2017 (8) TMI 509 - Tri - Insolvency and Bankruptcy

Application for Corporate Insolvency Rejected - Applicant Not an Operational Creditor

Mr. Sanjeev Jain Versus M/s Eternity Infracon Pvt. Ltd.

The Tribunal rejected the application under Section 9 of the Insolvency and Bankruptcy Code for the initiation of Corporate Insolvency Resolution Process. ... Initiation of Corporate Insolvency process - Insolvency and Bankruptcy Code, 2016 - unpaid operational debt as claimed by operational creditor - Held that:- The framer of the Code have also defined the expression 'Financial Debt' in section 5(8) to mean a debt which is disbursed against the consideration of time value of money. However, the framer of the Code has not included in the expression 'Operation Debt' as any debt other than the 'Financial Debt'. It is thus confined to aforesaid four categories like goods, services, employment and Government dues. In the present case, the debt has not arisen out of the provisions of goods or services. The debt has also not arisen out of employment or the dues which are payable under the statute to the Centre/State Government or local body. Therefore, the present claim of investments cannot be considered as an 'operational debt' under the Code. The provisions and scope of Section 9 including the applicable rules, forms and procedure are totally distinct and separate from that of Section 7 of the code. There is no provision in the code to convert a Section 9 application into a Section 7 application as prayed. On the contrary the Code provides that applications filed under section 7, 9 or 10, as the case may be should either be admitted or rejected in accordance with respective provisions. When the language of the code is clear and explicit the adjudicating authority has to give effect to it by adhering to the statutory requirements in toto. The provisions must be strictly followed substantially as well as procedurally. As made clear that in the present application filed under Section 9 of the Code neither there is any scope nor we have examined as to whether the applicant falls within the ambit of 'Financial Creditor'. Accordingly, leave is granted to the applicant to move under appropriate provisions of the Code, if so advised. In view of the discussions made above, once it is held that the applicant is not an 'Operational Creditor' and the debt in question not being 'operational debt', the present petition filed under Section 9 of the Code for initiation of corporate insolvency resolution Process is not maintainable and therefore rejected. Issues:1. Application filed under section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency process.2. Determination of whether the applicant qualifies as an 'Operational Creditor' under the Code.3. Analysis of the debt claimed by the applicant and its classification as 'operational debt' under the Code.4. Examination of the maintainability of the petition under section 9 for initiation of Corporate Insolvency process.5. Consideration of the applicant's request to be treated as a 'financial creditor' and the use of inherent powers of the Tribunal.Issue 1: Application under Section 9 for Corporate Insolvency ProcessThe application was filed under section 9 of the Insolvency and Bankruptcy Code, 2016 seeking initiation of Corporate Insolvency process against the Corporate Debtor, alleging non-repayment of an investment made by the applicant in a commercial project.Issue 2: Qualification as an 'Operational Creditor'The Tribunal analyzed whether the applicant could be considered an 'Operational Creditor' as defined in section 5(20) of the Code. It was concluded that the applicant, who had invested money without providing goods or services, did not fall within the purview of an 'Operational Creditor.'Issue 3: Classification of Debt as 'Operational Debt'The Tribunal examined the nature of the debt claimed by the applicant to determine if it qualified as 'operational debt' under the Code. It was established that the debt did not arise from the provision of goods or services, employment, or dues payable to the government, thus not meeting the criteria of 'operational debt.'Issue 4: Maintainability of the Petition under Section 9Given that the applicant did not qualify as an 'Operational Creditor' and the claimed dues were not classified as 'operational debt,' the Tribunal held that the petition filed under section 9 for initiating Corporate Insolvency process was not maintainable and consequently rejected.Issue 5: Request to be Treated as a 'Financial Creditor'The applicant requested to be treated as a 'financial creditor' and sought permission to file an application under section 7 of the Code instead. However, the Tribunal emphasized the necessity to adhere to the prescribed procedures and noted that there was no provision to convert a Section 9 application into a Section 7 application.In conclusion, the Tribunal rejected the application under Section 9 of the Code for initiation of Corporate Insolvency Resolution Process, stating that the applicant did not qualify as an 'Operational Creditor' and the claimed debt did not meet the criteria of 'operational debt.' The Tribunal granted leave to the applicant to explore other provisions of the Code if advised to do so.