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TMI Blog2019 (1) TMI 1314X X X X Extracts X X X X X X X X Extracts X X X X ..... s to refund the service tax if any refunded by the Government authorities for the past period. This is a separate undertaking not connected to the sale transactions but it is an independent undertaking given by the corporate debtor. The dispute is not in connection with any liability to discharge in connection with sale of shares. Even though definition of goods as contained in the Sale of Goods Act includes shares, but from the facts of the case, there is no dispute with regard to sale transaction of shares between the petitioner and the purchaser, i.e., Techwave Holdings P. Ltd. Thus, undertaking given by the corporate debtor in pursuant to the undertaking memorandum for refund of service tax does not fit into the definition of operational debt. Thus, the petitioner is not an operational creditor and failure to refund service tax is not an operational debt. Therefore, the petitioner cannot maintain this petition under section 9 of the Code. The petition therefore deserves to be rejected - C.P. (IB) No. 107/9/HDB of 2018 - - - Dated:- 23-7-2018 - Mr Ratakonda Murali, Member (J) For The Appellant : P. Ravi Prasad and Ojaswi (M.) For The Respondents : P. Jagannatham ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o pay to the petitioner/operational creditor any service tax refund amount received from service tax authorities. This petition is thus filed by the operational creditor praying for initiating corporate insolvency resolution process against the corporate debtor for failure to remit service tax refund. 2. The corporate debtor filed counter: (1) The corporate debtor denied all the averments made by the petitioner/operational creditor as false, frivolous and vexatious except those that are specifically admitted herein. (2) It contended that the petitioner does not fall within the meaning of the operational creditor as defined under section 5(20) of the IBC. (3) The respondent further stated that the company is ongoing concern with global operations spread in different parts of the world and with a business turnover of ₹ 35 crores. (4) It is contended that sequel to the share purchase agreement dated September 26, 2015 two agreements were entered into between the parties, i.e., undertaking memorandum (tax modalities agreement) and master services agreement on September 30, 2015 and both the agreements provided for arbitration as dispute resolution mechanism. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice under the Code. Therefore, prayed the Tribunal to dismiss the petition. 3. The petitioner claims that it is an operational creditor. The case of the petitioner that it had sold its shares to the Techwave Holdings P. Ltd., under a share purchase agreement dated August 26, 2015 and in that connection apart from share purchase agreement another document called tax modalities undertaking was also executed dated September 30, 2015. 4. The case of the petitioner that the corporate debtor has to refund the service tax received from the Government authorities to it. The case of petitioner that the Government authorities refunded the service tax amount of ₹ 1,40,35,232 and it was received by the corporate debtor. However, the case of the petitioner that corporate debtor failed to refund the service tax even though there was an obligation under the undertaking memorandum to refund service tax. 5. The case of the petitioner that the service tax received by the corporate debtor is in the nature of debt. It is the case of the petitioner that the corporate debtor by virtue of obligation arising under the tax modalities undertaking agreement to refund the same to the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... November 1, 2017 is shown as annexure 2. The correspondence between the operational creditor and the corporate debtor are shown as annexure II including master data of the corporate debtor. 9. Annexure III is the bank certificate obtained by the petitioner. These are main documents relied by the petitioner. As far as corporate debtor is concerned, there is no document filed on its behalf. 10. Written submissions are filed by both sides. The sum and substance in the written submissions are stated supra. I have heard counsels. 11. The petitioner has to establish that it comes under the definition of the operational creditor. The undisputed fact that the service tax refunded to the corporate debtor by the authorities was not refunded to the petitioner. Even otherwise, the petitioner filed the copies of cheques given for refund of service tax. So, it is very clear, the corporate debtor received refund of service tax. 12. The next undisputed fact that this service tax refunded is bound to be returned to the operational creditor by virtue of the sale modalities undertaking dated September 30, 2015. Entering into two agreements in connection with sale of shares is not in dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor and non-refund of service tax does mean debt under the provisions of the Code. 16. The contention of learned counsel for the petitioner that failure to refund the service tax received from the Government authorities by corporate debtor amounts to breach of contract, giving arose to claim. Learned counsel contended the claim arise in connection with selling of shares. The contention of learned counsel that the definition of goods in the Sale of Goods Act includes shares. Therefore, a claim arises in connection with sale of shares, is nothing but a claim in respect of goods. Learned counsel thus contended the petitioner is an operational creditor. 17. Before deciding whether the petitioner falls within the definition of operational creditor and non-refund of service tax falls within the definition of operational debt, section 3(6) of the Code defines claims, which is as follows: claim' means- (a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured; (b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finition of the operational creditor. 24. On the other hand, learned counsel for the corporate debtor submits that the claim for refund of service tax does not fall within the definition of operational debt and consequently, the petitioner is not operational creditor. The second contention of learned counsel that there is a dispute with regard to liability which was pre-existing, i.e., it was existing prior to the service of demand notice. 25. The question whether failure to refund the service tax received from Government authorities falls within the meaning of operational debt as contained in section 5(21) of the Code. May be petitioner sold its shares to Techwave Holdings P. Ltd., which the petitioner is having in the corporate debtor-company. Now the question whether there is liability on the part of purchaser Techwave Holdings P. Ltd., to discharge, as far as the petitioner is concerned, in respect of sale of shares. The corporate debtor is not purchaser of shares. Techwave Holdings P. Ltd., is the purchaser. There is no dispute between the petitioner who is seller and Techwave Holdings P. Ltd., who is the purchaser in respect of sale of shares. Thus, the present dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X
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