Operational creditor appeal dismissed for lack of documentary evidence and time-barred Section 9 application

NCLAT Principal Bench dismissed an appeal challenging rejection of Section 9 application by operational creditor seeking initiation of corporate insolvency resolution process. The tribunal held that appellant failed to establish operational creditor status, lacking documentary evidence of guarantee agreement with respondent for goods supplied to third party. No privity of contract existed between parties as goods were supplied by third parties, not appellant, despite claims of using local distributors. The application was also time-barred, filed in 2019 for 2015 default, exceeding three-year limitation period. NCLAT found the application was misuse of IBC provisions for debt recovery rather than genuine insolvency resolution.

---

---

Issues Involved:
1. Whether the Appellant is an Operational Creditor of the Respondent.
2. Whether the claim of the Appellant is an operational debt qua the Respondent.
3. Whether the claim of the Appellant is time-barred.
4. Whether the Section 9 application was filed for the purpose of CIRP or for recovery of money.

Issue-Wise Detailed Analysis:

1. Whether the Appellant is an Operational Creditor of the Respondent:
The Appellant claimed to be an Operational Creditor based on the assertion that the Respondent had guaranteed payment for goods supplied to Empathy. The Appellant relied on various e-mails to substantiate this claim. The Respondent refuted this, asserting there was no privity of contract and no legally valid contract of guarantee. The Tribunal examined the statutory definitions under Sections 5(20) and 5(21) of the IBC and found no documentary evidence or agreement stipulating the terms of the guarantee. The Tribunal concluded that the Appellant cannot be treated as an Operational Creditor due to the absence of privity of contract.

2. Whether the claim of the Appellant is an operational debt qua the Respondent:
The Tribunal noted that operational debt must relate to the provision of goods or services. The Appellant failed to provide evidence of a contractual agreement with the Respondent. The invoices attached to the Section 9 application were issued by third parties, not the Appellant, and were directed to Empathy, not the Respondent. The Tribunal held that without a direct supply of goods or services to the Respondent, the Appellant's claim did not constitute an operational debt.

3. Whether the claim of the Appellant is time-barred:
The Tribunal agreed with the Adjudicating Authority that the claim was time-barred. The limitation period was to be counted from the date of default, which was 28.08.2015. The Section 9 application was filed on 11.02.2019, beyond the three-year limitation period. The Tribunal referenced the Supreme Court's judgment in BK Educational Services Pvt. Ltd. Vs Parag Gupta and Associates, confirming that the proceedings were governed by the Limitation Act, 1963.

4. Whether the Section 9 application was filed for the purpose of CIRP or for recovery of money:
The Tribunal observed that the Appellant had issued multiple Demand Notices and filed several Section 9 applications, which were subsequently withdrawn, indicating a pattern of behavior aimed at coercing the Respondent. The Tribunal concluded that the application was not for insolvency resolution but for recovering money owed by Empathy. This misuse of IBC provisions was strongly deprecated.

Conclusion:
The Tribunal upheld the Adjudicating Authority's decision to reject the Section 9 application, finding no merit in the appeal. The appeal was dismissed, and each party was ordered to bear its own costs.

---