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

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more

Property can be sold on power of attorney - Delhi High Court

As reported in the Hindusthan Times on 5th May:-  http://www.hindustantimes.com/India-news/NewDelhi/Property-can-be-sold-on-power-of-attorney/Article1-1054964.aspx In a judgment that will benefit lakhs of Delhi residents living in co-operative housing societies and DDA flats, the Delhi High Court has quashed a Delhi government circular banning property sale in the Capital through general power of attorney (GPA). The court found that the directions in the circular, issued by the revenue department on April 27 last year, were contrary to the Supreme Court judgment dated October 11, 2011. The HC order will increase the number of saleable properties in Delhi and could bring down the value of freehold properties. According to realty watchers, on an average, around 20% of properties are registered through GPA transfers — a common way of selling leasehold properties and those that don’t have a clear title. The judgment came on a petition filed by a company, Pace Developers and ...
5 comments
Read more

Vanishing promoters and languishing shareholders

Over Rs 60,000 crore of shareholders’ wealth is stuck in 1,450 companies suspended by the stock exchanges. More importantly, near 100 per cent pledging of promoter holding appears to be common in many of these companies. This, almost rules out any chance of the companies bouncing back. The suspension is for non-compliance of the listing norms. Vanishing Companies - Definition As per the definition stipulated by SEBI, any listed company, which raised moneythrough initial public offer and, thereafter, stopped operations, did not file returnseither with the RoC or SEBI and did not exist on the registered premises wastermed as vanishing.There are provisions under Companies Act under which companies are termedvanishing companies on satisfying certain conditions. it is provided a companywould be deemed to be a vanishing company, if it satisfies all the conditions given below : a) Failed to file returns with Registrar of Companies (ROC) for a period of two years; b) Failed to fil...
3 comments
Read more