Non-Payment of Outstanding Lease Rent Amounts to Operational Debt: NCLT [Read Order]

The operational creditor, M/s Unified Credit Solutions Private Limited, was based at 715, DLF Star Tower, Sector-30, NH-8, Gurugram, Haryana 122001, on the 7th floor. A corporate debtor, M/s DS Home Construction Pvt. LTD., approached an operational creditor in 2020 to lease the aforementioned premises for use as an office.

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After that, the parties signed a five-year Registered Lease Agreement on October 1, 2020, which included rent terms and the Corporate Debtor's sole responsibility to pay all necessary taxes, maintenance fees, and electricity in addition to the monthly lease cost.

The Corporate Debtor then occupied the space and paid the agreed-upon security deposit in accordance with the lease agreement. Later on, though, he started postponing his rent payments from January to June 2022, and since July 2022, he has been in constant default. The Corporate Debtor allegedly made up a story about the Real Estate Regulatory Authority attaching its bank accounts in order to avoid paying the monthly lease rent. The company also requested an extension to pay the Operational Creditor the admitted/acknowledged monthly lease rental that was due and payable by January 2023.

Later, it made a false claim that the maintenance agency had disconnected the electricity because of a fire, but in fact, the reason was that the maintenance charges had not been paid. However, power was restored once the Corporate Debtor paid up the maintenance obligations by December 2022.

After that, on February 02, 2023, the Operational Creditor demanded that the Corporate Debtor pay down the remaining balance, plus interest, by February 9th, 2023. The Corporate Debtor did not respond to the notice of termination or release any payment for the unpaid lease rent, even after receiving it.

The Operational Creditor was forced to take legal action by filing an eviction petition with the Rent Controller, District Court, Gurugram, which is still pending a decision because the Corporate Debtor refused to leave the premises even after receiving the notice of termination. In April and May of 2023, a partial payment of ₹12,96,000 was made; nonetheless, significant amounts still owed. Additionally, the Corporate Debtor neglected to deposit the ₹1,80,000 TDS that was withheld from the lease rent between April and June of 2022.

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The total amount of outstanding operational debt as of 07.11.2023 was ₹1,84,47,567. On 30.11.2023, the Operational Creditor sent a demand notice under Section 8 of the IBC, requesting payment along with 10% annual interest. However, the Operational Creditor filed an application to begin insolvency proceedings against the Corporate Debtor when the latter failed to respond to the Demand Notice within ten days.

The bench of Shri Mahendra Khandelwal (Judicial Member) and Shri Atul Chaturvedi (Technical Member) observed that the Corporate Debtor was duly served by the Operational Creditor however no reply was received and the Corporate Debtor were set ex parte.

In this instance, the Operational Creditor has asserted that the unpaid lease fee from July 2022 amounts to ₹1,84,47,567.00. The Corporate Debtor has willfully failed to make the payments even though it has admitted and acknowledged its liability. The Tribunal said that it is important to examine the concept of "Operational Debt" as stated in Section 5(21) of The Insolvency and Bankruptcy Code, 2016 in order to ascertain whether the aforementioned sum asserted by the Operational Creditor would fall under the purview of "Operational Debt."

The Tribunal observed that the Operational Creditor had included authentic copies of the invoices with the petition, which amply demonstrated that the parties had engaged in a business transaction. These records attest to the fact that there is a legally binding debt resulting from the usage and occupancy of the leased space.

As a result, the Tribunal determined that there has been a blatant default by the Corporate Debtor and that it is obvious that a debt is due and payable.

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