Advanced License Fee Is An Operational Debt And Notice U/s 138 NIA Is Not A Dispute Under IBC: NCLT, Delhi

Factual Background

The Applicant/ Operational Creditor,i.e. Ashimara Housing Pvt. Ltd. filed an application for initiation of CIRP against the Respondent, who is the Corporate Debtor under Section 9 of the IBC r/w Rule 6 of the IBBI (Application to Adjudicating Authority) Rules, 2016.

The Applicant entered into an agreement with the Corporate Debtor for running a 'long stay residential accommodation' on a property which was jointly owned by the Corporate Debtor and Juvello Homes Pvt. Ltd. In both of these companies, the Director of the Corporate Debtor was a Director and major stakeholder. The Applicant was requested to make payments as interest free deposit towards advanced license fee for providing operations and management services with respect to the property. The Applicant issued two cheques to the Corporate Debtor.

The Applicant, being suspicious of the transaction due to unreasonable delay on part of the Corporate Debtor in handover, requested the bank to stop the payment of one of the cheques issued to Juvello Homes Pvt. Ltd. Subsequently, the Applicant withdrew from the project and requested the Corporate Debor to return the payment received by it towards advanced license fee. However, the Corporate Debtor did not pay the amount to the Applicant.

The Applicant sent a Demand Notice to the Corporate Debtor as per the terms of Section 8 of the IBC.

The main contentions raised by the Corporate Debtor were that since a legal notice has been sent to the Applicant under Section 138 of the Negotiable Instruments Act for payment of the amount towards advanced license fee, there exists a legal dispute between the two parties. Thus, the application for initiation of CIRP should not be entertained.

The Corporate Debtor also contended that repayment claimed by the Applicant is not an operational debt as per Section 5(21) of the Code and that the operational creditor can only file an application under IBC on the basis of an invoice, which is not available in the present case.

Decision

Whether Advance Payment Of License Free Comes Under The Definition Of Operational Debt

Placing reliance on Joseph Jayananda v. Navalmar (UK) Ltd. and Anup Sushil Dubey v. National Agriculture Co-operative Marketing Federation of India Ltd., the Tribunal held that the amount deposited by the Applicant towards the advanced license fee for providing operational and management services comes under the definition of operational debt and the applicant is an Operational Creditor.

Existing Legal Dispute- Notice U/S 138 Of The NIA

It was held that issuance of a legal notice under the Negotiable Instruments Act, 1881 cannot be treated as a legal dispute. As such, there is no pre-existing dispute.

Noting that the demand notice under Section 9 had been sent and no payment with respect to the amount claimed has been made, the Tribunal proceeded to accept the application after satisfying itself that all requirements of Section 9(5) (i) & (ii) of the Code were fulfilled and imposed a moratorium in terms of Section 14.

Case Title:Ashimara Housing Private Limited v. Vibrus Homes Private Limited

Citation: Company Petition (IB) No. 158/ND/2020

Counsel for the Applicant: Adv. Vivek Kishore, Adv. Zorawar Singh, Adv. Anamika

Counsel for the Respondent: Adv. Saurabh Sachdeva