NCLAT: Section 9 Application Rejected, Hitro Energy Solutions Released

The National Company Law Appellate Tribunal held that the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was not maintainable by 'M/s. Consolidated Construction Consortium Limited' against 'M/s. Hitro Energy Solutions Private Limited.' The impugned order admitting the application was set aside, and 'M/s. Hitro Energy Solutions Private Limited' was released from the Corporate Insolvency Resolution Process. The case was remitted to the Adjudicating Authority in Chennai to determine the fees and costs incurred by the Interim Resolution Professional, to be paid by 'M/s. Consolidated Construction Consortium Limited.'

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Issues:
1. Maintainability of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor.
2. Interpretation of the term 'Operational Creditor' under Section 5(20) and 5(21) of the I&B Code.
3. Existence of operational debt and default.
4. Consideration of limitation period for the application under Section 9.

Issue 1: Maintainability of the application under Section 9:
The appeal before the National Company Law Appellate Tribunal involved a challenge to the maintainability of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The application was filed by 'M/s. Consolidated Construction Consortium Limited,' an Operational Creditor, seeking the initiation of Corporate Insolvency Resolution Process against 'M/s. Hitro Energy Solutions Private Limited.' The appellant, a shareholder of the latter, contended that the application was not maintainable as 'M/s. Hitro Energy Solutions Private Limited' was not the Corporate Debtor of the Operational Creditor.

Issue 2: Interpretation of 'Operational Creditor' under the I&B Code:
The counsel for the Appellant argued that 'M/s. Consolidated Construction Consortium Limited' did not qualify as an Operational Creditor under the I&B Code since they neither supplied goods nor provided services to 'M/s. Hitro Energy Solutions Private Limited.' The counsel emphasized that the Purchase Order was issued to 'M/s. Hitro Energy Solutions,' a separate entity, and not to the Corporate Debtor. The appellant further contended that the application was time-barred if the limitation period was considered.

Issue 3: Existence of operational debt and default:
On the other hand, the counsel for 'M/s. Consolidated Construction Consortium Limited' asserted that 'M/s. Hitro Energy Solutions Private Limited' had prepared a Memorandum of Association to take over 'M/s. Hitro Energy Solutions,' to whom the Purchase Order was issued. However, there was no evidence to suggest that the takeover had occurred. The Purchase Orders submitted as evidence indicated that 'M/s. Consolidated Construction Consortium Limited' acted as a Purchaser and did not meet the criteria of an Operational Creditor.

Issue 4: Consideration of limitation period:
The Tribunal, after considering the arguments, held that the application under Section 9 was not maintainable by 'M/s. Consolidated Construction Consortium Limited.' Consequently, the impugned order admitting the application was set aside, and the application was dismissed. 'M/s. Hitro Energy Solutions Private Limited' was released from the Corporate Insolvency Resolution Process, and the case was remitted to the Adjudicating Authority in Chennai to determine the fees and costs incurred by the Interim Resolution Professional, to be paid by 'M/s. Consolidated Construction Consortium Limited.'

In conclusion, the appeal was allowed with the above observations and directions, with no costs imposed.

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