2022 (8) TMI 766

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....is Appeal are: On 24th December, 2010, the Appellant awarded a contract to Corporate Debtor for execution of 1750 MW Demwe Lower Hydroelectric Project, Arunachal Pradesh. Mobilization advance of Rs. 7,48,40,06,136/- was transferred by the Appellant to the Corporate Debtor through the Bank Transfer. On 14.02.2011, Corporate Debtor issued Corporate Guarantee in favour of the Appellant. The Corporate Guarantee was extended till 23.11.2021 on 30th January, 2019. An Order was passed by the Adjudicating Authority initiating Corporate Insolvency Resolution Process against the Corporate Debtor. In the Corporate Insolvency Resolution Process, the Appellant on 26th April, 2019 filed its claim to the Interim Resolution Professional (IRP) for an amount of Rs. 1784,99,28,651/- as a Financial Creditor. The Appellant received an Email from RP to attend meeting of the Committee of Creditors on 21st June, 2019. On 25th June, 2019, the Resolution Professional informed the Appellant that his claim does not fall as a Financial Creditor rather it falls as an Operational Creditor. On 24th July, 2019, the Appellant filed his claim as an Operational Creditor. On 3rd June, 2020, the Resol....

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....ional has no power to adjudicate the claim filed by the Appellant. The Resolution Professional initially accepted the claim of the Appellant as Financial Creditor which suo moto was subsequently rejected by the Resolution Professional. In any view of the mater, the mobilization advance by the Appellant was an Operational Debt and the Adjudicating Authority wrongly rejected the claim of the Appellant as an Operational Debt also. 4. Learned Counsel appearing for the Respondent No. 1 refuting the submissions of the Appellant submits that mobilization advance is not a loan/borrowing raised and meant to be repaid by the Respondent. Mobilization advance was not a Financial Debt. The transaction does not come under Section 5(8)(i) since the Corporate Guarantee has not been provided to support any liability falling under or within the meaning of (a) to (h) clauses of Section 5(8) of the Code. The Appellant has not rendered any services or delivered any goods to the Corporate Debtor hence the Appellant is not an Operational Creditor. 5. We have considered the submissions of Learned Counsel for the parties and perused the record. 6. The mobilization advance which was given by the Ap....

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....r price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause;" 9. Mobilization advance which was given by the Appellant to the Corporate Debtor was for mobilization of material and workforce on the site. Mobilization advance was not disbursed against the consideration for the time value of money. The submissions which has been pressed by the Learned Counsel for the Appellant is that the Corporate Debtor having given guarantee by the Guarantee Deed dated 14.02.2011 which was extended up 23.11.2021 transaction becomes a Financial Debt within the meaning of Section 5(8)(i). When we look into Section 5(8)(i) it is clear that the guarantee referred to in Section 5(8)(i) relates to any of the items referred to in sub-clauses (a) to (h) of Section 5(8) of the Code. ....

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.... in Section 5(8)(i) must relate to any of the items referred to in sub clauses (a) to (h). The mobilization advance given by the Appellant to the Corporate Debtor does not fall in any of the clauses (a) to (h) hence no benefit can be availed of the Appellant of provisions of Section 5(8)(i). 11. Now we come to the submissions of Learned Counsel for the parties as to whether the mobilization advance by the Appellant to the Corporate Debtor was an Operational Debt. The mobilization advance was given by the Appellant in pursuance of a contract entered between the parties i.e. EPC Contract dated 24th December, 2010. The advance given was to be adjusted in the running bills as per the terms and conditions of the contract or could have been demanded back by the Appellant. The contract between the parties could not be carried out due to non-providing of site for carrying out the work. The contract was virtually given up and was never implemented. In this reference, we may refer to the Judgement of the Hon'ble Supreme Court in Civil Appeal No. 2839 of 2020 in the matter of "M/s. Consolidated Construction Consortium Limited Vs. M/s. Hitro Energy Solutions Private Limited". In the above c....

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..... 42. It is then that we come to the core of the dispute - while the appellant has argued that the debt is in the nature of an operational debt which makes them an operational creditor, the respondent has opposed this submission. The respondent's submission, which was accepted by the NCLAT, seeks to narrowly define operational debt and operational creditors under the IBC to only include those who supply goods or services to a corporate debtor and exclude those who receive goods or services from the corporate debtor. For reasons which shall follow, we reject this argument. 43. First, Section 5(21) defines 'operational debt' as a "claim in respect of the provision of goods or services". The operative requirement is that the claim must bear some nexus with a provision of goods or services, without specifying who is to be the supplier or receiver. Such an interpretation is also supported by the observations in the BLRC Report, which specifies that operational debt is in relation to operational requirements of an entity. Second, Section 8(1) of the IBC read with Rule 5(1) and Form 3 of the 2016 Application Rules makes it abundantly clear that an operational creditor ca....

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.... Concern nonetheless encashed the cheque for advance payment, it gave rise to an operational debt in favor of the appellant, which now remains unpaid. Hence, the appellant is an operational creditor under Section 5(20) of the IBC." 12. The Judgement of Hon'ble Supreme Court in M/s. Consolidated Construction Consortium Limited (supra) is fully attracted in the facts of the present case. In the present case, the amount of mobilization advance was given by the Appellant to the Corporate Debtor whereas in the case of M/s. Consolidated Construction Consortium Limited, the amount of Rs. 50 Lakhs was given by the CMRL to the Corporate Debtor on instruction of the Appellant in pursuance of Contract. Hon'ble Supreme Court held the words "in respect of" in Section 5(21) has to be interpreted in a broad and purposive manner, in order to include all those who provide or receive operational services from the corporate debtor, which ultimately lead to an operational debt. In view of the law laid down by the Hon'ble Supreme Court in M/s. Consolidated Construction Consortium Limited, the mobilization advance given by the Appellant to the Corporate Debtor is clearly an Operational Debt and the A....