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2021 (1) TMI 931 - Tri - Insolvency and BankruptcySeeking to direct the Resolution Professional to accept the claim of the Applicant under the category of Financial Creditor and reconstitute the Committee of Creditors by including the name of Applicant - nature of the debt - Financial Debt or Financial debt - HELD THAT - In the instant case, the amount in claim is arising out of the judgment of XIII Additional District and Sessions Judge cum Commercial Court, Ranga Reddy District, Hyderabad and the said judgment arose out of the issue regarding payment of entire amount as advance by the Applicant towards the purchase orders placed with the Corporate Debtor and further on account of non-supply of goods. The transaction entered into between the Applicant and Respondent squarely falls within clause 2(c)(xviii) supra and therefore the Commercial Court had jurisdiction over disputes arising out of such commercial transactions. As a result, the above said Court could entertain the claim of the Applicant herein and duly adjudicated upon the same. In fact, if the said transaction was not a commercial transaction but was financial in nature, the Commercial Court could not have adjudicated upon the same. Therefore, it is obvious that the claim made by the Applicant herein pertains to a commercial transaction between the parties - It is an admitted fact that pursuant to the agreement in the form of purchase order the Applicant has paid the money as an advance for supply of goods and not as a disbursement of debt for time value of money. In the Purchase Order between the Appellant and the Respondent, nowhere it is mentioned that the amount paid by the Appellant to the Respondent will be repayable by the Respondent along with interest over a period of time in a single or series of payments in future. The Appellant has not disbursed any money against the consideration for the time value and hold that the claim of the Appellant is not a Financial Debt within the meaning of section 5(8) of the Code - this Adjudicating Authority does not find any infirmity in the decision of the RP. Application dismissed.
Issues Involved:
1. Determination of the nature of debt: Financial Debt vs. Operational Debt. Issue-wise Detailed Analysis: 1. Determination of the nature of debt: Financial Debt vs. Operational Debt The present application was filed under Section 60(5) of the Insolvency and Bankruptcy Code (I&B Code), 2016, seeking to direct the Resolution Professional (RP) to accept the claim of the Applicant as a Financial Creditor and reconstitute the Committee of Creditors accordingly. Applicant's Arguments: - The Applicant Company placed purchase orders with the Corporate Debtor (CD) for procuring yarn and paid the entire amount in advance as mentioned in the proforma invoices. - The Corporate Debtor failed to supply the remaining material and issued a cheque for the advance money, which was dishonored due to insufficient funds. - The Applicant filed a commercial suit and obtained a decree in its favor for the recovery of ?1,68,99,220/- along with future interest at 6% p.a. - The Applicant filed its claim with the Interim Resolution Professional (IRP) in Form C, but the IRP considered the transaction as an operational debt and directed the Applicant to submit the claim in Form B. - The Applicant argued that the advance payment made had the commercial effect of borrowing, satisfying the condition of the time value of money under Section 5(8)(f) of the I&B Code, 2016, and should be treated as a Financial Creditor. Respondent's Arguments: - The Respondent/RP contended that the Applicant is trying to misinterpret the provisions of Sections 5(8)(f), 5(21), and 5(22) of the I&B Code, 2016, to project itself as a Financial Creditor. - The Applicant's transaction with the Corporate Debtor was for the purchase of material and not a financial debt. - The Commercial Court's judgment was based on a transaction involving procurement of goods and services, not a loan transaction. - The RP rightly instructed the Applicant to submit its claim under the category of "Other Creditors" and not as a Financial Creditor. Tribunal's Analysis: - The Tribunal noted that the dispute is not about the quantum of the amount but the nature of the debt. - The claim arose from the judgment of the Commercial Court regarding the advance payment made by the Applicant for purchase orders placed with the Corporate Debtor and non-supply of goods. - The jurisdiction of the Commercial Court is conferred by Section 6 of the Commercial Courts Act, 2015, which deals with commercial disputes. - The transaction between the Applicant and the Corporate Debtor falls within the definition of a "commercial dispute" as per Section 2(c) of the Commercial Courts Act, 2015. - The definition of Financial Debt under Section 5(8) of the I&B Code, 2016, requires the debt to be disbursed against the consideration for the time value of money. - The Tribunal observed that the advance payment was made for the supply of goods and not as a disbursement of debt for the time value of money. The Purchase Order did not mention repayment with interest over time. - Hence, the Tribunal concluded that the claim of the Applicant is not a Financial Debt within the meaning of Section 5(8) of the I&B Code, 2016. Conclusion: - The Tribunal found no infirmity in the decision of the RP to classify the Applicant's claim as an operational debt and not a financial debt. - Consequently, the application was dismissed.
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