MANU/NC/2372/2022

IN THE NATIONAL COMPANY LAW TRIBUNAL

CUTTACK BENCH
CP (IB) No. 181/CB/2020
Decided On: 08.04.2022
Appellants: Smarkworks Coworking Spaces Pvt. Ltd.
Vs.
Respondent: Turbot HQ India Pvt. Ltd.
Hon'ble Judges/Coram:
P. Mohan Raj, Member (J) and Satya Ranjan Prasad, Member (T)
Counsels:
For Appellant/Petitioner/Plaintiff: Aditya Kanodia and Indradeep Basu, Advs.
For Respondents/Defendant: Sidhant Dwibedi, Adv.
ORDER
P. Mohan Raj, Member (J)
The brief contents of the Petitions are as follows:-
1 . The petitioner/Operational Creditor engaged in the business of co-working and
shared office space in different centers of India. The Operational Creditor entered into
an agreement dated 17th August, 2018 with the Corporate Debtor in respect of service
centre situated at Kolkata. As per the agreement, petitioner agreed to provide serviced
office space consisting of 44 works stations at an agreed monthly fee of Rs. 3,52,000/-
plus taxes. In the agreement lock-in period of 36 months clause is added. The
agreement came into effect from 1st October, 2018. During the continuance of the
agreement period on 4th June 2019 the Corporate Debtor intimated to the petitioner
that they intend to terminate the agreement from the first week of September, 2019.
The petitioner brought to the notice of the Corporate Debtor about the lock-in-period
terms of the agreement. The Corporate Debtor left the co-working centre from
01.09.2019 and ending the agreement dated 17th August, 2018. The Corporate Debtor
paid payment only up to July, 2019. The Operational Creditor sent statutory notice to
corporate debtor under Section 8 of the Insolvency and Bankruptcy Code, 2016.
Claiming an amount of Rs. 1,28,95,402/- (One Crore Twenty-Eight Lakhs Ninety-Five
Thousand Hundred two). The notice was responded by the Corporate Debtor by his
reply dated 28th August 2020 with falls and frivolous allegation and denying payment.
Hence this petition.
2. The brief contents of the Reply are as follows:-
(i) In the agreement entered between the Operational Creditor and Corporate
Debtor even, though there it is mentioned that an agreement is a "pay-as-you-
use service agreement but, in facts the agreement is lease agreement as
provided under Section-105 of the Transfer of Property Act, 1882. It contains
all the ingredients of lease agreement. The lease agreement for more than
eleven months is compulsorily registrable under Section-17(1)(d) of the
Registration Act, 1908. Here, the agreement is not registered as per the

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 Registration Act, hence, the same cannot be taken into consideration in view of
bar provided Under Section-49(c) of the Registration Act 1908.
(ii) The claim of the Petitioner for realization of the rent is not comes under
definition of operational debt as provided under section 5(21) of the Insolvency
and Bankruptcy Code 2016. Further lease of immovable property cannot be
considered as a supply of goods or rendering of any service to attract Section 9
of the Insolvency and Bankruptcy Code, 2016. The lease agreement was
executed in an unstamped Papers. It is evident from the copy of document sent
to the Respondent along with Section 8 statutory notice. This was pointed out
in the reply dated 05.11.2020 sent by corporate debtor. After the receipt of
reply the Operational Creditor attached ante dated stamp paper and filed into
court as annexure E. The absence of signature of corporate debtor in the stamp
paper established that stamp paper was subsequently appended with
Agreement. The Petitioner purposely done it to get out of the defect of
unstamped pointed-out by the respondent.
(iii) The claims of the petitioner to recover arrears of rent is not maintainable
because of the West Bengal premises Tenancy Act, 1997. The petitioner claims
of rent for the locking period amounts to damages so the Petitioner is not
entitled for the same unless it is adjudicated in the court of law. Apart from that
the Petitioner has not fulfill his commitments, there was deficiencies in service
such as failure of fire safety apparatus, parking facilities and other service
deficiencies were not attended by the petitioner. Further, after the respondent
vacated the premises, the petitioner leased the said premises to another firm
thus petitioner has not suffered any damages.
(iv) In this scenario, the respondent has not committed any default even
otherwise there is no operational debt to attract the provisions of Insolvency
and Bankruptcy Code, 2016. Hence, this petition is liable to be dismissed.
3. The points for determination are:-
(i) Whether, the amount claimed by the petitioner for the locking period
amounts to operational debt?
(ii) Whether, the agreement dated 17th August 2018 is compulsorily registrable
Instrument under the Registration Act 1908.?
(iii) Whether, the agreement dated 17.08.2018 was originally engrossed on an
unstamped paper?
POINT NO:-1
4 . The petitioner claims amount pertaining to the locking in period. The agreement
dated 17.08.2018, was executed for three years period it came into effect from
01.10.2018 but, the Respondent vacated the premises on 01.9.2019. The petitioner here
in claims amount for the remaining months from 01.09.2019 to 30.09.2021 The
petitioner claims amount on the basis of breach of contract. It covers under Section 74
of the Indian Contract Act 1872. When the liquidated damages, or the amount fixed in
the contract for breach of contract or for non-performance the said amount is ceiling,
not the actual amount to be paid. Here, also the petitioner claims the amount on the
basis of monthly fee fixed in the agreement. The Liquidated Damages will crystallize
only after the adjudication by the competent Civil Court. This cannot be determined in

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the Insolvency Proceedings; undecided claim cannot be used to bring an application for
insolvency. As per Section 5(21) of Insolvency and Bankruptcy Code, 2016. Operational
debts mean debts due towards the supply of goods or service rendered. But here the
petitioner claims amount because of breach of contract. Even though in the agreement
fee of Rs. 3,52,000/- per month is fixed towards services; here admittedly the
Respondent not availed the services of petitioner after 1.09.2019, so the amount
claimed in the petition is not the amount payable towards services availed, but it is
claimed by the Petitioner for breach of agreement. In such situation the amount claimed
by the Petitioner not comes under the 'Operational Debt' under Insolvency and
Bankruptcy Code, 2016. On the Respondent side relies upon Delhi High Court, DB
Judgment Tower Vision India Pvt. Ltd. and others vs. Procall Private Ltd. And others.
MANU/DE/4958/2012 there in Para 27 it is stated as follows:-
This is a case where the premises were given by the petitioner to the
respondent on license basis vide lease and license agreement dated 18.2.2008.
Lock-in period of 33 months was prescribed and the entire amount is claimed
on account of premature termination of agreement by the respondent. The
petitioner is claiming total amount of the lock-in period. It is nowhere stated as
to how it has suffered any loss on this account and whether the liquidated
damages stipulated in the agreement are genuine pre-estimate damages. Once
we have accepted the judgment in Manju Bagai (supra) and we are also in
agreement with the view taken by the Bombay High Court in E-City Media
Private Limited (supra), the consequence of that would be to dismiss this
petition as well.
5 . On the respondent side stated that after the respondent vacated the premises, the
petitioner let out the premises to another firm, hence petitioner has not suffered any
monetary loss in this regard. Of course, this contention is denied by the petitioner.
When petitioner claims rent for the locking in period, it is to the Civil Court to decide.
Whether, the petitioner really sustains any loss or engaged another firm during the said
lock in period. All this questions to be decided and determined the actual loss suffered
by the petitioner. These factors cannot be decided here. In these types of cases the
breach of agreement, gives right to the other party right to sue but not confer any right
to receive the amount straight away. On the petitioner said relies Supreme Court
Judgment Pioneer Urban Land and Infrastructure Ltd. And Anr. Vs. Union of India. This
is the case pertaining to the payment made by the Allottees of real estate projects/Home
buyers, There the allottees who had paid substantial portion of the total sale
consideration amount to developers there the said Paid amount is considered as
financial debt. There allottees claimed refund of paid amount in that context it is held
that debt is liability, whether or not such right is reduced to Judgment. But here the
Respondent denies his liability to pay any amount, because he had not availed any
facility from the Petitioner, and Petitioner has not suffered any loss. The Fact is
distinguishable and not applicable to our case. On the Petitioner side also relies upon
the Delhi High Court, citation M/s. Satya Narain Sharma Huf vs. M/s. Ashwani Sarees
Pvt. Ltd. C.S. No. 1439/2008 dated 06.04.2009. The case is pertaining to registered
lease, here on the Petitioner side not admitted that the agreement entered between the
parties is lease deed in such a situation the said citation not improved the case of the
Petitioner, the another Judgment relied by the petitioner is Sanjeev Kumar vs. Aithent
Technologies Private Limited and another. This is also the case pertaining to lease deed
and payment of rent, there majority of members held that it is not a simple case where
rent is due which part of rent, there also other dues of electricity, diesel, sewer and
water charges and separate invoices were issued, in that context the order of
Adjudicating authority has confirmed. Here the petitioner denies the lessor and lessee

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relationship between the parties and denies the due amount is rent, then it is not known
how this citation support his case. Thus, the citations relied on the petitioner side not
helpful his case. In the circumstances it is concluded that the claim made in the petition
is not an operational debt comes under the ambit of Insolvency and Bankruptcy Code,
2016. Thus, this point is answered.
POINT NO:-2
6. The petitioner stated that the agreement entered between the parties is only service
provided agreement it is not a lease agreement. On the respondent side stated that even
though the agreement is named as service providing agreement, but the contents of the
agreement shows that it is a rent agreement, because all the ingredients set out in
Section 105 of the transfer of properties. Act 1882, are available. The nature of an
agreement cannot be decided on the nomenclature given in the deed, but it should be
decided on the contents of document. The lease deed creates certain rights to the lessee
in the immovable property. Here as per the recitals of agreement no right is conveyed.
On the petitioner side it is not disputed that the services provided to the respondent in
the service rooms and permitted the respondent to stay in the room and carry out his
works. This amounts to license as provided in Section 52 Easement Act 1882. There is
no pale of controversy that the petitioner granted permission to Respondent to use the
service rooms for a specified period. The permission granted by the petitioner to
Respondent to stay and work is immovable property. The period fixed is three years.
The question arises is whether such a document is compulsorily registrable. Section
17(1)(b) of Registration Act 1908 says any instrument, create, declare either in present
or in future certain rights over the immovable property values more than Rs. 100/- is
compulsorily registered. In our case the impugned agreement dated 17.08.2018 created
certain right to the respondent, to stay in the service rooms, for consideration of more
than Rs. 100/- thus the agreements satisfy all the requirements of section 17(1)(b) of
Registration Act 1908 in consequence the agreement is compulsorily registrable
instrument. In this case the agreement is not registered hence, the same cannot be
taken into consideration in view of the bar provided under Section 49(c) of the Indian
Registration Act 1908. Thus, this point is answered.
POINT NO:-3
7. On the respondent side alleged that the agreement dated 17.08.2018, was engrossed
on an unstamped paper. On the petitioner side denies this contentions and stated that
the document was engrossed on sufficient stamped paper. The admitted fact is when the
petitioner sent statutory notice dated 18.08.2020, sent copy of the agreement without
stamp paper. Now the agreement is filed along with main petition (Page 46) with Rs.
100/- non-judicial stamp paper. The explanation offered on the petitioner side is it had
happened inadvertently. On the respondent side stated that the petitioner tried to set
right defect, after the defect was pointed out by respondent in his reply notice dated
05.09.2020. The agreement is written on thirteen sheets (Page 48-60), all these sheets
bears signatures and office seals of both the Parties to agreement, 1st sheet of
agreement starts with title office service Agreement. The stamp paper now filed in the
petition (Page 46, 47) bears the signature and office seal of the petitioner alone. The
missing of signature and office seal of the respondent in stamp paper create doubt and
support the version of the respondent. Normally the beginning lines of the agreement
used to write in the stamp paper and rest of the matters will be written on the attached
full scape paper. Here no portion of the agreement is written on the stamp paper it
stands alone without connecting the agreement written or typed on the stamp paper.
There the names of both companies are typed as like cause title of the case typed in

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Judicial stamp paper while filing of the proceeding before the courts. Thus, it proves
that stamp paper (page 46) was ante dated and placed before the copy of agreement
and filed along with the petition. In this circumstance it is concluded that Agreement
dated 17.08.2018 was engrossed on unstamped paper. When the agreement is
engrossed on unstamped paper, the said instrument is not admissible in evidence for
any purpose, unless stamp duty and penalty is paid as provided under Section 35(a) of
Indian Stamp Act. 1869. The unstamped instrument should be impounded under Section
33 of Indian Stamp Act, but here on the petitioner side filed only Photo Copy of the
unstamped agreement, the same cannot be impounded in view of Apex Court Citation
Hariom Agarwal vs. Prakash Chand Malviya India kanoon. Org/doc/1515290/In fine it is
answered that the impugned agreement was engrossed on unstamped paper.
In these circumstances the unstamped and unregistered agreement cannot be
considered, it has no legal value, If the impugned agreement dated 17.08.2018 is set
apart from the legal proceeding, the claim of the Petitioner stand without base; in
consequence the Petitioner plea is negatived.
In the result Petition is Dismissed.
8. The registry is directed to send e-mail copies of the order forthwith to all the parties
and their counsels for information and for taking necessary steps.
9 . Certified Copy of this order may be issued on payment fee, if applied for, upon
compliance of all requisite formalities.
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