Skip to main content

Advanced payment for supply of goods is not Operational Debt

 IN THE MATTER OF Smt. Andal Bonumalla vs Tomato Trading LLP., the primary question raised in the appeal before NCLAT against the order of the NCLT was whether an advance amount for supply of goods can be considered as an Operational Debt under Section 5(20) of the I&B Code?

The NCLAT observed that this is admitted fact that the Corporate Debtor has agreed to deliver 130 Matric Tons of Sugar to the Operational Creditor, for the same, the Operational Creditor paid an advance amount total Rs. 34,90,180/- to Corporate Debtor and Corporate Debtor has issued Proforma Invoice dated 08.02.2017. The Corporate Debtor refunded Rs. 9 Lakhs only, balance principal amount of Rs. 25,90,180/- and interest Rs. 4,92,634/- total as on 07.03.2018 a sum of Rs. 30,82,814/- is due from the Corporate Debtor. We have considered whether this amount is come within the definition of Operational Debt under Section 5 (21) of I&B Code. The Respondent No. 1 has not supplied any goods or provided any services to Respondent No. 2, but paid an advance amount to Respondent No. 2 for supplying Sugar. However, the Respondent No. 2 failed to supply the Sugar to Respondent No. 1. Thus, the advance amount in the hand of Respondent No. 2 cannot termed as Operational Debt. Consequently, the Respondent No. 1 does not come within the definition under Section 5(20) of I&B Code, the Operational Creditor.

Allowing the appeal, the NCLAT held that advanced payment to Respondent (Operational Creditor) for supply of goods cannot be treated to be an Operational Debt and the Application under Section 9 of I&B Code, was not maintainable. The advance amount paid by the Respondent No. 1 to Respondent No. 2 for supply of Sugar is not an Operational Debt. Learned Adjudicating Authority erroneously admitted the Application. Thus, the Appeal is allowed and the impugned order dated is set aside.

Comments

Post a Comment

Most viewed this month

Deposit Of Minimum 20% Fine/Compensation U/s 148 NI Act Mandatory

In OP(Crl.).No.348 OF 2019, T.K.SAJEEVAN vs FRANCIS T.CHACKO, the appeal was filed against the order of the lower court to deposit 25% of the fine before filling of appeal. The appellant argued that the deposit introduced through the Section 148 of the NI Act after amendment was directory in nature as it used the term 'may' while mentioning the issue of deposit. The Kerala High Court however disagreeing held that in view of the object of the Legislature while incorporating Section 148 into N.I. Act, the word 'may' will have to be read as 'shall'. The imposition of payment contemplated under Section 148 N.I. Act cannot be restricted to some prosecutions and evaded in other prosecutions. Since the amount directed to be deposited being compensation, undoubtedly, it is liable to be ordered to be deposited irrespective of the nature of the prosecution. Therefore, the word 'may' can only be taken to have the colour and meaning of 'shall' and there
Post a Comment
Read more

NCLT - Mere admission of receipt of money does not qualify as a financial debt

Cause Title : Meghna Devang Juthani Vs Ambe Securities Private Limited, National Company Law Tribunal, Mumbai, CP (IB) No. 974/MB-VI/2020 Date of Judgment/Order : 18.12.2023 Corum : Hon’ble Shri K. R. Saji Kumar, Member (Judicial) Hon’ble Shri Sanjiv Dutt, Member (Technical) Citied:  Carnoustie Management India Pvt. Ltd. Vs. CBS International Projects Private Limited, NCLT Swiss Ribbons Pvt. Ltd. & Anr vs. Union of India & Ors. (2019) Sanjay Kewalramani vs Sunil Parmanand Kewalramani & Ors. (2018) Pawan Kumar vs. Utsav Securities Pvt Ltd 2021 Background Application was filed under section 7 of the Insolvency and Bankruptcy Code, 2016 alleging loan of Rs, 1.70 cr is due. The Applicate identified herself as the widow and heir of the lender but could not produce any documents proving financial contract between her Late husband and the CD but claimed that the CD has accepted that money was received from her husband. The applicant subsequently filed rejoinder claiming the debt t
Post a Comment
Read more

Jurisdiction of consumer forum is not ousted even if the other party has filed suit on the same matter in Civil Court

In Yashwant Rama Jadhav v. Shaukat Hussain Shaikh, First Appeal No. 1229 of 2017, decided on 18.11.2017,  the grievance of the petitioner before the National Consumer Disputes Redressal Commission was that appellants/complainants had entered into agreements with the respondents for purchase of residential flats, which the respondents were to construct and despite paying the substantial amount to the respondents, the construction of the flats had not been completed. The State Commission dismissed the complaints and ruled in favor of respondents against which the appellants approached the National Commission. The NCDRC held that Section ‘3’ of the Consumer Protection Act, to the extent it is relevant provides that the provisions of the Act shall be in addition and not in derogation of the provisions of any other law for the time being in force. Thus the remedy available under the Consumer Protection Act is an additional remedy, which Parliament has made available to a consumer. Even
Post a Comment
Read more