Supreme Law News

Can Purchaser of goods/services be an operational creditor ?

In its latest judgment, the Supreme Court has very clearly defined operational debt and operational creditors under the Insolvency and Bankruptcy Code, 2016.

So far, it remained limited only to including those who supply goods or services to a corporate debtor and exclude those who receive goods or services from the corporate debtor.

The Court said, that a demand notice for an operational debt by an operational creditor does not necessarily need to be accompanied by an invoice.

It can also include a ‘provision of law, contract or other document.

SC was of the view that ‘in respect of’ in Section 5(21) of IBC must 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.

The Apex Court in its Judgement, held that a debt arising out of advance payment made to a corporate debtor for supply of goods or services would be considered as an operational debt.

Reliance in this regard was placed on Section 8(1) of the IBC read with Rule 5(1) and Form 3 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016.

Regulations 7(2)(b)(i) and (ii) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016 was also relied upon.

The appellant in Consolidated Construction Consortium Limited v. Hitro Energy Solutions Private Limited had sought an operational service from the respondents when it contracted them for the supply of light fittings.

The contract was subsequently terminated but the respondent nonetheless encashed the cheque for advance payment.

To know more about Insolvency and Bankruptcy Code, 2016, or seek any clarification visit our website, www.4csupremelawint.com

or contact us on our WhatsApp (9828320572).

#law #supremecourt #construction #energy #india #Insolvency #bankruptcylaw #debt #debtrecovery #creditors

Dr Ajay Kummar Pandey
Advocate Supreme Court of India

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Dr. Ajay Kummar Pandey

( LLM, MBA, (UK), PhD, AIMA, AFAI, PHD Chamber, ICTC, PCI, FCC, DFC, PPL, MNP, BNI, ICJ (UK), WP, (UK), MLE, Harvard Square, London, CT, Blair Singer Institute, (USA), Dip. in International Crime, Leiden University, the Netherlands )

Advocate & Consultant Supreme Court of India, High Courts & Tribunals.