Appeal allowed, Corporate Debtor released from CIRP, fees to be determined by Adjudicating Authority

The Appeal was allowed, and the impugned order was set aside. The Corporate Debtor was released from the Corporate Insolvency Resolution Process (CIRP), with management returning to the Promoters/Directors. The matter was remitted to the Adjudicating Authority for determining the fees and costs of the CIRP, to be borne by the Respondent. The Application was deemed erroneously admitted as the advance amount for goods did not constitute Operational Debt under Section 5(20) of the I&B Code.

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Issues Involved:
1. Admissibility of Application under Section 9 of I&B Code without prescribed demand notice.
2. Classification of advance amount for goods as Operational Debt under Section 5(20) of I&B Code.

Analysis:

Issue 1:
The Appellant challenged the admission of the Application under Section 9 of the I&B Code, citing non-compliance with the prescribed format for the demand notice. The Appellant relied on previous judgments to support this argument. However, the Respondent contended that the notice was in the prescribed format and the objection was not raised earlier. The Tribunal noted the Annexures attached to the demand notice and found no merit in the Appellant's objection. The Adjudicating Authority had not addressed this issue, leading to the dismissal of this ground of appeal.

Issue 2:
Regarding the classification of the advance amount for goods as Operational Debt, it was established that the Corporate Debtor failed to supply the agreed-upon goods despite receiving the advance payment. The Tribunal analyzed relevant provisions and previous judgments to conclude that the advance amount did not constitute Operational Debt under Section 5(20) of the I&B Code. The Tribunal highlighted precedents where similar situations were considered, emphasizing that payment for goods not supplied does not fall under Operational Debt. Consequently, the Application was deemed erroneously admitted, leading to the allowance of the Appeal and setting aside of the impugned order.

The Tribunal released the Corporate Debtor from the CIRP, directing the return of management to the Promoters/Directors. The matter was remitted to the Adjudicating Authority for determining the fees and costs of the CIRP, to be borne by the Respondent. The Appeal was allowed without costs.

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