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TMI Blog2022 (11) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... rious requests from the Operational Creditor to the Corporate Debtor with regard to goods and services. Thus, the correspondence as encapsulated shows that an amount of Rs.60 lakhs was advanced for providing goods and services to the Corporate Debtor. Neither goods and services could be provided, nor any Agreement could be entered between the Appellant and the Corporate Debtor. The impugned order dated 06.01.2022 rejecting Section 9 Application on the ground that advance payment paid is not an Operational Debt deserves to be set aside and is hereby set aside - application is revived before the Adjudicating Authority to be heard and decided afresh after hearing both the parties. Appeal allowed. - Company Appeal (AT) (Insolvency) No. 261 of 2022 - - - Dated:- 10-11-2022 - [ Justice Ashok Bhushan ] Chairperson And [ Barun Mitra ] Member ( Technical ) For the Appellant : Mr. Barun Kumar Sinha, Ms. Nidhi Vardhan , Advocates For the Respondent : Mr. Karan Luthra and Ms. Aarushi Tiku , Advocates JUDGMENT ASHOK BHUSHAN , J. This Appeal by an Operational Creditor has been filed against the order dated 06.01.2022 passed by National Company Law Tribunal, New De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 28.03.2016 and the Application has been filed after expiry of the three years. (v) The Adjudicating Authority by the impugned order has rejected the Section 9 Application holding that advance payment made by Operational Creditor to the Corporate Debtor does not fall within the four corners of the Operational Debt. (vi) Aggrieved by the said order, this Appeal has been filed. 3. The learned Counsel for the Appellant challenging the impugned order contends that advance payment of Rs.60 lakhs on 28.03.2016 was made for the purposes of providing aviation services by the Corporate Debtor. The Draft Agreement was forwarded to the Corporate Debtor, which was never signed by the Corporate Debtor. The advance amount was towards obtaining goods and services, hence it falls within the Operational Debt. The Adjudicating Authority committed error in holding that advance payment does not fall within the definition of Operational Debt. It is submitted that in the Balance Sheets of the Corporate Debtor, the amount of Rs.60 lakhs has been shown as advance received from customers , which contains clear acknowledgement of the advance received for providing goods and services, hence, the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28/03/16 CHQ PAID-MICR CTS-NO-PUNJ LLOYD AVIATION 000000000 0000600 28/03/16 6,000,000.00 12,441,098.17 8. The Balance Sheets of the Corporate Debtor were brought before the Adjudicating Authority, which are also on the record, mentions the amount of Rs.60 lakhs as advance received from the customers. The fact that advance of Rs.60 lakhs reflected in the Balance Sheets dated 2015-16 and onwards as advance received from customers has not been denied. The case of the Corporate Debtor is that there being no privity of contract between the Appellant and the Corporate Debtor, the advance amount cannot be said to be advanced for providing any goods and services. 9. The definition of Operational Debt as contained in Section 5(21) is to the following effect: (21) operational debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the 2[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; 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Operational Debt as contained in IBC. While analyzing the provisions, the Hon ble Supreme Court laid down following: 49. We have to now consider the debt in the present appeal. According to the appellant, it is the advance payment CMRL made on their behalf to the proprietary concern, which was encashed even though the project between CMRL and the appellant was terminated. On the other hand, the respondent has attempted to urge that there was no privity of contract between the appellant and the respondent, and that CMRL had not transferred the debt to the appellant. We reject both these submissions. It is amply clear from the facts that the debt arises from purchase orders between the appellant and the proprietary concern (which is the underlying contract), regardless of whether CMRL may have made the payment on behalf of the appellant. Thus, the ultimate dispute still remains between the appellant and the proprietary concern, and the debt arises from that. 50. It is then that we come to the core of the dispute-while the appellant has argued that the debt is in the nature of an operational debt which makes them an operational creditor, the respondent has opposed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide it in exchange for goods or services. Indeed, the decision notes that [e]xamples given of advance payments being made for turnkey projects and capital goods, where customisation and uniqueness of such goods are important by reason of which advance payments are made, are wholly inapposite as examples vis- -vis advance payments made by allottees . Hence, this leaves no doubt that a debt which arises out of advance payment made to a corporate debtor for supply of goods or services would be considered as an operational debt. 52. Similarly, in the present case, the phrase in respect of in Section 5(21) has to be interpreted in a broad and purposive manner in order to include all those who provide or receive operational services from the corporate debtor, which ultimately lead to an operational debt. In the present case, the appellant clearly sought an operational service from the proprietary concern when it contracted with them for the supply of light fittings. Further, when the contract was terminated but the proprietary concern nonetheless encashed the cheque for advance payment, it gave rise to an operational debt in favour of the appellant, which now remains unpaid. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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