NCLT Kochi (18.03.2021) in Kripa Cashew Exports Vs Royals International Trade and Allied Products Pvt. Ltd. [IBA/38/KOB/2020] held that;
Thus any amount claimed as due by a person representing as ‘Operational Creditor’ should demonstrate firstly that the said amount in default falls within the definition of ‘claim’ as defined in Section 3(6). Such a claim, secondly should be capable of being treated as a ‘debt’ as defined under Section 3(11) of I&B Code, 2016 and finally the ‘debt’ should fall within the confines of Section 5(21) of I&B Code, 2016 (i.e.) it should be capable of being treated as an ‘Operational Debt’ and such an operational debt must be owed by the Corporate Debtor to a creditor who can then be considered as an Operational Creditor as defined under Section 5(20) of IBC, 2016.
In the case of Mobilox Innovations Pvt. Ltd. Versus Kirusa Software Private Limited; 2018 1 SCC 353, it is clearly stated that the Tribunal when examining an application under Section 9 of I&B Code,2016, will have to determine:
“(i) Whether there is an “operational debt” as defined exceeding Rs 1 lakh? (See Section 4 of the Act)
(ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? And
(iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? “
Excerpts of the order;
This is an application filed on 03.11.2020 under Section 9 of Insolvency & Bankruptcy Code, 2016 (hereinafter as ‘I&B Code’) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter referred to as Rules) by the applicant M/s. Kripa Cashew Exports (hereinafter referred to as ‘Operational Creditor’) to initiate Corporate Insolvency Resolution Process (CIRP) against M/s. Royals International Trade and Allied Products Pvt. Ltd. (hereinafter referred to as ‘Corporate Debtor/Respondent’).
Submissions of the Operational Creditor
# 2. The applicant is a sister concern of M/s. Thankam Cashew factory. As part of the contract between M/s. Thankam Cashew factory and the Corporate Debtor for the purchase of Raw Cashew Nuts Crop, 2017 the purchase money had to be paid in advance. Since M/s. Thankam Cashew Factory was not having the required funds to make immediate payment to the Corporate Debtor, an amount of ₹1,15,00,000.- (Rupees One Crore Fifteen Lakhs Only) has been paid to the Corporate Debtor from the account of M/s.Kripa Cashew Exports.
# 3. Further it is stated that on making supply order, the Corporate Debtor failed to supply the quantity as per agreed terms, the Corporate Debtor supplied short quantity of 268.139 MT valued at ₹4,10,22,661 (Rupees Four Crores Ten Lakhs Twenty-Two Thousands Six hundred and Sixty-One Only) and the Corporate Debtor issued Cheque No.10055499 dated 30.10.2017 for an amount of Rupees 1,16,96,603 (Rupees One Crore Sixteen Lakhs Ninety-Six Thousand Six Hundred and Three Only) to M/s. Kripa Cashew Exports, However, on presentation, the cheque was returned due to insufficient funds.
# 15. Learned Counsel for the Corporate Debtor raised the maintainability of the application under Section 9 of the I&B Code, 2016. It is argued on behalf of the Corporate Debtor that the Operational Debt as defined in the Code in Section 5 (21) means “a claim in respect of the provision of goods or services including employment or a debt in respect of the repayment 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.” It is further stated that Section 3(11) of the Code provides that “Debt” means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt.
# 16. In the present case, the first point which arises for consideration is whether the debt falls within the purview of Operational Debt under Section 5 (21) of the I&B Code,2016?
# 17. To arrive at a decision, this Tribunal has gone through the judgement of Hon'ble National Company Law Appellate Tribunal ('NCLAT') in Jindal Steel and Power Limited v. DCM International Limited, Company Appeal (AT) (Insolvency) No. 288 of 2017, wherein the Appellate Tribunal held as under:
"Admittedly, the Appellant is a tenant of Respondent-'Corporate Debtor'. Even if it is accepted that a Memorandum of Understanding has been entered between the parties in regard to the premises in question, the Appellant being a tenant, having not made any claim in respect of the provisions of the goods or services and the debt in respect of the provisions of the goods or services and the debt in respect of the repayment of dues does not arise under any law for the time being in force payable to the Central Government or State Government, we hold that the Appellant tenant do not come within the meaning of 'Operational Creditor' as defined under sub-section (20) read with sub-section 21 of Section 5 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to 'I&B Code') for triggering Insolvency and Bankruptcy Process under Section 9 of the 'I&B Code'."
# 18. Thus any amount claimed as due by a person representing as ‘Operational Creditor’ should demonstrate firstly that the said amount in default falls within the definition of ‘claim’ as defined in Section 3(6). Such a claim, secondly should be capable of being treated as a ‘debt’ as defined under Section 3(11) of I&B Code, 2016 and finally the ‘debt’ should fall within the confines of Section 5(21) of I&B Code, 2016 (i.e.) it should be capable of being treated as an ‘Operational Debt’ and such an operational debt must be owed by the Corporate Debtor to a creditor who can then be considered as an Operational Creditor as defined under Section 5(20) of IBC, 2016.
# 19. The claim of the Operational Creditor is not based on an operational debt, because no goods/services were to be rendered by the Corporate Debtor. The Operational Creditor is not relating to the goods/services including employment or the debt in respect of the repayment of the dues, but it is related to non-payment of the advance money paid to the Corporate Debtor on behalf of M/s. Thankam Cashew Factory. Therefore, the same is not covered under the definition of the “Operational Debt” as provided under Section 5(21) of the Code.
# 20. In the case of Mobilox Innovations Pvt. Ltd. Versus Kirusa Software Private Limited; 2018 1 SCC 353, it is clearly stated that the Tribunal when examining an application under Section 9 of I&B Code,2016, will have to determine:
“(i) Whether there is an “operational debt” as defined exceeding Rs 1 lakh? (See Section 4 of the Act)
(ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? And
(iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? “
In the matter under consideration, from the aforesaid discussion, this Tribunal finds that all the above conditions are not available for admission of the Application.
# 21. Considering the totality of the facts and the circumstances of the case and the law applicable, it is not a fit case for admission and order Corporate Insolvency Resolution Process against the Corporate Debtor. Hence IBA/38/KOB/2020 is dismissed without costs.
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