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2024 Supreme(Online)(NCLAT) 886
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
ASHOK BHUSHAN, J
Mr. A. Guhan – Appellant
Versus
Ms. Sunita Umesh – Respondent
Company Appeal (AT) (Insolvency) No. 1095 of 2023 & I.A. No. 3782 of 2023
For the Appellants: Mr. Abhijeet Sinha, Mr. Abhinav Hansaria, Mr. Aditya Shukla
For the Respondent: Mr. Sumant Batra, Ms. Nidhi Yadav, Mr. Sarthak Bhandari
Unpaid rent during CIRP is classified as operational debt, not CIRP costs, due to existing defaults predating CIRP initiation.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 5(13) and 14(1)(d) - Claim of rent and damages - Appellant's claim for rental damages post-CIRP not treated as CIRP Cost - The critical question whether unpaid rent qualifies as CIRP Costs or Operational Debt assessed by the Adjudicating Authority; established that Appellant’s rights not prejudicially affected by the Moratorium - Claim for CIRP Costs denied as Corporate Debtor ceased operations before CIRP commencement and Appellant already had a crystallised Arbitral Award - Upheld the distinction from previous judgments regarding operational debt applicability. (Paras 4, 9, 12)
(B) The adjudication emphasized that rights were not prejudiced due to the Moratorium, as payment defaults occurred before CIRP commencement, hence rental amounts are classified as operational debts, with appropriate legal recourse available to Appellant prior to CIRP initiation. (Paras 20, 22)
| Table of Content |
|---|
| 1. overview of the appeal and impugned order details. (Para 1 , 2) |
| 2. factual background including lease agreement and defaults. (Para 3 , 4 , 5) |
| 3. legal arguments made by both parties regarding cirp costs. (Para 6 , 7 , 8 , 9) |
| 4. court's analysis on the applicability of regulations and legal definitions. (Para 10 , 12 , 14) |
| 5. conclusion affirming exclusion of claims as cirp costs. (Para 19 , 20 , 21) |
JUDGMENT
ASHOK BHUSHAN, J.
This Appeal has been filed challenging the Order dated 09.05.2023 passed by the Learned Adjudicating Authority (National Company Law Tribunal, New Delhi Bench, Court – II) in Company Appeal (IBC) No.13/2023. Company Appeal (IBC) No. 13/2023 was filed by the Appellant challenging the decision of the Liquidator communicated by email dated 03.01.2023. CA filed under Section 42 of the Insolvency and Bankruptcy Code, 2016 , (for short `The Code’ or `The IBC’) by the Appellant was disposed of with 3 directions as contained in Paragraph 5 of the Order. Aggrieved by the Order passed by the Adjudicating Authority, this Appeal has been filed.
2. Brief facts of the case necessary to be noticed for deciding the Appeal are:
i. Appellant’s predecessor in title executed a Lease Deed dated 04.04.2012 in favour of the Corporate Debtor, letting out an industrial shed with built-up area and open space situated in Survey No. 820/1 B2 in No. 28 Kuthambakkkam Village, Thiruvallur District.
ii. Lease deed was executed for 7 years on monthly lease rent of Rs. 21,83,000/-.
iii. Appellant obtained title over the demise premises Property by virtue of Settlement Deed registered on 18.03.2015.
iv. The Corporate Debtor started defaulting payment of the lease rent from the month of December 2014. Lessor invoked Clause 21(a) of the Lease Deed and Notice dated 01.05.2015 was issued to the Corporate Debtor terminating the Lease Deed and calling upon the Corporate Debtor on failure to pay the arrears of rent due, to hand over the possession.
v. Arbitration Proceedings were initiated and Arbitral Tribunal in Arbitration Case No. 01/2015 gave an Award on 07.09.2016, directing for payment of rental arrears from 16.12.2014 to 01.05.2015 of Rs.1,26,95,876/- and further directed to pay Rs.21,83,000/- p.m., as damages for use and occupation till the handing over of the possession and to vacate and handover possession.
vi. The Appellant filed Execution Petition being EP No.40/2018 and EP No. 41/2018 before the Ld. District Judge, Thiruvallur to exclude the Award, which Execution Proceedings remain pending till Corporate Insolvency Resolution Process (CIRP) was commenced against the Corporate Debtor on 03.02.2021.
vii. Public announcement was made on 06.02.2021.
viii. Appellant filed their claim on 13.02.2021 in ‘Form-B’ claiming a sum of ₹12,18,30,000/- being the sum for the rent payable between 01.05.2015 and 15.02.2021, after giving credit to the advance amount and deducting TDS.
ix. By Order dated 18.10.2022, Adjudicating Authority directed for liquidation of the Corporate Debtor and appointed Respondent as Liquidator. Application filed by the Appellant I.A. No. 2379/2022 was disposed of permitting the Appellant to approach the Liquidator with their prayers and Liquidator was directed to decide. As per the Order of the Adjudicating Authority, Appellant approached the Liquidator and sought prayer for handing over possession of the demised property and paying the arrears of lease rent/damages.
x. On 03.01.2023 Liquidator communicated her decision to the Appellant that arrears of rent/damages for unauthorised occupation of the demised premises property are admitted as an Operational Debt and not as a CIRP Cost.
xi. With regard to vacation of Plot, Liquidator informed that Auction Proceeding has begun and will be completed within few days and property will be handed over.
xii. Adjudicating Authority in the Impugned Order has issued following 3 directions by disposing the Appeal filed by the Appellant:
“I. The Respondent would make the vacant possess
