Ultimate magazine theme for WordPress.

Conflicting choices: Non-Fee of lease an operational debt or not?

Issue: Conflicting decisions: Non-payment of rent an operational debt or not?

In 2018, by the case of M. Ravindranath Reddy v. G. Kishan & Ors., the Tribunal opined that the landlord, who filed an application for recovery of alleged enhanced lease rent, cannot be treated as an operational Debtor as this lease rent does not fall under any of these categories:

“(a) provision of goods;

(b) provision of services, including employment; or

(c) a debt arising under any statute and payable to Government/local authority” as provided under Section 5(20) and Section 5(21) of the Code.

Later, In the case of Anup Sushil Dubey v. National Agricultural Co-operative Marketing federation of India Limited & Ors. which was decided by the NCLAT in 2020. It was stated by the tribunal that lease rentals which arise out of the use and occupation of any cold storage unit which is for the purpose of business and commerce is to be considered as an Operational Debt as provided under Section 5(21) of the IBC, 2016.

Recently, in the case of Promila Taneja v. Surendri Design Pvt Ltd, a Landlord filed the Application under Section 9 of Insolvency and Bankruptcy Code, 2016. It was dismissed by the Adjudicating Authority on the ground that the ‘rent’ of any immovable property do not fall under the head of Operational Debt as envisaged under Section 5 (21) of IBC by the Adjudicating Authority as well as the NCLAT.

The Appellant has appealed in the Supreme Court stating that the NCLAT has decided two contradicting judgements previously in 2018 and 2020 respectively. The Supreme Court, under the same appeal, has issued a notice against the decisions given by the NCLAT.

Comments are closed.