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Judgment
Per: Justice Rakesh Kumar Jain: (Oral)
23.07.2025 : This appeal is directed against the order dated 16.06.2023, passed by the National Company Law Tribunal, Mumbai Bench IV, by which CP (IB) No. 1281/MB-IV/2020 filed by Hotel Horizon Pvt. Ltd. (Operational Creditor/OC) under Section 9 of the Insolvency and Bankruptcy Code, 2016 (in short ‘Code’) against PCK Corporation LLP (Corporate Debtor/CD) for the resolution of an amount of Rs. 1,47,92,962/- has been admitted and Sunil Kumar Bansal was appointed as the IRP.
The Appeal has been filed by the Suspended director of the CD under Section 61 of the Code.
The brief facts of this case are that the OC is the owner of a land and building situated at Juhu Tara Road, Juhu Mumbai. The OC leased out Unit No. 1 admeasuring 1368 sq. ft. area situated on the 2nd floor of the ‘C’ wing of the said building to the CD by a registered leave and license agreement dated 15.11.2017 for a period of 5 years for running a restaurant under the name of “The Kattlery”.
The OC agreed to grant license to the CD for a period of 5 years commencing from 01.11.2017 and ending on 30.10.2022. As per the said agreement, the CD was to pay the license fee, CAM charges, all other utilities as well as interest on delayed payment in a timely manner, however, the CD failed to pay the same, therefore, the OC issued the notice under Section 8 of the Code on 27.12.2019 which was duly replied by the CD on 19.01.2020. Thereafter, the OC filed the application under Section 9 of the Code on 15.05.2020.
In part IV of the application, the OC claimed the defaulted amount of license fee of Rs. 1,05,57,540/-, CAM Charges of Rs. 1,88,238/-, HVAC Running Cost of Rs. 8,16,568/-, Infrastructure Charge of Rs. 5,68,000/-, water consumption charges of Rs. 2,29,581/- and Interest on delayed payments of Rs. 24,33,035, all aggregating to Rs. 1,47,92,962/-. The claim of license fee includes Rs. 84,99,540 being license fee for the unexpired lock in period of 3 years.
While contesting the application, the CD has mainly taken the stand of frustration of contract, inter alia, on the ground that the leave license agreement executed on 15.11.2017 was for a particular business. The stand of the CD is that he was to do business of Kettlery, however, since master franchise agreement was terminated by the franchisee on 12.11.2018, therefore, it had become impossible for the CD to continue with the said business under the name of ‘Kettlery’, therefore, he informed the OC vide letter dated 01.03.2019 about the frustration of the contract and also handed over the keys of the premises on 14.03.2019. It is also the stand of the CD that it is basically a civil dispute which could have been agitated before the Civil Court instead of pushing the CD into CIRP by filing the application under Section 9.
The Tribunal, however, admitted the application filed by the OC while referring to clause 14.3 of the said agreement and also relied upon a decision of the Hon’ble Bombay High Court in the case of Indiabulls Properties Pvt. Ltd. Vs. Treasure Developers Pvt. Ltd., CP No. 496 of 2013.
Counsel for the Appellant has vehemently argued that the Tribunal has committed a patent error in admitting the application under Section 9 despite the fact that the agreement entered into by the CD with the OC had become impossible to perform in view of the fact that the master franchisee was terminated by the franchisee. He has, therefore, referred to Section 56 of the Indian Contract Act, 1872 (in short ‘Act’) to argue that if the agreement becomes impossible to carry out then it becomes void. In order to substantiate his argument, he has referred to some clauses of the said agreement. It is submitted that the leave and license agreement dated 15.11.2017 was entered into for a particular business. The term ‘business’ is defined in clause 1.2 which read “business shall mean restaurant under the brand of the kettlery which shall be operated in the name and style of the kettlery only from the licensed unit”. He has further referred to clause 2 of the said agreement pertaining to grant of license. The said clause read as under:-
Thereafter, he drew our attention to clause 3.2 which pertains to lock in period and termination. The relevant part of the said clause is as under:-
Counsel for the appellant has also very fairly referred to clause 14.3 (‘b’ and ‘o’) which also read as under:-
Counsel for the appellant has contended that as per clauses of the said agreement, referred to above, agreement between the parties was totally frustrated, therefore, he had not only communicated the same to the OC on 01.03.2019 in writing but had also handed over the keys of the premises on 14.03.2019. In support of his submissions, he has also relied upon a decision of the Hon’ble Supreme Court in the case of Satyabrata Ghose Vs. Mugneeram Bangur and Company & Anr., (1953) 2 SCC 437 in regard to the frustration of the contract while referring to Section 56 of the Act.
No one has appeared on behalf of the OC. Counsel for the IRP has appeared and submitted that the OC has been non-cooperative and non-responsive to its communication.
Be that as it may, the only issue involved in this case which requires adjudication is as to whether the leave and license agreement as read by the CD has caused frustration of the contract between the parties or there is a provision in the said agreement as per which the CD still could have used the premises for any other business?
No doubt that busines has been defined as the business of kettlery as we have already mentioned but there is no dispute that the premises was let out by the OC to the CD for five years alongwith a condition of lock in period of three years. Clause 14.3 (b) categorically provides that the CD still could have used the premises for any other brand but with the prior consent of the licensor and the very fact that there is a provision in the said agreement to the benefit of the CD to use the premises for any other brand is itself sufficient to knock down the case of the CD that the leave and license agreement has not totally been frustrated. The judgment relied upon by the CD is not applicable to the facts of this case.
In view thereof, we do not find any error committed by the Tribunal who has also interpreted the same provision in the impugned order for the purpose of coming to the conclusion that there was a debt and default on the part of the CD for which the application filed under Section 9 of the Code has rightly been admitted.
No other point has been raised.
In view of the aforesaid facts and circumstances, we do not find any merit in this appeal and the same is hereby dismissed though without any order as to costs.
I.As, if any, are hereby closed.