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2022 (7) TMI 241 - AT - Insolvency and BankruptcyOperational Debt or not - claim of the Licensor for payment of License Fee for use and occupation of immovable premises for commercial purposes - Whether the Judgment of this Tribunal in M. RAVINDRANATH REDDY VERSUS G. KISHAN [2020 (2) TMI 56 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] lays down the correct law? - it was held in the case that Any debt arising without nexus to the direct input to the output produced or supplied by the corporate debtor, cannot, in the context of Code, be considered as an operational debt, even though it is a claim amounting to debt. HELD THAT:- The ‘operating cost’ as defined, is an expense incurred in the conduct of the principal activities of the enterprise. The ‘operational debt’ is also a debt which is incurred in the conduct of principal activities of the enterprise. In the present case, the Corporate Debtor has taken a licensed premises for running an Educational Institution. All cost incurred by the Corporate Debtor and cost which remained unpaid shall become a debt on the part of Operational Creditor. The payment of License Fee is an obligation on the Corporate Debtor under the Agreement dated 15.04.2017. In a judgment relied by learned Counsel for the Appellant is Sanjeev Kumar vs. Aithent Technologies Private limited and another [2021 (2) TMI 443 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI], where the Corporate Debtor has taken on lease the basement and the ground floor of the premises and Lease Deed was executed for renting out the premises. Demand Notice was sent and then Section 9 Application was filed. One of the questions which arose for consideration in the case was as to whether a landlord by providing lease, will be treated as providing services to the Corporate Debtor, and hence, an Operational Creditor within the meaning of Section 5(2) read with Section 5(21) of the Insolvency and Bankruptcy Code, 2016? In the above context, the Adjudicating Authority had admitted the Application, which order was upheld by this Tribunal holding that Operational Creditor had provided different type of services to the Corporate Debtor. Section 14, sub-section (2) deals with supply of essential goods or services to the Corporate Debtor. The said provision has nothing to do with the extent and expense of ‘operational debt’ within the meaning of Section 5(21). The observation that ‘any debt arising without nexus to the direct input or output produced or supplied by the Corporate Debtor, cannot be considered to be operational debt’ is conclusion drawn by this Tribunal contrary to the scheme of the Code. The ‘operational debt’ as defined in Section 5(21) has meaning much wider than the essential goods and services. Essential goods and services are entirely different concept and the protection under Section 14(2) as provided for is an entirely different context. Thus, the observations made that there has to be nexus to the direct input or output produced or supplied by the Corporate Debtor, is a much wider observation not supported by scheme of the Code. 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 the facts of the present case, where Agreement itself contemplate payment of GST for the services under the Agreement, on which GST is payable, the definition of ‘service’ under Central Goods and Services Tax Act, 2017 cannot be said to be irrelevant - in the present case, debt pertaining to unpaid license fee was fully covered within the meaning of ‘operation debt’ under Section 5(21) and the Adjudicating Authority committed error in holding that the debt claimed by the Operational Creditor is not an ‘operational debt’. The Application filed by the Operational Creditor (Appellant herein) deserves admission under Section 9 of the Code - application allowed.
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