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Whether Claim For Payment Of License Fee Of Immovable Premises For Commercial Purpose Is Operational Debt?

The National Company Law Appellate tribunal, Delhi vide its recent judgment gave its finding on the above referred issue in the matter of "Jaipur Trade Expocentre Private Limited Vs M/S Metro Jet Airways Training Private Limited (Judgment Dated 5th July, 2022)".

The issue before the tribunal was that whether claim for payment of license fee of immovable premises for commercial purpose is operational debt? The case arose out of a license agreement entered into between the appellant and respondent for granting a license of a premises for running an education establishment by Respondent in lieu of monthly license fee + government taxes.

While reviewing the definition of 'operational debt' as contained in Section 5(21) of the Insolvency and Bankruptcy Code ("Code"), the tribunal observed that the clause provides that 'operational debt' means a claim in respect of provision of goods or services. It was further noted by the tribunal that the agreement between the parties provided that the Licensee shall pay all government taxes including but not limited to Services Tax, VAT, GST, Excise etc. over and above License Fee therefore the agreement itself support payment of GST and GST contemplated only for goods and services.

The tribunal further observed that where Agreement itself contemplate payment of GST for services under the Agreement, on which GST is payable, the definition of 'service' under Central Goods and Services Tax Act, 2017 cannot be said to be irrelevant. More so, even if an expression is not defined in the statute, the meaning of expression in general parlance to be considered for finding out meaning and purpose of expression.

The tribunal held that " The Licensee was licensed for a particular kind of service for use by the Licensee for running a business of Educational Institution. Hence in present case, debt pertaining to unpaid license fee was fully covered within the meaning of 'operational debt' under Section 5(21) of Code.

Therefore, the tribunal rightly concluded that 'the claim of Licensor for payment of license fee for use of Demised Premises for business purposes is an 'operational debt' within meaning of Section 5(21) of the code'.

Written By: R.K. Dubey

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