Sarla Tantia vs Ramaanil Hotels & Resorts Pvt Ltd

[Arising out of order dated 23rd July, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata in C. P. (IB) No. 335/KB/2018]

IN THE MATTER OF:

Sarla Tantia 96, Narkeldanga Main Road, Kolkata - 700 054.

...Appellant

Vs

Ramaanil Hotels & Resorts Pvt. Ltd. Registered office at 24, Green Park, Block - A, Old - 827, Jessore Road, Kolkata - 700 055.

Corporate Office at 81/2A, Raja Dinendra Street, Kolkata - 700 006.. ....Respondent

Present:

For Appellant: Mr. Vaibhav Gaggar, Mr. Vipul Agrawal, Mr. Arjun Kant, Mr. Adarsh Chamoli, Mr. Soham Goswami, Advocates.

For Respondent: Mr. Sameer Abhyankar and Mr. Akshay Joshi, Advocates. -2-

BANSI LAL BHAT, J.

Appellant, claiming to be an 'Operational Creditor' provided a portion

of third floor of her premises No. DD-30, Salt Lake City, Kolkata measuring

2281 sq.ft. 'super built area' to Respondent in terms of Leave and License

Agreement executed inter-se the parties on 1st January, 2016 for a period of

nine years for license fee of Rs.88 per sq.ft. per month calculated on the

basis of 'super built area'. The licensed premises was permitted to be used

by the licensee (Respondent-Corporate Debtor) for carrying on business of

restaurant under the name and style of 'Ramaanil Hotels & Resorts Pvt. Ltd.'

after the same was inspected by the Respondent as stipulated in the Leave

and License Agreement spread over page nos. 65 to 76 of the paper book.

The Respondent - Corporate Debtor having defaulted in payment of rent

with arrears together with interest calculated at Rs.40,96,295/- till 31st

December, 2017, demand notice in terms of Section 8 (1) of the Insolvency

and Bankruptcy Code, 2016 (hereinafter referred to as 'I&B Code') was

issued by the Appellant - Operational Creditor on 1st January, 2018 and

served upon the Respondent - Corporate Debtor on 2nd January, 2018.

Respondent did not respond to the same. The Appellant filed an application

in the prescribed format under Section 9 of the I&B Code before the

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Adjudicating Authority (National Company Law Tribunal), Kolkata Bench,

Kolkata for triggering of Corporate Insolvency Resolution Process against the

Respondent - Corporate Debtor. However, the application came to be

rejected in terms of impugned order dated 23rd July, 2018 passed by the

Adjudicating Authority on the ground that the Respondent - Corporate

Debtor established that there was a pre-existing dispute in regard to rate of

rent on the basis of carpet area and without settling the dispute it could not

be held that the adhoc amount paid by the Respondent - Corporate Debtor

was towards discharge of entire liability of the rent arrears. Aggrieved by

the aforesaid order of rejection, the Appellant - Operational Creditor has

filed the instant appeal assailing the impugned order on various grounds set

out in the memo of appeal, which shall be adverted to hereinafter.

2. The factum of the licensed premises having been provided by the

Appellant to Respondent on leave and license basis w.e.f. 1st January, 2016

for space measuring about 2281 sq. ft. 'super built area' on 3rd Floor

(southern portion) of the premises no. DD-30, Salt Lake City, Kolkata in

terms of Leave and License Agreement executed between the parties on 1st

January, 2016 on the agreed license fees for a period of nine years has not

been in controversy before the Adjudicating Authority. Even before this

Appellate Tribunal factum and validity of the aforesaid Leave and License

Agreement is not in controversy. The only issue raised by the Respondent -

Corporate Debtor is in regard to existence of a prior dispute disentitling the

Appellant to trigger Corporate Insolvency Resolution Process. Appellant's

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case is that the said license was granted in consideration of license fee of

Rs.88 per sq. ft. per month calculated on the basis of 'super built up area' of

2281 sq. ft. and in terms of the Leave and License Agreement governing

relations inter-se the parties, the Respondent Corporate Debtor was under a

legal obligation to pay monthly license fee of Rs.2,00,728/- calculated on the

aforestated basis. In this regard, reference is made to clause 2 of the Leave

and License Agreement which reads as under:-

"The license fee of the licensed premises had been agreed

to be paid by the licensee @ Rs.88/- (Rupees Eighty Eight

Only) per sq. ft. per month to be calculated on super built

up area, and all other Municipal rates and taxes, service

tax and all other statutory liabilities as applicable will be

payable extra. All payment shall be made by A/c. payee

cheque only."

3. It is contended on behalf of the Appellant that the Respondent paid

the license fee in respect of the licensed premises from January, 2016 to

November, 2016 at the agreed rate calculated on the basis of 'super built up

area' of 2281 sq. ft. on the basis of invoices raised by the Appellant without

demur and no dispute was ever raised by the Respondent regarding the said

invoices and payments made during the aforesaid period. It is further

contended that the Respondent even did not choose to reply the demand

Company Appeal (AT) (Insolvency) No. 513 of 2018 -5-

notice served upon it by the Appellant and failed to give a notice of dispute

which clearly demonstrates lack of bonafide and plausible dispute.

4. Per contra learned counsel for Respondent contended that there was

ample evidence to indicate the existence of a plausible dispute between the

parties prior to issuance of demand notice. Reference is made to Appellant's

letter dated 4th September, 2017 addressed to Urban Development

Department, rent receipts issued by the Appellant after June, 2017 and

inspection report ordered by Executive Magistrate to buttress the point that

a prior dispute existed between the parties with regard to calculation of rent

on the basis of area of the premises.

5. Heard learned counsel for the parties and fathomed through the

depths of the factual matrix as emerging from record.

6. Initiation of Corporate Insolvency Resolution Process at the instance

of an Operational Creditor is provided for under the provision engrafted in

Section 9 of the I&B Code, whereunder an Operational Creditor may file an

application before the Adjudicating Authority for initiating a Corporate

Insolvency Resolution Process after complying with the statutory

requirements of Section 8. Dwelling on the scope of this provision in

"Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407", the

Hon'ble Apex Court observed as under:

Company Appeal (AT) (Insolvency) No. 513 of 2018 -6-

"29. The scheme of Section 7 stands in contrast with the

scheme under Section 8 where an operational creditor is,

on the occurrence of a default, to first deliver a demand

notice of the unpaid debt to the operational debtor in the

manner provided in Section 8(1) of the Code. Under Section

8(2), the corporate debtor can, within a period of 10 days

of receipt of the demand notice or copy of the invoice

mentioned in sub-section (1), bring to the notice of the

operational creditor the existence of a dispute or the record

of the pendency of a suit or arbitration proceedings, which

is pre-existing--i.e. before such notice or invoice was

received by the corporate debtor. The moment there is

existence of such a dispute, the operational creditor gets

out of the clutches of the Code."

In a later judgment titled in "Mobilox Innovations (P) Ltd. v. Kirusa

Software (P) Ltd., (2018) 1 SCC 353", the Hon'ble Apex Court further

observed as under:-

51. It is clear, therefore, that once the operational creditor

has filed an application, which is otherwise complete, the

adjudicating authority must reject the application under

Section 9(5)(2)(d) if notice of dispute has been received by

the operational creditor or there is a record of dispute in

Company Appeal (AT) (Insolvency) No. 513 of 2018 -7-

the information utility. It is clear that such notice must

bring to the notice of the operational creditor the

"existence" of a dispute or the fact that a suit or arbitration

proceeding relating to a dispute is pending between the

parties. Therefore, all that the adjudicating authority is to

see at this stage is whether there is a plausible contention

which requires further investigation and that the "dispute"

is not a patently feeble legal argument or an assertion of

fact unsupported by evidence. It is important to separate

the grain from the chaff and to reject a spurious defence

which is mere bluster. However, in doing so, the Court

does not need to be satisfied that the defence is likely to

succeed. The Court does not at this stage examine the

merits of the dispute except to the extent indicated above.

So long as a dispute truly exists in fact and is not

spurious, hypothetical or illusory, the adjudicating

authority has to reject the application."

7. Adverting to the facts of the case in hand be it seen that the status of

parties respectively as Operational Creditor and Corporate Debtor was

neither in issue before the Adjudicating Authority nor has the same been

disputed before this Appellate Tribunal. It is also not disputed that the

relations inter-se the parties in regard to the licensed premises are governed

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by the Leave and License Agreement which stipulates in unambiguous terms

that the license fee @ Rs.88 per sq. ft. per month shall be calculated on the

basis of 'super built up area'. Municipal Taxes, Service Tax and other

statutory liabilities as applicable will be payable in addition thereto. The

stipulations in the aforesaid agreement do not admit of any ambiguity in so

far as calculation of license fee on the basis of 'super built up area' is

concerned. The aforesaid agreement also brings it to fore that the

Respondent had inspected the licensed premises before execution of the

aforesaid agreement and agreed to pay the license fee on aforesaid terms.

The licensed premises comprising of approximately 2281 sq. ft. was marked

and duly inspected by the Respondent before execution of Leave and License

Agreement. Clause 30 of the aforesaid agreement provided that in the event

of any dispute or difference arising between the parties the same shall be

referred to sole arbitration of Mr. Sanjay Kumar Vaid, Advocate Kolkata. It

is manifestly clear that the Respondent was sufficiently clear about the area

of the licensed premises, which specifically provided for calculation of

license fee on the basis of 'super built up area'. It was therefore absurd on

the part of Respondent to question calculation of license fee in the aforesaid

manner, that too after acting upon the aforesaid agreement by effecting

payment of license fee from January, 2016 to November, 2016 without

raising any objection or disputing the invoices raised in regard to license fee

payable for the aforesaid period. The conduct of Respondent antecedent to

the execution of Leave and License Agreement as also subsequent conduct

in paying the license fee at the agreed terms on the basis of 'super built up

Company Appeal (AT) (Insolvency) No. 513 of 2018 -9-

area' speaks volumes about the hollowness of the plea raised on behalf of

Respondent that the Respondent was under obligation to pay rent on the

basis of 'carpet area' which, on the face of it, is fallacious.

8. The Adjudicating Authority was not supposed to conduct a roving

enquiry though it could have been within its rights to go for a limited

exercise of sifting the material available before it for separating the grain

from the chaff and to reject the spurious defense. The contractual relations

inter-se the parties which are governed by the Leave and License Agreement

do not admit of any oral agreement contrary to stipulations therein. Thus

viewed, the defense raised by the Respondent that the adhoc amount was

paid on the basis of reduced 'carpet area' of the licensed premises or that

the oral agreement running parallel to the Leave and License Agreement

enjoined upon the Respondent to pay rent on the basis of 'carpet area',

which was less as compared to the 'super built up area', was a mere

moonshine and could not be entertained as a pre-existing dispute to defeat

initiation of Corporate Insolvency Resolution Process. The Adjudicating

Authority has clearly landed in error in rejecting the Appellant's version that

the license fee was fixed for 'super built up area' and not for 'carpet area' as

clearly stipulated in the Leave and License Agreement and the Appellant was

under no obligation to reduce the rent. Reliance on irrelevant documents in

coming to conclusion that there was a pre-existing dispute was uncalled for.

The Adjudicating Authority also failed to notice that the Respondent never

sought settlement of any dispute in regard to calculation of rent on 'carpet

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area' basis through arbitration which was the agreed mode of resolution of

dispute between the parties in terms of the Leave and License Agreement.

Significantly, no dispute was raised by the Respondent in reply to demand

notice to which he did not at all respond.

9. Having regard for the factual matrix of the matter and the settled law

on the subject, we are of the considered opinion that the impugned order

suffers from serious legal infirmity and the same cannot be supported. A

well merited case has been thrown out resulting in grave injustice. We

accordingly, allow the appeal and set aside the impugned order. Since the

debt and default is established, the Adjudicating Authority will admit the

application under Section 9 of I&B Code after providing an opportunity to

the Respondent - Corporate Debtor to settle the claim of Appellant, if it so

chooses.

10. The appeal is accordingly allowed. There shall be no order as to costs.

[Justice S. J. Mukhopadhaya] [Justice Bansi Lal Bhat] Chairperson Member (Judicial)

NEW DELHI 26th February, 2019 AM

Company Appeal (AT) (Insolvency) No. 513 of 2018