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2020 (5) TMI 38 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Scope of Operational Debt - interpretation of section 5(21) of IBC, 2016 - Learned Counsel for the Operational Creditor referred to section 5(21) of the IBC, 2016 and submitted that 'Operational debt' is not only restricted to goods and services being rendered but also includes debt in respect of the payment of dues arising under law for the time being in force - HELD THAT - It is evident that, in relation to the second part of the definition of 'Operational Debt', it is clear that the 'debt in respect of payment of dues arising under any law for the time being in force' should be payable to the Central Government, State Government or any Local authority - However it is evident from the records, that in the present case, the Operational Creditor is not a Central Government or State Government or a Local authority - Hence, the submissions made by the learned Counsel for the Operational Creditor, does not hold water in view of the interpretation given above to section 5(21) of IBC, 2016. Petition dismissed.
Issues:
1. Application filed under section 9 of the Insolvency & Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process. 2. Qualification of the debt as an 'Operational Debt'. 3. Interpretation of section 5(21) of the IBC, 2016 regarding 'Operational Debt'. Issue 1: Application for Corporate Insolvency Resolution Process The application was filed under section 9 of the Insolvency & Bankruptcy Code, 2016 by the Operational Creditor against the Corporate Debtor, seeking to initiate the Corporate Insolvency Resolution Process. The Operational Creditor claimed a sum of Rupees Three Crore Forty Seven Lakhs Seventy Three Thousand Seven Hundred and Nineteen along with interest, which was allegedly owed by the Corporate Debtor. Issue 2: Qualification of the debt as an 'Operational Debt' The Operational Creditor contended that the debt claimed falls under the category of 'Operational Debt'. The Operational Creditor had entered into agreements with the Corporate Debtor for conducting specified tests and trials. The Operational Creditor argued that the Corporate Debtor failed to maintain quality standards, leading to the invalidation of studies by the European Medicines Agency. The Operational Creditor demanded a refund of the amount paid, asserting that the operational debt became due on a specific date. However, the Tribunal found that the transaction did not qualify as an 'Operational Debt' as per the provisions of the IBC, 2016. The Tribunal referenced various judgments to support its decision, highlighting the criteria that need to be met for a debt to be classified as an 'Operational Debt'. Issue 3: Interpretation of section 5(21) of the IBC, 2016 The Tribunal analyzed section 5(21) of the IBC, 2016, which defines 'Operational Debt'. The section includes claims related to the provision of goods or services, employment, or debts arising under current laws payable to governmental authorities. The Tribunal emphasized the specific wording and requirements of the section, noting that the debt in question did not meet the criteria specified in the definition of 'Operational Debt'. As the Operational Creditor did not fall under the categories of Central Government, State Government, or Local authority, the Tribunal concluded that the submissions regarding the debt classification did not align with the statutory interpretation provided by the section. In conclusion, the Tribunal dismissed the petition as the debt did not qualify as an 'Operational Debt' under the IBC, 2016. The judgment provided a detailed analysis of the legal provisions and precedents to support the decision, emphasizing the specific requirements for a debt to be categorized as an 'Operational Debt'.
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