Unpaid Rental Dues and GST by CD Under Lease Deed Treated as Operational Debt u/s 5(21) of IBC | NCLAT

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Operational Debt u/s 5(21) of IBC

Case Details: Vaibhav Aggarwal v. Sunil Sachdeva - [2024] 164 taxmann.com 313 (NCLAT-New Delhi)

Judiciary and Counsel Details

  • Ashok Bhushan, Chairperson & Barun Mitra, Technical Member
  • Virag Gupta, Ashok Kumar Jain, Vishal Arun Mishra & Umang Mangal, Advs. for the Appellant.
  • Rajesh Ranjan, Archit Chauhan & Ishwar Mohapatra, Advs. for the Respondent.

Facts of the Case

In the instant case, a lease agreement was executed between lessors, i.e., late RS and CS and lessee, i.e., respondent no.2 (the corporate debtor), for a property in New Delhi with a lease term of 12 years from 28.08.2016 to 27.08.2028. After RS and CS passed away, their son ‘SS’ claimed to be their legal heir.

Thereafter, due to non-receipt of rent and GST, ‘SS’ issued a notice to the corporate debtor for Rs. 52.64 lakhs, followed by a termination notice on 28-4-2019, claiming a default amount of Rs. 85.44 lakhs. Despite these notices, no payments were made. Consequently, ‘SS’ issued a demand notice under section 8 and filed a section 9 application before NCLT, which the Adjudicating Authority (NCLT) admitted.

It was noted that the lessee was solely responsible for paying conversion charges. Further, the corporate debtor had been irregular in paying rent since 10.03.2017 and had not made a payment towards rent and GST since 30.08.2018.

NCLAT Held

The NCLAT noted that the operational creditor had been consistently pressing for the release of their outstanding amount. There was nothing on record to show that the corporate debtor had objected to or controverted claims raised by an operational creditor prior to the issue of the section 8 demand notice, the first two conditions of operational debt exceeding Rs. 1 lakh and having become due and payable but not yet paid would be squarely met.

The NCLAT held that although the corporate debtor had raised various grounds of pre-existing disputes, there was no real and substantial pre-existing dispute that could thwart the admission of the section 9 application against the corporate debtor. Therefore, the impugned order passed by the NCLT admitting the application u/s 9 and initiating the CIRP was justified.

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