2017 (5) TMI 663 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution process - qualification to maintain an application as an Operational Creditor - Held that - As evident from the perusal of the definition of Operational Debt that it is a claim in respect of provision of goods or services including dues on account of employment or a debt in respect of repayment of dues arising under any law for the time being in force and payable to Centre or State Government or local authority. It is thus clear that debt may arise out of provision of goods or services or dues arising out of employment or dues arising under any law for time being in force and payable to the Centre/State Government. The framer of the Code have also defined the expression Financial Debt in section 5(8) to mean a debt which is disbursed against the consideration of time value of money. However the framer of the Code has not included in the expression Operation Debt as any debt other than the Financial Debt . It is thus confined to aforesaid four categories like goods, services, employment and Government dues. In the present case the debt has not arisen out of the provisions of goods or services. The debt has also not arisen out of employment or the dues which are payable under the statute to the Centre/State Government or local body. The refund sought to be recovered is necessarily associated with the delivery of the possession of immovable property which has been delayed. Whether the Petitioner could be regarded as an Operational Creditor within the meaning of section 5(20)? - Held that - The Operational Creditors are those persons to whom the Corporate Debt is owed and whose liability from the entity comes from a transaction on operations. The final report of the Committee in para 5.2.1 defines Operational Creditor like the wholesale vendor of spare parts whose spark plugs are kept in inventory by Car Mechanic and who gets paid only after spark plugs are sold to acquire the status of Operational Creditor so and so forth. The Petitioner in the present case has neither supplied any goods nor has rendered any service to acquire the status of an Operational Creditor . We are further of the view that given the time line in the code it is not possible to construe section 9 read with section 5(20) & (21) of the Code so widely to include within its scope even the cases where dues are on account of advance made to purchase the flat or a commercial site from a construction company like the Respondent in the present case especially when the Petitioner has remedy available under the Consumer Protection Act and the General Law of the land. Therefore we are not inclined to admit the petition.

Summary

Issues:
- Application under section 9 of Insolvency and Bankruptcy Code 2016 for Corporate Insolvency Resolution process
- Determination of the petitioner as an 'Operational Creditor' under the Code

Analysis:
1. The application was filed under section 9 of the Insolvency and Bankruptcy Code 2016 seeking the initiation of the Corporate Insolvency Resolution process against the Respondent Company. The petitioner had booked a flat in a project and paid an advance amount, following which disputes arose regarding possession and refund of the booking amount.

2. The key question was whether the petitioner could be considered an 'Operational Creditor' as per the Code. The definition of 'Operational Debt' includes claims related to goods, services, employment, or dues payable to the government. In this case, the debt did not stem from goods, services, employment, or statutory dues, but from the delayed possession of immovable property.

3. The Tribunal analyzed the provisions of section 9 of the Code and emphasized that for a petitioner to be classified as an 'Operational Creditor,' they must meet the requirements outlined in sections 5(20) and (21) of the Code. The petitioner failed to establish themselves as an 'Operational Creditor' as they had not supplied goods or services to the Respondent.

4. Referring to a similar case, the Tribunal highlighted the necessity for an 'Operational Creditor' to issue a notice to the debtor and meet all requirements specified in the Code. The petitioner's argument to treat the petition under section 9 of the Code was dismissed as lacking merit.

5. Ultimately, the Tribunal dismissed the petition, stating that the petitioner did not qualify as an 'Operational Creditor' under the Code. The decision was made without imposing costs on the petitioner, and it was clarified that the dismissal should not prejudice the petitioner's rights to pursue the matter in another forum.

6. In conclusion, the Tribunal rejected the application for Corporate Insolvency Resolution, emphasizing that the petitioner did not meet the criteria to be classified as an 'Operational Creditor' under the Insolvency and Bankruptcy Code 2016. The judgment highlighted the specific requirements and definitions under the Code to determine the eligibility of a petitioner in such cases.