2017 (10) TMI 353 - AT - Companies Law

Appellants' appeal dismissed for not meeting 'Operational Creditors' criteria. Parties granted liberty for next steps. No costs awarded.

Gurcharan Singh Soni & Kuldeep Kaur Soni Versus Unitech Ltd. & Anr.

The appeal was dismissed as the appellants were not considered 'Operational Creditors'. However, the parties were granted liberty to determine their ... Corporate insolvency procedures - Default in payment of debt - operational debt - Held that:- There is a 'debt' due to the appellants and there is default on the part of the respondents- 'Corporate Debtor'. However, the appellants do not come within the meaning of “Operational Creditor”. In the case of “Nikhil Mehta and Sons. v. AMR Infrastructure Ltd.”[2017 (8) TMI 1017 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] this Appellate Tribunal noticed that Nikhil Mehta & Ors. purchased flat/ shops from builder pursuant to an agreement. In terms of the said agreement, this Appellate Tribunal held the “Nikhil Mehta and Sons” as the 'Financial Creditor', as in their case the 'Financial Debt' was coming within the meaning of Section 5(8)(f) of the I & B Code. As the agreement reached between the parties pursuant to which amount has been ordered to be refunded by consumer forum is not available before us and appellants have not taken a plea that they are the 'Financial Creditor', we are not deciding such question leaving the question open for decision in case the appellants claims to be 'Financial Creditor' and moves before the Adjudicating Authority with such plea. For the reasons aforesaid, while we are not inclined to interfere with the impugned order dated 21St March, 2017 on the ground that the Appellants are not 'Operational Creditor', give liberty to the parties to decide their course of action as they may take, in accordance with law. Issues:Challenge to rejection of application by Adjudicating Authority, validity of notice under Section 8, authority to issue notice under Section 8, interpretation of 'debt' and 'default', classification as 'Operational Creditor' or 'Financial Creditor'.1. Challenge to rejection of application by Adjudicating Authority:The appellants challenged the order passed by the Adjudicating Authority rejecting their application under Section 9. The appellants argued that the amount due to them falls within the definition of 'debt' and as it remained unpaid, there was a 'default', making their petition maintainable under Section 9.2. Validity of notice under Section 8:The respondents contended that the notice under Section 8 was not served on the 'Corporate Debtor'. However, it was found that the notice had been issued and served on the 'Corporate Debtor' as reported by the Postal Department, contradicting the respondent's submission.3. Authority to issue notice under Section 8:The respondents argued that the notice under Section 8 was issued by a Power of Attorney holder who was not competent to do so. In response, it was highlighted that the appellants had given a General Power of Attorney to Mr. Mukesh Chadha, empowering him to act on their behalf, including issuing notices and engaging advocates.4. Interpretation of 'debt' and 'default':The definitions of 'debt' and 'default' under the Insolvency and Bankruptcy Code were analyzed. 'Debt' was defined as a liability or obligation in respect of a claim due from any person, while 'default' referred to non-payment of debt when due and payable. It was established that there was a 'debt' due to the appellants, and a 'default' on the part of the respondents.5. Classification as 'Operational Creditor' or 'Financial Creditor':The Tribunal differentiated between 'Operational Creditor' and 'Financial Creditor' based on the nature of the debt. While the appellants were found to have a 'debt' and 'default', they were not classified as 'Operational Creditor'. The possibility of being classified as 'Financial Creditor' was left open for the appellants to pursue before the Adjudicating Authority.6. Conclusion:The appeal was dismissed as the appellants were not considered 'Operational Creditors'. However, the parties were granted liberty to determine their further course of action. No costs were awarded in the circumstances. The judgment provided a detailed analysis of the issues raised, including the validity of notices, interpretation of legal definitions, and the classification of creditors based on the nature of the debt.