2018 (8) TMI 1559 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency process in respect of the Corporate Debtor - Held that - The framer of the Code has 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 . As 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. Therefore, the present claim of the applicant cannot be considered as an operational debt under the Code. The Operational Creditors are those persons to whom the Operational Debt is owed and whose liability from the entity comes from a transaction on operations. The applicant in the present case had advanced money towards booking of a shop and admittedly has neither supplied any goods nor has rendered any service etc. as defined in section 5(21) of the Code and as such his claim does not fall within the purview of operational debt, he cannot acquire the status of an Operational Creditor . According to section 9(1) a petition like the one in hand could be maintained only by an Operational Creditor against the Corporate Debtor . In case the applicant does not fall within the definition of Operational creditor , his present application filed under section 9 for initiation of Corporate Insolvency process in respect of Corporate Debtor shall not be maintainable. Therefore, once the applicant is not an Operational Creditor and his claimed dues not being operational debt , the present petition filed under section 9 of the Code for initiation of Corporate Insolvency Resolution Process is not maintainable. Once it is held that the applicant is not an Operational Creditor and the debt in question not being operational debt , the present petition filed under Section 9 of the Code for initiation of corporate insolvency resolution Process is not maintainable and therefore rejected.

Summary

Issues:
1. Application filed under section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency process.
2. Determination of whether the applicant qualifies as an 'Operational Creditor' under the Code.
3. Analysis of whether the claimed dues constitute 'operational debt' as per the Code.

Analysis:
1. The judgment pertains to an application filed under section 9 of the Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency against a Corporate Debtor. The applicant alleged non-delivery of a property/shop booked, seeking repayment of the amount paid along with additional profit. The Corporate Debtor disputed the claim, leading to a legal dispute.

2. The Tribunal analyzed the definition of an 'Operational Creditor' under Section 5(20) of the Code, emphasizing that an operational creditor is one to whom an operational debt is owed. The applicant, in this case, had paid for a shop booking but had not provided goods or services as defined in the Code. As the claim did not fall under the purview of operational debt, the applicant could not be categorized as an 'Operational Creditor.'

3. Further, the judgment delved into the definition of 'operational debt' under Section 5(21) of the Code, highlighting that such debt arises from the provision of goods or services, employment dues, or statutory payments to the government. Since the debt in question did not stem from these categories, it did not qualify as 'operational debt' under the Code. Consequently, the Tribunal deemed the present petition for Corporate Insolvency not maintainable due to the applicant's inability to meet the criteria of an 'Operational Creditor' or the nature of the debt as 'operational.'

In conclusion, the Tribunal rejected the application for initiation of Corporate Insolvency Process as the applicant did not meet the requirements of an 'Operational Creditor' and the claimed dues did not constitute 'operational debt' as defined by the Insolvency and Bankruptcy Code, 2016.