Tribunal Dismisses Application for Non-fulfillment of Statutory Requirements Due to Lack of Privity and Operational Debt.

The NCLT dismissed the application IBA/38/KOB/2020 under Section 9 of the I&B Code, 2016, due to non-fulfillment of statutory requirements. The Tribunal determined that there was no privity of contract between the Operational Creditor and the Corporate Debtor, and the claim did not qualify as an 'Operational Debt' under Section 5(21) of the Code. Consequently, the application was deemed non-maintainable and dismissed without costs.

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Issues Involved:
1. Existence of an operational debt exceeding Rs. 1 crore.
2. Whether the debt is due and payable and has not been paid.
3. Existence of a dispute or pending suit/arbitration before the receipt of the demand notice.
4. Privity of contract between the Operational Creditor and the Corporate Debtor.
5. Maintainability of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Existence of an Operational Debt Exceeding Rs. 1 Crore:
The Operational Creditor claimed that the Corporate Debtor failed to supply the agreed quantity of raw cashew nuts and issued a cheque for Rs. 1,16,96,603, which was dishonored due to insufficient funds. The Corporate Debtor admitted to receiving Rs. 1,15,00,000 from the Operational Creditor and issued a cheque that was dishonored. This established the first condition of having an operational debt exceeding Rs. 1 crore.

2. Whether the Debt is Due and Payable and Has Not Been Paid:
The Operational Creditor issued a demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016, to which the Corporate Debtor did not respond. A certificate from a Chartered Accountant confirmed that no payments were received from the Corporate Debtor since 19.10.2007 until 17.09.2020. Hence, it was proved that the debt was due and payable and had not yet been paid.

3. Existence of a Dispute or Pending Suit/Arbitration Before the Receipt of the Demand Notice:
The Corporate Debtor did not raise any pre-existing dispute before the issuance of the demand notice. Any notice of dispute issued after the demand notice cannot be considered as a pre-existing dispute within the purview of the I&B Code, 2016. Therefore, there was no pre-existing dispute between the parties.

4. Privity of Contract Between the Operational Creditor and the Corporate Debtor:
The Corporate Debtor argued that the contract was between M/s. Thankam Cashew Factory and the Corporate Debtor, and the Operational Creditor was a stranger to the contract. The Tribunal noted that there was no privity of contract between the Operational Creditor and the Corporate Debtor. The Operational Creditor does not come under the definition of Operational Creditor as defined under Section 5(20) of the I&B Code, 2016.

5. Maintainability of the Application Under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The Tribunal referred to the judgment in Jindal Steel and Power Limited v. DCM International Limited, which held that the amount claimed should fall within the definition of 'claim' under Section 3(6) and 'debt' under Section 3(11) of the I&B Code, 2016. The Tribunal found that the claim of the Operational Creditor was not based on an operational debt as it was related to the non-payment of advance money paid on behalf of M/s. Thankam Cashew Factory. Therefore, it did not fall under the definition of 'Operational Debt' as provided under Section 5(21) of the Code.

Conclusion:
The Tribunal concluded that the conditions for admitting the application under Section 9 of the I&B Code, 2016, were not met. The application IBA/38/KOB/2020 was dismissed without costs.

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