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Insolvency: Filling of application by a Decree Holder under the IB Code

Citation : Mukul Agarwal, Ex-Director, Greatech Telecom Technologies Pvt. Ltd. vs Royale Resinex Pvt. Ltd. & Others

Date of Judgment/Order : 30th March, 2022

Court/Tribunal : National Company Law Appellate Tribunal, Principal Bench, New Delhi

Corum : Ashok Bhushan, J.

Background

Appeal was filed by the Suspended Director of the Corporate Debtor aggrieved by the judgment of the NCLT, Delhi admitting an Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 by the Respondent No. 1 as an Operational Creditor.

One of the objections raised by Appellant was that the Application under Section 9 of the Code was filed by the Operational Creditor on the basis of Decree of the Civil Court dated 08.09.2016. The Application filed on the basis of Decree of Civil Court cannot be said to be an Application for an ‘operational debt’. The Respondent was not an Operational Creditor and no ‘operational debt’ being due on the Corporate Debtor, hence, the Application under Section 9 was not maintainable.

Judgment

NCLAT looking into the transaction of account on which debt fell due, clearly that transaction was for supply of poly propylene by the Operational Creditor to the Corporate Debtor and due to non-payment of the amount towards the material supplied by the Operational Creditor, the amount became due. The amount due, thus, is an amount under the provisions of goods and is fully covered with the definition of Section 5(21) of the Code and the said claim is therefore an Operational Debt.

The NCLAT observed that the mere fact that when the Corporate Debtor did not pay the amount, suit for recovery was filed in the year 2016 by the Operational Creditor, which was also Decreed on 08.09.2016, does not in any manner effect the transaction out of which the amount fell due. The fact that amount was adjudicated and a Decree was passed, in no manner take away the nature of ‘operational debt’.

When the Form-3 under The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, itself contemplates about giving details of particular of an order of Court, the Decree of the Civil Court in favour of the Operational Creditor, it in no manner affect the maintainability of the Application filed by the Operational Creditor under Section 9 of the Code.

Based on the above the NCLAT reached the conclusion that that the Application filed by Respondent under Section 9 was fully maintainable and the claim of the Respondent was a claim of ‘operational debt’.

Note:

The issue of the IB Code with Decree Holder is continuing. For example, in this matter while it may be that the Applicant is/was a Operational Creditor, the Application was filed as a Decree Holder and as clearly stated by the Supreme Court in Sri Subhankar Bhowmik vs Union of India and Anr., WP(C)(PIL) No.04/2022, a Decree Holder is a specific type of a creditor under IB Code as mentioned in Section 3(10) of the IBC. So the question is can a person approaching the NCLT with a decree file application as an Operational Creditor.

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