NCLT Delhi Rules, Non-Payment Of Outstanding Lease Rent Amounts To Operational Debt
Pranav B Prem
The National Company Law Tribunal (NCLT), New Delhi Bench, comprising Shri Mahendra Khandelwal (Judicial Member) and Shri Atul Chaturvedi (Technical Member), has held that non-payment of lease rent amounts to an "Operational Debt" under the Insolvency and Bankruptcy Code, 2016. Accordingly, it admitted a petition filed by M/s Unified Credit Solutions Private Limited against M/s DS Home Construction Pvt. Ltd. under Section 9 of the Code for initiation of the Corporate Insolvency Resolution Process (CIRP).
The dispute originated from a Registered Lease Agreement dated 1st October 2020 between the Operational Creditor and the Corporate Debtor for a term of five years in respect of an office premises located in Gurugram. The agreement explicitly stated that the Corporate Debtor would be solely liable for payment of lease rent, taxes, electricity, and maintenance charges. Possession of the premises was taken on 1st November 2020 after the agreed security deposit was furnished.
However, the Corporate Debtor defaulted in timely payment of lease rent from January to June 2022 and fell into continuous default from July 2022 onwards. To evade payments, the Corporate Debtor claimed that its bank accounts had been attached by the Haryana Real Estate Regulatory Authority (HRERA), requesting time until January 2023 to settle dues. Additionally, the Corporate Debtor fabricated a story regarding electricity disconnection due to a fire incident, whereas the actual cause was non-payment of maintenance charges, which were eventually cleared only in December 2022, leading to restoration of electricity.
Despite a notice dated 2nd February 2023 from the Operational Creditor demanding payment of arrears with interest by 9th February 2023, no reply or payment followed. Consequently, the lease was terminated effective from 3rd March 2023, converting the Corporate Debtor's possession into unauthorized occupancy. The Operational Creditor then filed an eviction petition before the Rent Controller, Gurugram, which remains pending.
The Corporate Debtor made a part payment of ₹12,96,000 between April and May 2023 but failed to clear the remaining dues. Furthermore, it did not deposit ₹1,80,000 TDS deducted on lease rent between April and June 2022. As of 7th November 2023, the total outstanding operational debt was ₹1,84,47,567. A demand notice under Section 8 of the Code was issued on 30th November 2023, but the Corporate Debtor neither replied nor made payment within the stipulated 10 days.
The Tribunal noted that despite being served via multiple modes, including email and speed post, the Corporate Debtor neither responded nor appeared before the Tribunal and was thus proceeded against ex parte.
While examining the issue, the Tribunal considered whether the unpaid lease rent qualified as "Operational Debt" under Section 5(21) of the Code. It observed that the claim arose from a commercial lease arrangement and involved use and occupation of a premises, which constituted provision of services. The Tribunal noted, “the Operational Creditor has annexed true copies of the invoices... which justifies that there had been a transaction between the parties.”
Further, the Corporate Debtor’s acknowledgment of liability and failure to pay the amount reinforced that the debt was due and payable. The Tribunal found no evidence of any pre-existing dispute or pending litigation prior to the issuance of the demand notice. Citing the Supreme Court’s judgment in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. [(2018) 1 SCC 353], it confirmed that the conditions under Section 9 of the Code stood satisfied.
Accordingly, the Tribunal admitted the application under Section 9, initiating CIRP against the Corporate Debtor and appointing Mr. Vaneet Bhatia as the Interim Resolution Professional (IRP). It also imposed a moratorium under Section 14 of the Code, restraining all legal actions and recovery proceedings against the Corporate Debtor.
The NCLT, New Delhi, admitted the insolvency petition filed by Unified Credit Solutions Pvt. Ltd. under Section 9 of the Insolvency and Bankruptcy Code, 2016, against DS Home Construction Pvt. Ltd. for default in payment of lease rent. The Tribunal held that unpaid lease rent constitutes an operational debt under the Code and accordingly initiated CIRP by appointing an IRP and declaring a moratorium.
Cause Title: M/s Unified Credit Solutions Pvt. Ltd. V. M/s DS Home Construction Pvt. Ltd.
Case No: Company Petition IB/70/ND/2024
Coram: Shri Mahendra Khandelwal [Hon’ble Member (Judicial)], Atul Chaturvedi [Hon’ble Member (Technical)]
[Read/Downoad order]
