreement was five years (60 months), commencing 15th June 2011. The agreement had a 36-month (three year) lock-in period. It also provided that should Treasure World terminate the agreement before the end of that three-year lock-in period, it would incur a contractual liability to pay Indiabulls the license fee, car parking fee and maintenance charges for the remainder of that lock-in period. There is also a separate provision for liquidated damages. These are the provisions of clauses 3.1, 13.2 and 9.9 of the leave and license agreement, and their interpretation and effect lie at the heart of the present dispute. I will consider these clauses and their implications presently.

4. Treasure World paid Indiabulls a three-part refundable interest-free security deposit: Rs.65,20,384/- as six months’ license fee; Rs.2,79,445/- equivalent to three months’ common area maintenance charges; and Rs.5,12,316/-equivalent to two months’ electricity and HVAC charges. These three security deposits were to continue during the tenure of the leave and license agreement. They were to be refunded when Treasure World returned possession. Indiabulls was entitled to adjust this security deposit against amounts contractually due from Treasure World.

5. Indiabulls claims that Treasure World was persistently in default in paying the license fee and other charges. Indiabulls had to send repeated reminders for payment. On 29th September 2012, Indiabulls sent Treasure World a notice (Exhibit “E” to the petition), demanding payment of the license fee and service tax from June through September 2012; maintenance charges from July through September 2012; and electricity charges from July 2012 onward. Indiabulls also demanded interest on all these claims. In default, it threatened termination of the agreement.

6. On 29th October 2012, Treasure World emailed Indiabulls saying it would vacate the premises in question on 31st October 2012. It asked for a grace period for packing and moving. There followed, between 31st October 2012 and 12th December 2012, some email correspondence between the parties. This relates principally to the matter of Treasure World vacating the premises.

7. On 14th January 2013, Indiabulls wrote to Treasure World demandi