Person Who Only Advances An Amount For Supply Of Goods & Services Is Not An “Operational Creditor”: NCLT Chennai

The National Company Law Tribunal, Chennai Bench, comprising Shri Sanjiv Jain (Judicial Member) and Shri Sameer Kakar (Technical Member), while adjudicating an application under Section 9 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in Mr.V. Umadevi vs Kumarna Gin & Pressing Pvt. Limited has held that the payment of advance amount to receive the supply of goods and services from the Corporate Debtor does not come within the ambit of Operational Debt. Background Facts Mr. G. Venkatesh (“Operational Creditor”) advanced a sum of Rs. 1,10,03,813 for purchase of yarn from Kumarna Gin & Pressing Pvt. Limited (“Corporate Debtor”). The Operational Creditor was unable to deliver the yarn on time. Thus the Operational Creditor was constrained to issue a Demand Notice dated 08.02.2020 to the Corporate Debtor. It was argued by the Corporate Debtor that the Operational Creditor has failed to produce any purchase orders specifying the variety, count, quantity, etc. of the yarn. It was further contended that the debt does not cross the limit of 1 crore and the Operational Creditor has intentionally waited till the claim amount exceeds Rs. 1 crore. Findings of the Tribunal It was observed by the Tribunal that it was not the Operational Creditor which was providing any goods or services to the Corporate Debtor. It was infact the Corporate Debtor supplying the goods to the Operational Creditor. Thus the Applicant was not an “Operational Creditor”. Reliance was placed on the NCLAT Judgment of Kavita Anil Taneja vs ISMT Ltd ((2019) ibclaw.in 504 NCLAT) wherein it was held that a person who has not supplied goods or services but has advanced an amount to receive supply of goods would not come within the ambit of “Operational Creditor.” It was further observed that there was no written agreement or material record to show entitlement of interest from the Corporate Debtor. The principle amount due and payable was Rs. 91,90, 827. Thus the threshold of Rs. 1 crore was not fulfilled. With the aforesaid observations, the Tribunal dismissed the petition. Case: Mr.V. Umadevi vs Kumarna Gin & Pressing Pvt. Limited Case No. IBA/840(CHE)/2020 Counsels for the Applicants;Adv. V. Kuberan Counsel for the Respondent ;Sr. Adv. P. Valliappan Click Here To Read/Download Order

Person Who Only Advances An Amount For Supply Of Goods & Services Is Not An “Operational Creditor”: NCLT Chennai

Udai Yashvir Singh

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