Skip to main content

Advance Paid Towards Service Is Operational Debt

Cause Title : Chipsan Aviation Private Limited vs Punj Llyod Aviation Limited, Company Appeal (AT) (Insolvency) No. 261 of 2022, National Company Law Appellate Tribunal, Principal Bench, New Delhi

Date of Judgment/Order : 10th November, 2022

Corum : Justice Ashok Bhushan Chairperson, Barun Mitra] Member (Technical)

Citied: Construction Consortium Limited vs. Hitro Energy Solutions Private Limited – (2022) SCC OnLine SC 142

Background

An application under Section 9 of the Insolvency Code was filed against the Corporate Debtor (Respondent) alleging an advanced of Rs. 60 lakhs was provided to the Respondent – Corporate Debtor for aviation related services, which services were not provided by the Corporate Debtor nor the advance paid by the Appellant was refunded. The advance payment was reflected in the Balance Sheets of the Corporate Debtor as as advance received from the customers under the head current liabilities. 

The Respondent refuted the claim stating that there was no privity of contract between the Appellant and the Corporate Debtor and there is no Operational Debt in existence.

The Adjudicating Authority 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. The appeal was filed against said order.

Judgment

The NCLAT referring to the judgment in Construction Consortium Limited (supra) observed that it was held that advance payment is covered within the definition of Operational Debt. Section 5(21) defines “operational debt” as a “claim in respect of the provision of goods or services”. 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. The NCLAT thus set aside the order of NCLT.

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

Winding-Up Petition Can’t Be Used If Bona Fide Payment Disputes Pending

The Karnataka High Court, in the case of M/s Uttam Industrial Engineering Ltd vs  M/s Shree Basaveshwar Sugars Ltd, has held that a winding-up petition has serious  ramifications on the financial standing of a company and cannot be used in cases  where there is a bona fide dispute regarding the amount owed by one party to the  other and in such cases the company court should relegate the matter either to the  civil court or arbitral tribunal. In this case, Uttam Industrial Ltd entered into a contract with Basaveshwar Sugars Ltd  to provide machinery and equipment for a sugar plant. Article referred:  http://www.livelaw.in/remedy-winding-petition-cant-relied-upon-bona-fide-payment-disputes-karnataka-hc/
Post a Comment
Read more

Owner of vehicle is not expected to verify the genuineness of the driving license before appointing a driver

Cause Title : Rishi Pal Singh Versus New India Assurance Co. Ltd & Ors., Civil Appeal No. 4919 Of 2022, The Supreme Court Of India Date of Judgment/Order : July 26, 2022 Corum : Hemant Gupta; J., Vikram Nath; J. Background the truck owned by the appellant met with an accident. The owner deposed before the court that before employing the driver, he had taken his driving test and that he was driving the vehicle satisfactorily and  that the driver was employed with him for 3 years before the date of the accident. He produced his driving license. This was reaffirmed by the driver who deposed that the driving license was obtained from the driver and it was issued from Nagaland, but no such license was produced on record. Both the Motor Accident Claims Tribunal and the High Court have held that the owner has alleged that the driver had a driving license from Nagaland but the same was not produced and therefore, the Insurance Company is entitled to recover the awarded amount...
Post a Comment
Read more