NCLAT held that a debt arising from unpaid rent under a lease agreement qualifies as an operational debt under the IB Code.
National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) was hearing an appeal and observed that a debt arising from unpaid rent under a lease agreement qualifies as an operational debt under Section 5(21) of the Insolvency and Bankruptcy Code, 2016.
The present appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 ('IBC') by the appellant against the Order dated 14.02.2023 ('Impugned Order') of the Adjudicating Authority (National Company Law Tribunal, New Delhi, Court III) in CP No. (IB)-2768(ND)/2019. The Impugned Order admitted a Section 9 application under IBC filed by Mr. Sunil Sachdeva, an operational creditor, and initiated the Corporate Insolvency Resolution Process (CIRP) against Haldiram Fincap Pvt Ltd. (HFPL) - the corporate debtor. Aggrieved, the appellant, an authorized representative of the corporate debtor, preferred the present appeal.
The factual matrix revealed that a lease agreement was executed on 28.08.2016 between the lessors, the late Shri Ram Prakash Sachdeva and the late Smt. Chand Sachdeva, and HFPL, in respect of a property in Paharganj, New Delhi. Upon the lessors' demise, their son, Mr. Sunil Sachdeva, claimed status as the legal heir. Despite HFPL purportedly assigning the lease to Haldiram Bhujiawala Inc (HBI) on 16.12.2016, no rent or GST was paid, leading Mr. Sunil Sachdeva to issue notices and eventually, a demand notice under Section 8 of IBC, followed by a Section 9 application.
The appellant argued that the lease had been assigned to HBI, and therefore HFPL bore no liability for rent. They contended that Mr. Sunil Sachdeva lacked legal documentation proving his ownership of the leased premises and thus should not be treated as an operational creditor. Additionally, the appellant claimed pre-existing disputes related to the non-payment of conversion charges for the property and the alleged forceful possession taken by Mr. Sunil Sachdeva in January 2019.
However, the Adjudicating Authority found that HFPL remained the actual lessee, as reflected in various communications and legal proceedings. The Authority concluded that the email of 18.01.2018 and the legal notice dated 22.10.2019 did not establish a pre-existing dispute. Moreover, the obligation to pay conversion charges lay with HFPL as per the lease deed. Hence, the Authority determined that an operational debt existed, was due and payable, and exceeded the threshold limit, thus justifying the initiation of CIRP against HFPL.
The Appellate Tribunal dismissed the appeal, affirming that the respondent, Mr. Sunil Sachdeva, was an operational creditor and that no genuine pre-existing dispute existed, thereby upholding the Impugned Order admitting HFPL into CIRP.
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