Rahul Gupta vs Mahesh Madhavan

[arising out of Order dated 8th December, 2017 by NCLT, Chennai in Case No. CP/625/(IB) /CB/2017]

IN THE MATTER OF:

Rahul Gupta S/o Shri Raj Kumar Gupta, R/o E-1101, The Palm Springs, Golf Course Road, Sector 54, Gurgaon, Haryana - 122 001. ...Appellant

Versus

1. Mahesh Madhavan No. 247, Race Course Road, Coimbatore, Tamil Nadu - 641 018.

2. M/s. Black N. Green Mobile Solutions Pvt. Ltd. GEE GEE Universal 7th Floor, No. 2, Mc. Nicholas Road, Chetpet, Chennai - 600 031. Tamil Nadu .... Respondents

For Appellant : Mr. Anish R. Shah, Advocate

For Respondents: Mr. A.K. Mylsamy, Ms. Shalini Kaul and Mr. Chaman Choudhary, Advocates

JUDGMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

The appellant - Rahul Gupta, shareholder of second respondent - 'M/s.

Black N Green Mobile Solutions Pvt. Ltd.' ('Corporate Debtor)' has preferred 2

this appeal against order dated 8th December, 2017 passed by the

Adjudicating Authority (National Company Law Tribunal), Chennai Bench

whereby and whereunder application preferred by the respondent - 'Mahesh

Madhavan' under Section 9 of the Insolvency and Bankruptcy Code, 2016

(hereinafter referred to as the 'I&B Code') has admitted, order of moratorium

has been passed and the 'Resolution Professional' has been appointed with

certain directions.

2. The main plea taken by the appellant is that the appeal under Section

9 of the I & B Code was not maintainable against the second respondent, who

was not the lessee or tenant of the Mahesh Madhavan (Operational Creditor).

3. The question arises for consideration in this appeal is whether a

'sub-tenant' can be treated to be a 'Corporate Debtor' of the owner of the house

(lessor)?

4. It is not in dispute that an 'Agreement of Lease' was executed on 3rd day

of December, 2012 between 'Mr. Mahesh Madhavan' and one 'M/s. Universal

Power Systems Pvt. Ltd.' for the lease of 8942 sq.ft. of super built up area of

the premises for the purpose of office. 'Mr. Mahesh Madhavan' (Operational

Creditor) has been shown as "Lessor" and 'M/s. Universal Power Systems Pvt.

Ltd.' as "Lessee". The relevant terms and conditions of the agreement, are as

follows:

"B. RENT

That the 'LESSEE' herein agrees that they shall for

the duration of the lease, pay the 'LESSOR' monthly

Company Appeal (AT) (Insolvency) No. 03 of 2018 3

rent circulated at Rs. 70/- per sq. ft. excluding

common area maintenance charges on or before 5th

of every English Calendar month for which it is due

for a period of 1 year with effect from 16 th January

2013 and 5% increase every year on the existing rent

for next 2 years as under :

PERIOD RENT/MONTH DEPOSIT

16.01.2013 Rs.6,25,940/- Rs.62,59,400/- TO 15.01.2014 16.01.2014 TO Rs.6,57,237/- 15.01.2015

16.01.2015 Rs.6,90,099/- TO 15.01.2016

(i) The 'LESSEE' agree to deposit the above said

monthly rent into LESSOR's Bank Account No.

53019310146 with State Bank of India,

Avishanshi Road, NRI Branch, Coimbatore

- 641 018 ; Any delay in payment of rent

would attract interest at 18% per annum;

(ii) The 'LESSEE' confirms that the said monthly

rent is exclusive of taxes and levies charged by

the Government such as Service Tax and that

Company Appeal (AT) (Insolvency) No. 03 of 2018 4

any such taxes or levies shall be borne by the

'LESSEE' only;

(iii) The 'LESSEE' further confirms that he shall

furnish the 'LESSOR' the yearly certificates for

Tax Deducted at Source (TDS) for the rents

paid with respect to the demised premises.

C. SECURTIY DEPOSIT:

(i) The 'LESSEE' has agreed to pay to the

'LESSOR' an Interest free Security Deposit of

Rs.62,59,400/- (Rupees Sixty Two Lakhs Fifty

Nine Thousand and Four Hundred Only) being

ten months rent, as follows:-

a. Rs.40,00,000/- (Rupees Forty Lakhs Only) at

the time of execution of this agreement vide

RTGS through Axis Bank Ltd. UTR No.

UTI30000248 SET 1 STP 12557/43318662

b. Balance of Rs.22,59,400/- (Rupees Twenty

Two Lakhs Fifty Nine Thousand Four Hundred

Only) on or before 15th December, 2012.

(ii) The Lessor shall refund the Interest Free

Refundable Security Deposit to the Lessee on

the expiration or earlier termination of the

lease. The Lessor shall refund the said

Company Appeal (AT) (Insolvency) No. 03 of 2018 5

Security Deposit less any arrears of payment

due from the Lessee simultaneous with the

handover of the Premises by the Lessee to the

Lessor.

(iii) If upon expiration or earlier termination of the

lease, the Lessee is ready to handover the

vacant possession of the Premises to the

Lessor and the Lessor fail to refund the

Security Deposit to the Lessee, the Lessee will

be entitled to retain the possession of the

Premises without paying any applicable Rent

until such time as the entire Security Deposit is

repaid along with interest at the rate of 18%

per annum for the delayed period. In case, the

Lessee is continuing its operations from the

Premises in such a scenario, the Lessee shall

pay the Maintenance Charges and utility

charges on consumption basis only.

(iv) The monthly rent shall be paid by the 'LESSEE'

as per para B above and under no

circumstances the 'LESSEE' can request the

'LESSOR' for adjustment of the Security

Deposit against the monthly rent."

Company Appeal (AT) (Insolvency) No. 03 of 2018 6

5. Subsequently, another 'Lease Agreement' was entered into on 27th

March, 2015 between one 'Mrs. Kaneez Fathima Khader and four others' with

2nd Respondent 'M/s. Black N Green Mobile Solutions Pvt. Ltd.' whereby the

premises in question has been sub-leased in favour of the 2nd Respondent.

The relevant part of the agreement is as follows:

"The Agreement of Lease entered into at Chennai on this

27th day of March in the Year Two Thousand and Fifteen

(2015)

BETWEEN

1. Mrs. Kaneez Fathima Khader, wife of Dr. A.K.Sait,

aged about 63 years, residing No. 21, Rutland Gate IV

Street, Nungambakkam, Chennai - 600 006.

2. Mrs. Zebunissa Hashim, Wife of Late M. Hashim

Sulaiman, aged about 75 years, residing at No. 13,

Sulaiman Zackria Avenue, Casa Major Road, Egmore,

Chennai - 600 006.

3. Mrs. Razia Humayune Dada, wife of Mr. Humayune

Dada, aged about 76 years, represented by her Power of

Attorney Holder Mrs. Zebunissa Hashim, Wife of (late) M.

Hashim Sulaiman, residing at 13, Sulaiman Zackria

Avenue, Casa Major Road, Egmore, Chennai - 600 008.

4. Mrs. Khamrunissa Y Dada, wife of Mr. Imran Yusuf

Dada, aged about 53 years, residing at 13, Sulaiman

Company Appeal (AT) (Insolvency) No. 03 of 2018 7

Zackria Avenue, Casa Major Road, Egmore, Chennai -

600 008.

5. GHYAZ Hashim, son of (late) M. Hashim sulaiman, aged

about 50 years, residing at No. 13, Sulaiman Zackria

Avenue, Casa Major Road, Egmore, Chennai - 600 008.

hereinafter referred to as "the LESSOR" (which

expressions shall unless be repugnant to the context or

meaning thereof deem to mean and include his

representatives, administrators, nominees, assigns and

Successors-in-title) of the ONE PART :

AND

Black N Green Mobile Solutions Pvt. Ltd., a company

registered under the Companies Act of 1956 operating

from Gee Gee Universal 2, Mc. Nichols Road, Chetpet,

Chennai - 600 031 and represented herein by its director,

Mr. Karthik Shankar as authorised by the board

resolution dated 8th April, 2011.

Herein after referred to as the LESSEE

Of the OTHER PART:

Wherever the context so requires in the agreement the

singular shall mean and include the plural and the

masculine gender shall mean and include the feminine

gender and references to the individual shall also

Company Appeal (AT) (Insolvency) No. 03 of 2018 8

wherever the context so requires mean and include other

legal entities.

The LESSOR and the LESSEE if admitted in the context

are individually referred to as "Party" and collectively as

"Parties"

Whereas the LESSOR has agreed to grant by way of

Lease to the LESSEE and the LESSEE is desirous of

taking on Lease the 7th floor admeasuring 8942

sq.ft.(super built up area), in the building known as "Gee

Gee UNIVERSAL", No. 2 Mc.Nichols Road, Chetpet,

Chennai - 600 031 together with 8 reserved open to sky

car part around the building and furniture and fittings

more particularly described in "Schedule - A" hereunder

and hereinafter referred to as the "DEMISED

PREMISES" for use as its own office.

AND WHEREAS the Parties hereto are desirous of

reducing the terms and conditions into writing by

executing this Agreement

NOW THIS AGREEMENT OF LEASE WITNESSETH AS

FOLLOWS:

1. DURATION OF THE LEASE

The LESSOR doth hereby confirm that they have

granted unto the LESSEE herein a lease to use

Company Appeal (AT) (Insolvency) No. 03 of 2018 9

and occupy the DEMISED PREMISES with effect

from 1st May 2015 and valid up to 30th April, 2017

both days inclusive i.e. for a period of twenty four

(24) months (The "Lease Period")

2. RENT

That the "LESSEE" herein agrees that it shall for

the duration of the lease, pay the 'LESSOR'

monthly rent calculated as under on or before 5th

of every English Calendar month for which it is

due. It is agreed between the parties herein that

the below mentioned rent payable by the 'LESSEE'

shall be for a period of Four years and as

enhanced in clause 4 infra.

'FITOUT PERIOD' means a Lease Rental free

period of 30 days from 1st April, 2015.

AREA- 8942 SQ.FT.

PERIOD RENT/MONTH DEPOSIT

01.04.2015 TO FITOUT RENT FREE PERIOD 30.04.2015 01.05.2015 TO Rs.4,47,100/- Rs.35,76,800/- 30.04.2017

01.05.2017 TO Rs.4,91,810/- Rs.39,34,480/- 30.04.2019

Company Appeal (AT) (Insolvency) No. 03 of 2018 10

The monthly rent shall be paid by the 'LESSEE' as

above and under no circumstances the "LESSEE'

can request the 'LESSORS' for adjustment of the

Security Deposit against the monthly rent."

6. The case of the respondent is that sub-tenant (Corporate Debtor) was

paying part of the rent directly to Mr. Mahesh Madhavan (Financial Creditor).

The said sub-tenant having failed to pay, the 'Operational Creditor' moved the

application under Section 9 for initiation of Corporate Insolvency Resolution

Process against the 'sub-tenant'/'Corporate Debtor' wherein principal sum of

Rs.28,04,553 along with 18% interest per annum has been shown towards

lease rent for the period from 5th October, 2014 to 5th May, 2015. 'Mr. Mahesh

Madhavan' has shown to be 'Operational Creditor' and 'M/s. Black N Green

Mobile Solutions Pvt. Ltd.' as Corporate Debtor.

7. From the admitted fact, we find that 'Mr. Mahesh Madhavan'

(Operational Creditor) had not entered into any agreement with 'M/s. Black N.

Green Mobile Solutions Pvt. Ltd.' (Corporate Debtor). The Agreement dated

3rd December, 2012 was reached between 'Mr. Mahesh Madhavan'

(Operational Creditor) with one 'M/s. Universal Power Systems Pvt. Ltd.' and

not with the Corporate Debtor in question. 'M/s. Black N. Green Mobile

Solutions Pvt. Ltd.' (Corporate Debtor) is not in the occupation of the premises

on the basis of aforesaid agreement dated 3rd December, 2012. A separate

lease dated 27th March, 2015 was entered into between Mrs. Kaneez Fathima

Khader and four others (Lessor) and M/s. Black N. Green Mobile Solutions

Company Appeal (AT) (Insolvency) No. 03 of 2018 11

Pvt. Ltd. (Lessee). Merely because 'sub-tenant' is occupying the premises does

not mean of landlord tenant that Mr. Mahesh Madhavan is 'Operational

Creditor' of M/s. Black N. Green Mobile Solutions Pvt. Ltd.. Sub-tenant has

no liability to pay the rent to the original owner of the premises, but to the

tenant with which it has executed the agreement. If part of the payment was

made directly by the 'sub-tenant' to Mr. Mahesh Madhavan (Operational

Creditor) it will not create the relationship of 'Operational Creditor' and the

'Corporate Debtor' between the aforesaid two persons.

8. The Adjudicating Authority having failed to notice the aforesaid fact

wrongly admitted the application and in absence of any relationship between

'Mr. Mahesh Madhavan' (Operational Creditor) and 'M/s. Black N. Green

Mobile Solutions Pvt. Ltd.' as Corporate Debtor, the petition under Section 9

was not maintainable and was fit to be rejected.

9. For the aforesaid reasons, we set aside the impugned order dated 8th

December, 2017 in C.P. NO. CP/625/(IB)/CB/2017.

10. In effect, order(s) passed by Ld. Adjudicating Authority appointing

'Resolution Professional', declaring moratorium, freezing of account, and all

other order(s) passed by Adjudicating Authority pursuant to impugned order

and action taken by the 'Resolution Professional', including the advertisement

published in the newspaper calling for applications all such orders and actions

are declared illegal and are set aside. The application preferred by Respondent

under Section 9 of the I&B Code, 2016 is dismissed. Learned Adjudicating

Authority will now close the proceeding. 'M/s. Black N. Green Mobile Solutions

Company Appeal (AT) (Insolvency) No. 03 of 2018 12

Pvt. Ltd.' is released from all the rigour of law and is allowed to function

independently through its Board of Directors from immediate effect.

11. Learned Adjudicating Authority will fix the fee of the 'Resolution

Professional', and 'M/s. Black N. Green Mobile Solutions Pvt. Ltd.' will pay

the fees and other cost incurred by the Resolution Professional. The appeal

is allowed with aforesaid observation and direction. However, in the facts and

circumstances of the case, there shall be no order as to cost.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice Bansi Lal Bhat ] Member(Judicial)

New Delhi

21st May, 2018

/ns/

Company Appeal (AT) (Insolvency) No. 03 of 2018