2017 (12) TMI 1241 - Tri - Insolvency and Bankruptcy

Application Dismissed: Lack of Privity & Creditor Status

The Tribunal dismissed the application under section 9 of the Insolvency and Bankruptcy Code, 2016, as the petitioner, lacking privity of contract with ... Corporate insolvency resolution process - Held that:- The petitioner is not an operational creditor as per section 5(20) read with section 5 (21) of I&B Code, 2016. The preliminary objection raised by the respondent being sustainable under law this petition is liable to be dismissed. Accordingly, this petition is dismissed. Issues:1. Maintainability of the application under section 9 of the Insolvency and Bankruptcy Code, 2016.2. Privity of contract between the petitioner and the respondent.3. Locus standi of the petitioner to file the application.4. Operational creditor status of the petitioner.5. Nature of debt claimed as operational debt under section 5(21) of the Insolvency and Bankruptcy Code, 2016.Analysis:1. The application was filed under section 9 of the Insolvency and Bankruptcy Code, 2016 for initiating insolvency resolution process against the Corporate Debtor, Fabworth Promoters Private Limited. The petitioner alleged default in payment by the respondent and claimed an amount due based on invoices and debit notes issued for services provided.2. The respondent objected to the petition citing lack of privity of contract between the petitioner and themselves. They argued that the petitioner had no authority to file the application, leading to a preliminary objection on the maintainability of the petition.3. The petitioner, a subsidiary of a London-based company, filed the petition without a direct contract with the respondent. The respondent challenged the authority of the petitioner to claim the amount demanded, emphasizing the absence of a contractual relationship between the parties.4. The respondent contended that the debt claimed was not owed to the petitioner but to its holding company in London. The respondent raised objections based on the definition of an operational creditor under section 5(20) of the Insolvency and Bankruptcy Code, stating that the debt was not legally assigned to the petitioner.5. The Tribunal analyzed the nature of the debt claimed by the petitioner, considering whether it qualified as an operational debt under section 5(21) of the Code. The Tribunal found that the invoices issued were not based on a work order between the petitioner and the respondent, leading to a conclusion that the debt claimed did not meet the criteria of an operational debt.6. Referring to a previous judgment, the Tribunal emphasized the importance of meeting the criteria for being considered an operational creditor. The comparison drawn highlighted the need for a valid agreement or service rendered directly to the debtor to qualify as an operational debt, which was lacking in the present case.7. Based on the analysis of the petition and relevant legal provisions, the Tribunal concluded that the petitioner did not meet the requirements to be classified as an operational creditor under the Insolvency and Bankruptcy Code, 2016. Consequently, the preliminary objection raised by the respondent was upheld, leading to the dismissal of the petition.8. The Tribunal clarified that the dismissal of the petition did not prevent the holding company of the petitioner or the petitioner itself, upon obtaining a valid assignment of debt, from filing a similar petition in the future. No costs were awarded in the judgment.