Whether the non-payment of rent would qualify as an operational debt defined u/s 5(21) of IBC 2016?

In this case of Promila Taneja vs. Surendri Design Pvt Ltd, a Civil Appeal No(s).4237 of 2020, the Supreme Court issued notice in an appeal filed against an order passed by National Company Law Appellate Tribunal.

In the present case, it has been submitted that the demand was both in respect of the arrears of rent as well as on account of damages for breach of the lock-in period.

Ms Anjoo Jain, learned counsel appearing on behalf of the appellant, submits that there are two conflicting decisions of the National Company Law Appellate Tribunal on the issue as to whether the non-payment of rent would qualify as an operational debt within the meaning of Section 5(21) of the Insolvency and Bankruptcy Code 2016 and the following decision belongs to the –

  1. M Ravindranath Reddy v Mr G Kishan & Ors, Company Appeal (AT) (Insolvency) No 331 of 2019 decided on 17 January 2020; and
  2. Anup Sushil Dubey v National Agriculture Co-operative Marketing Federation of India Limited & Ors, Company Appeal (AT)(Insolvency) No 229 of 2020 decided on 7 October 2020.

In this case, the landlord filed the Application under Section 9 of Insolvency and Bankruptcy Code, 2016, which was dismissed by the Adjudicating Authority on ground that dues in the nature of rent of immovable property do not fall under the head of Operational Debt as defined under Section 5 (21) of IBC.

Operational debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the 6[payment] of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority.

The apex court had issued a notice in this appeal which was filed against an order of NCLAT.

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