2019 (12) TMI 1326 - Tri - Insolvency and Bankruptcy

Petitioner not 'Operational Creditor' - Dismissal under Section 9 of Insolvency Code

The Tribunal held that the petitioner, M/s. Vision Millennium Exports Private Limited, did not qualify as an 'Operational Creditor' and the amount claimed ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational debt or not - existence of debt and dispute or not - HELD THAT:- A right to payment is a claim. 'Debt' means a liability or an obligation in respect of a claim which is due from any person which includes a financial debt an operational debt. Any liability or obligation in respect of a claim due from any person is a debt. May be that the petitioner is entitled for refund of TDS amount which is due from the corporate debtor. There is an obligation on the part of the corporate debtor to refund the amount deducted towards TDS. Now the question is whether the amount deducted towards TDS falls within the definition of 'operational debt'. When the amount paid towards TDS comes within the four corners of the definition of 'operational debt', then only the petitioner can maintain this petition under section 9 of the I&B Code and the petitioner will be called as 'operational creditor'. The operational debt is a claim in respect of the provision of goods or services. If any amount is payable in respect of goods, then it becomes an 'operational debt'. Here the petitioner is claiming that it has paid TDS to the statutory-authorities without deducting the same from the invoices. Firstly, the petitioner is not supplier of goods. The petitioner is only a purchaser. Secondly, no amount is due in respect of the amount payable for purchase of material. The corporate debtor is the supplier - Admittedly, it is not the case of rendering any services to the corporate debtor. Amount paid towards TDS cannot be held to be an 'operational debt'. If the petitioner has paid TDS to the statutory authorities, naturally the petitioner is entitled for refund from the corporate debtor. The petitioner has to initiate separate action against the corporate debtor for recovery of the same by filing a civil suit or taking appropriate action available under the law. As far as I&B Code is concerned the claim must be in respect of provision of goods or services or other liabilities stated thereunder in section 5(21) of the I&B Code. We are unable to agree with the contention of the operational creditor that the amount paid to the statutory authorities towards TDS is an 'operational debt' - the amount paid by the petitioner towards TDS does not come within the definition of 'operational debt' and as such the petitioner is not an 'operational creditor', who can maintain this petition under section 9 of the I&B Code. The money given towards advance was held to be not an 'operational debt'. This was confirmed in the decisions cited above. Similarly, the amount paid towards TDS will not come under the definition 'operational debt'. Therefore, the petition cannot be admitted under section 9 of the I&B Code and the petition deserves to be rejected - petition dismissed. Issues Involved:1. Whether the petitioner qualifies as an 'Operational Creditor' under the Insolvency and Bankruptcy Code, 2016.2. Whether the amount claimed by the petitioner constitutes an 'Operational Debt' under the Insolvency and Bankruptcy Code, 2016.3. Admissibility of the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016.Issue-wise Detailed Analysis:1. Whether the petitioner qualifies as an 'Operational Creditor' under the Insolvency and Bankruptcy Code, 2016:The petitioner, M/s. Vision Millennium Exports Private Limited, contends that it is an 'Operational Creditor' as defined under Section 5(20) of the Insolvency and Bankruptcy Code, 2016. The petitioner argues that it purchased commodities from the respondent, M/s. Edelweiss Rural & Corporate Services Private Limited, and paid the amounts due under the invoices. However, the petitioner failed to deduct TDS, which it subsequently paid to the statutory authorities. The petitioner claims that the respondent received an excess amount and availed credit of the TDS amount from the statutory authorities, thereby creating an obligation to refund the amount to the petitioner.The respondent disputes this claim, arguing that the petitioner does not fall within the definition of an 'Operational Creditor' as it did not supply any goods or services to the respondent. The respondent asserts that it was the supplier of goods and received the sale consideration, thereby negating any creditor-debtor relationship.The Tribunal examined the definitions provided in the Insolvency and Bankruptcy Code, 2016, particularly Section 5(20) and Section 3(11), which define 'Operational Creditor' and 'Debt' respectively. The Tribunal concluded that the petitioner does not qualify as an 'Operational Creditor' since the petitioner did not supply goods or services to the respondent, and the amount claimed does not arise from any such provision.2. Whether the amount claimed by the petitioner constitutes an 'Operational Debt' under the Insolvency and Bankruptcy Code, 2016:The petitioner argues that the amount paid towards TDS should be considered an 'Operational Debt' as it relates to the provision of goods purchased from the respondent. The petitioner relies on the definition of 'Operational Debt' under Section 5(21) of the Insolvency and Bankruptcy Code, 2016, which includes claims in respect of the provision of goods or services.The respondent counters this argument by stating that the amount paid towards TDS does not fall within the definition of 'Operational Debt.' The respondent emphasizes that the petitioner did not supply any goods or services and that the TDS amount paid to the statutory authorities does not constitute a debt arising from such provision.The Tribunal examined the relevant definitions and concluded that the amount paid towards TDS does not fall within the definition of 'Operational Debt.' The Tribunal noted that the petitioner is a purchaser and not a supplier of goods, and the amount paid towards TDS is related to tax obligations rather than the value of goods or services rendered. Therefore, the Tribunal held that the amount claimed by the petitioner does not constitute an 'Operational Debt.'3. Admissibility of the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016:Given the conclusions on the first two issues, the Tribunal addressed the admissibility of the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Tribunal reiterated that for a petition to be admitted under Section 9, the petitioner must qualify as an 'Operational Creditor' and the amount claimed must constitute an 'Operational Debt.'Since the petitioner does not qualify as an 'Operational Creditor' and the amount claimed does not constitute an 'Operational Debt,' the Tribunal held that the petition is not maintainable under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Tribunal dismissed the petition but noted that the petitioner is free to pursue other legal remedies for the recovery of the TDS amount.Conclusion:The Tribunal concluded that the petitioner, M/s. Vision Millennium Exports Private Limited, does not qualify as an 'Operational Creditor' and the amount claimed does not constitute an 'Operational Debt' under the Insolvency and Bankruptcy Code, 2016. Consequently, the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, was dismissed. The petitioner was advised to seek alternative legal remedies for the recovery of the TDS amount.