2019 (1) TMI 1802 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Operational Creditor or not - any goods or services not supplied - HELD THAT - The respondent submitted that the work order was a joint venture for which the respondent also invested 50% money and 50% of the same was payable to the corporate debtor . If that be so and we accept, as suggested by the learned counsel for the appellant that the respondent invested an amount for the joint ventur,e then in that case the respondent can claim as the financial creditor and not as operational creditor . The respondent is not an operational creditor , and, therefore, the application under Section 9 was not maintainable.

Summary

Issues: Application under Section 9 of the Insolvency & Bankruptcy Code, 2016 - Whether respondent qualifies as an 'Operational Creditor' - Whether respondent can claim as a 'financial creditor' - Legality of orders passed by Adjudicating Authority - Dismissal of the application under Section 9 of the I&B Code.

Analysis:
1. The respondent, 'M/s. ISMT Limited,' filed an application under Section 9 of the Insolvency & Bankruptcy Code, 2016, alleging a debt default of ?2,10,00,000. The Adjudicating Authority admitted the application based on the default and the notice issued under Section 8(1) of the I&B Code.

2. The appellant argued that 'M/s. ISMT Limited' does not meet the criteria of an 'Operational Creditor' as no goods or services were supplied. However, the respondent claimed to have paid an advance against a work order for the supply of Indonesian Thermal Coal to the 'corporate debtor.'

3. The work order dated 7th January, 2012, detailed the supply of coal by the 'corporate debtor' to the respondent's power plant. The dispute centered on whether this transaction qualified the respondent as an 'Operational Creditor' under the I&B Code.

4. The definition of 'Operational Creditor' under Section 5(20) was crucial in determining the respondent's status. The advance payment made by the respondent for coal supply did not align with the typical operational creditor activities of supplying goods or services, leading to the conclusion that the respondent did not fall under this category.

5. The respondent's argument of a joint venture investment was considered, suggesting a 'financial creditor' status instead of an 'operational creditor.' The tribunal ruled that the respondent did not qualify as an 'operational creditor,' rendering the Section 9 application invalid.

6. The impugned order admitting the application was set aside, allowing the respondent to pursue appropriate action as a 'financial creditor' if the 'corporate debtor' defaulted on the settlement offer. All orders related to the insolvency proceedings were declared illegal, and the respondent was released from the legal constraints to operate independently.

7. The Adjudicating Authority was tasked with determining the fees of the Interim Resolution Professional, to be paid by the 'corporate debtor' for the period of service. The appeal was disposed of without costs, marking the conclusion of the case with the dismissal of the Section 9 application and the restoration of the respondent's independent operational status.