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2022 (2) TMI 799 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational creditors or not - whether the Dispute raises a plausible contention which requires more examination in the form of an investigation and it not a Dispute which is a patently weak legal argument or an assertion of fact? - HELD THAT - Section 5(21) defines operational debt meaning a claim in respect of the provisions of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority - Before the Adjudicating Authority , the Appellant/Operational Creditor alongwith the application had only mentioned the details of 1110 Nos of invoices but had not enclosed the copies of the said invoices and as such the application was treated as an incomplete one by the Adjudicating Authority . Even the copy of the ledger account was not placed on record before the Adjudicating Authority . One cannot remain oblivion to the prime fact that in the case on hand, the Appellant/Operational Creditor and Respondent/Corporate Debtor were supplying materials mutually and under such circumstances the Appellant/Applicant singly to be considered as an Operational Creditor qua the Corporate Debtor - it cannot be brushed aside that the Appellant had received the services/goods from the Respondent/Corporate Debtor and in that context, the claim arose between the parties. A Debt may not be due if it is not payable in law or in fact. The application must be complete with a view to enable an Adjudicating Authority to admit the same. While scrutinising an application under Section 9 of the Code, an Adjudicating Authority is to determine (a) whether there is an operational debt as per Section 4 of the Code (b) whether the material/documentary evidence submitted with the application indicates that the aforesaid debt is due and payable and the same was not paid. (c) whether there is existence to a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed prior to the receipt of the Demand Notice of the unpaid operational debt pertaining to a dispute - If anyone of the above said conditions is lagging behind, then the application is to be rejected in the eye of law. It is to be remembered that an adjudicating authority is to follow the particular mandate of Section 9 (5) of the Code, and admit or reject the application based on the ingredients enumerated in Section 5 of the Code. This Tribunal considering the facts and circumstances of the present case and also on going through the impugned order passed by the Adjudicating Authority comes to a consequent conclusion that the application project by the Applicant/Operational Creditor before the Adjudicating Authority is devoid of necessary qualitative and quantitative details, coupled with the candid facts that the Appellant is not an operational creditor pertaining to the Respondent/Corporate Debtor and viewed in that perspective, the conclusion arrived at by the Adjudicating Authority (National Company Law Tribunal, Division Bench II, Chennai) in dismissing the application is free from legal infirmities - Appeal dismissed.
Issues Involved:
1. Qualification of the Appellant as an 'Operational Creditor'. 2. Completeness of the Application filed by the Appellant. 3. Existence of an 'Operational Debt' and its due payment. 4. Existence of a dispute between the parties. Detailed Analysis: 1. Qualification of the Appellant as an 'Operational Creditor': The Appellant claimed to be an 'Operational Creditor' of the Respondent, asserting an outstanding amount of ?14,41,728/-. The Adjudicating Authority noted that the relationship between the parties involved mutual supply of materials, where the Operational Creditor supplied materials to the Corporate Debtor, who then converted these materials into finished products and supplied them back. This mutual supply arrangement questioned the Appellant's qualification as an 'Operational Creditor'. The Authority emphasized that only a supplier of goods or services can be considered an 'Operational Creditor', not the recipient of such goods or services. Therefore, the Appellant did not qualify as an 'Operational Creditor' in this context. 2. Completeness of the Application: The Adjudicating Authority found the Appellant's application incomplete due to the absence of essential documents. The Appellant listed 1110 invoices but failed to enclose copies of these invoices, which are crucial for adjudicating the application. Additionally, the Appellant did not provide a copy of the ledger account. The Authority held that these documents were necessary for a complete application, and their absence rendered the application incomplete. 3. Existence of an 'Operational Debt' and its Due Payment: The Appellant argued that an unpaid amount of ?14,41,728/- was outstanding from the Respondent for supplies made between 01.05.2017 and 10.12.2017. The Respondent, however, contended that no payment was due as the mutual supply arrangement involved setting off receivables against supplies, with no actual payment required. The Adjudicating Authority noted that for a debt to qualify as an 'Operational Debt', it must undergo a percolation process involving a claim, which is treated as a debt, and this debt should fall within the confines of 'Operational Debt' as defined under Section 5(21) of IBC, 2016. The Authority concluded that the Appellant did not supply goods or services to the Corporate Debtor in a manner that qualified as an 'Operational Debt'. 4. Existence of a Dispute Between the Parties: The Respondent argued that the Appellant had violated the terms of their mutual agreement by unilaterally stopping business without prior notice, as required by their understanding. The Respondent also claimed losses due to this breach and sought compensation. The Adjudicating Authority considered whether there was a plausible contention requiring further examination. The Authority found that the Appellant's act of stopping business unilaterally and the Respondent's counterclaim for losses indicated a genuine dispute. Therefore, the existence of this dispute precluded the admission of the Appellant's application. Conclusion: The Tribunal upheld the Adjudicating Authority's decision, concluding that the Appellant's application lacked necessary details and that the Appellant did not qualify as an 'Operational Creditor'. The Tribunal also noted the existence of a genuine dispute between the parties. Consequently, the appeal was dismissed, affirming the Adjudicating Authority's order.
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