2019 (3) TMI 250 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process (CIRP) - existence of relationship as between the petitioner and respondent being that of an Operational Creditor and a Corporate Debtor as defined under the provisions of IBC, 2016 - Breach of agreement - HELD THAT - Operational Creditor should have supplied goods or rendered any services to the Corporate Debtor. However, in the instant case, even as per the agreement which has been entered into as between the parties and which was also referred at the Bar during the course of arguments on maintainability annexed as Annexure-5, wherein, it is seen that the scope of agreement as given in Clause-I is to be effect that Krishna Phoschem Ltd. agrees to sell H Acid and buyers agrees to purchase these products as per the quantity agreed hereunder in a month. The Krishna Phoschem Ltd. has been defined as a seller in the sale purchase agreement and Colorant Ltd. has been defined as a buyer under the said sale purchase agreement dated 21st day of August, 2017. The main grievances of the petitioner is that the seller of the agreement, namely, the Corporate Debtor has not abided to the terms and conditions of the agreement in the supply of H Acid as contracted under the agreement. Under the circumstances, there is a breach of the said agreement dated 2 August, 2017 which had forced the buyers, namely, the petitioner to purchase its requirements of H Acid from the open market at almost twice the price as agreed between the parties and the claim is also in relation to the difference in price which the petitioner was required to pay. In view of the breach of the said agreement and it is thus seen that the claim is more by way of claim for damages arising out of breach of agreement as entered into between the parties. This Tribunal is not convinced that there exists as between the petitioner and the respondent, a relationship of an Operational Creditor and Corporate Debtor and that there is an Operational Debt of which a default has been committed. This Tribunal is constrained therefore to dismiss this petition.

Summary

Issues:
1. Maintainability of the petition under the Insolvency and Bankruptcy Code, 2016 as an Operational Creditor against the Corporate Debtor.

Analysis:
1. The petitioner, M/s Colorant Ltd., claimed an amount of &8377; 61,72,850 as an Operational Creditor under the Insolvency and Bankruptcy Code, 2016, based on a sale purchase agreement with the Corporate Debtor. The debt arose due to the Corporate Debtor's failure to supply agreed products, leading the petitioner to purchase them at a higher price from the market.

2. The Tribunal examined the definitions of an Operational Creditor and Operational Debt under Sections 5(20) and 5(21) of the IBC, 2016. An Operational Creditor is a person owed an operational debt, which includes claims for goods, services, or repayment of dues to government entities. The debt claimed must arise from the provision of goods or services to the Corporate Debtor.

3. The Tribunal noted that the claim by the petitioner did not strictly fall within the definition of an Operational Debt as per the IBC, 2016. The agreement between the parties indicated a breach by the Corporate Debtor, resulting in a claim for damages rather than a debt arising from the provision of goods or services.

4. Referring to previous judgments, the Tribunal highlighted the distinction between a claim for damages due to breach of agreement and an operational debt under the IBC. It emphasized that only debts falling within the definition of financial debt could be considered as such under the IBC.

5. Despite acknowledging a legally enforceable claim by the petitioner, the Tribunal concluded that the relationship between the parties did not meet the criteria of an Operational Creditor and Corporate Debtor under the IBC. Therefore, the petition was dismissed on the grounds of maintainability, suggesting recourse to a Civil Court for enforcing the claim.

6. The Tribunal clarified that the dismissal of the petition did not prevent the petitioner from seeking redressal through the appropriate legal forum. The decision was based on the provisions of the IBC, 2016, and the lack of a valid claim falling within the scope of an Operational Debt.

This detailed analysis of the judgment from the National Company Law Tribunal, Jaipur, provides a comprehensive overview of the issues involved, the legal interpretations made, and the ultimate decision reached regarding the maintainability of the petition under the Insolvency and Bankruptcy Code, 2016.