N.S. Rangachari vs Consolidated Construction Consortium ...
- CitationCompany Appeal (AT) (Insolvency) No. 19 of 2019
Ratio decidendi
The rule this decision rests on
The reasoning in this order rests on the following principles, stated as the Tribunal applies them: An application under Section 9 of the Insolvency and Bankruptcy Code, 2016 is not maintainable at the instance of a person who is not an "operational creditor" in relation to the corporate debtor against whom it is filed, where that person has neither supplied goods nor rendered services to that corporate debtor but has merely issued purchase orders to a different entity. Where the operational creditor's own documents, including purchase orders and the list of documents annexed to the application, show it as the purchaser rather than the supplier, and the purchase orders were issued to a separate entity, the operational creditor does not fall within the meaning of an operational creditor under Section 5(20) read with Section 5(21), and an admission order founded on such an application cannot stand. A bare assertion that the corporate debtor took over the business of the entity to which the purchase orders were issued, unsupported by any document on record showing such a takeover, does not establish the relationship required for a Section 9 application.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
N. S. Rangachari ...Appellant
Versus
Consolidated Construction Consortium Ltd. ...Respondent
Present: For Appellant : Mr. K. Kumar, Senior Advocate with Mr. Y.Lokesh and Mr. Ashish Kumar Upadhayay, Advocates
For Respondent : Mr. R. Sudhakaran, Advocate
ORDER
12.12.2019 'M/s. Consolidated Construction Consortium Limited'-
('Operational Creditor') moved an application under Section 9 of the Insolvency
and Bankruptcy Code, 2016 ("I&B Code" for short) for initiation of the 'Corporate
Insolvency Resolution Process' against 'M/s. Hitro Energy Solutions Private
Limited'. The Adjudicating Authority (National Company Law Tribunal), Single
Bench, Chennai, by impugned order dated 6th December, 2018 having admitted
the application, the present appeal preferred by Mr. N.S. Rangachari,
Shareholder of 'M/s. Hitro Energy Solutions Private Limited'.
2. Learned counsel appearing on behalf of the Appellant submits that the
application under Section 9 was preferred by 'M/s. Consolidated Construction 2
Consortium Limited'- ('Operational Creditor') was not maintainable against 'M/s.
Hitro Energy Solutions Private Limited' which is not the 'Corporate Debtor' of the
'Operational Creditor'.
3. Relying on the record, it is submitted that 'M/s. Consolidated Construction
Consortium Limited'- ('Operational Creditor') has issued order for supply of
material to one 'M/s. Hitro Energy Solutions', which is a separate Company.
4. It is submitted by the counsel for the Appellant that neither goods were
supplied by 'M/s. Consolidated Construction Consortium Limited'- ('Operational
Creditor') nor given any services to 'M/s. Hitro Energy Solutions Private Limited'
who was shown as 'Corporate Debtor', 'M/s. Consolidated Construction
Consortium Limited' does not come within the meaning of 'Operational Creditor'
in terms of Section 5(20) read with Section 5(21) of the 'I&B Code'.
5. Further, according to the counsel for the Appellant, the requisition for
supply was made to 'M/s. Hitro Energy Solutions Private Limited' by 'Purchase
Order' to one 'M/s. Hitro Energy Solutions', which is a proprietary concern and
'M/s. Hitro Energy Solutions Private Limited' which is a separate entity
(Company). If the period of limitation is counted, the application under Section
9 was also barred by limitation.
6. Mr. R. Sudhakaran, learned counsel appearing on behalf of 'M/s.
Consolidated Construction Consortium Limited'- ('Operational Creditor')
submitted that 'M/s. Hitro Energy Solutions Private Limited' prepared a
'Memorandum of Association' on 22nd January, 2014 to take over 'M/s. Hitro
Company Appeal (AT) (Insolvency) No. 19 of 2019 3
Energy Solutions Private Limited' to whom 'Purchase Order' was issued by 'M/s.
Consolidated Construction Consortium Limited'- ('Operational Creditor').
7. However, there is nothing on the record to suggest that by any list
prepared 'M/s. Hitro Energy Solutions Private Limited' has taken over 'M/s. Hitro
Energy Solutions'. The 'Purchase Orders' are on the record which has been
referred to in Part IV of Form 5 (application under Section 9), relevant of which
is extracted below:
8. List of other Documents attached 1.
to this application in order to prove Purchase Order No. :
the existence of operational debt and KH000015 dated the amount in default 24.06.2013.
2.Purchase Order No. :
KH000016 dated 24.06.2013.
3. Purchase Order No. : KH000017 dated 24.06.2013.
4. Cheque given by CMRL to the Corporate Debtor. 5. Letter dated 23.07.2016 sent by the Operational Creditor.
8. The 'Purchase Orders' have also been enclosed by the Appellant, one of
which is the sample copy of the 'Purchase Order' is extracted below:
Company Appeal (AT) (Insolvency) No. 19 of 2019 4
9. The 'Purchase Orders', which makes it clear that 'M/s. Consolidated
Construction Consortium Limited' is a 'Purchaser' and do not come within the
meaning of 'Operational Creditor' having not supplied any goods nor given any
services to 'M/s. Hitro Energy Solutions Private Limited'. In any case, whether
'M/s. Hitro Energy Solutions Private Limited' or 'M/s. Hitro Energy Solutions' all
Company Appeal (AT) (Insolvency) No. 19 of 2019 5
'Purchase Orders' having issued on 24th June, 2013 and advance cheques have
been issued for subsequently such orders, 'M/s. Consolidated Construction
Consortium Limited' cannot move application under Sections, 7 or 9 or the 'I&B
Code'.
10. As the application under Section 9 was not maintainable at the instance
of 'M/s. Consolidated Construction Consortium Limited', we set aside the
impugned order dated 6th December, 2018. The application under Section 9
preferred by 'M/s. Consolidated Construction Consortium Limited' is dismissed.
'M/s. Hitro Energy Solutions Private Limited' is released from rigour of the
'Corporate Insolvency Resolution Process'. The case is remitted to the
Adjudicating Authority, Single Bench, Chennai to notice the 'Interim Resolution
Professional'/ 'Resolution Professional' and decide the fees and cost incurred by
him which is to be paid by 'M/s. Consolidated Construction Consortium Limited'.
The appeal is allowed with aforesaid observations and directions. No costs.
[Justice S.J. Mukhopadhaya] Chairperson
[Justice Bansi Lal Bhat] Member (Judicial)
[Justice Venugopal M.] Member (Judicial)
/ns/gc
Company Appeal (AT) (Insolvency) No. 19 of 2019
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