Vyomit Shares Stock & Investment Pvt Ltd vs Na
- CitationCompany Appeal (AT) (Insolvency)No.258 of 2019
Ratio decidendi
The rule this decision rests on
The Adjudicating Authority's view that SEBI is not an operational creditor is not accepted, the Tribunal applying its earlier decision in Synergies Dooray (following Swiss Ribbons) that statutory dues payable to the Central or State Government or a local authority, including income tax and value added tax, fall within "operational debt" under Section 5(20) of the Insolvency and Bankruptcy Code, 2016, and that the authorities entitled to such dues are operational creditors. Dismissal of the appeal rests on a factual finding that the corporate debtor generated income and profit in the financial year ending 31 March 2017, which the Tribunal held was sufficient reason not to interfere with the order rejecting the Section 10 application, notwithstanding the appellant's plea that it was in loss.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
IN THE MATTER OF: Vyomit Shares Stock & Investments Pvt. Ltd. .....Appellant Vs. Securities and Exchange Board of India (SEBI) ......Respondent
Present : For Appellant: Mr. Sunil Fernandes, Mr. Siddharth Sharma, Mr. Darpan Sachdeva, Advocates For Respondents: Ms. Udita Singh, Advocate
O R D E R
15.05.2019 - The 'Corporate Applicant' filed an application u/s 10 of Insolvency
& Bankruptcy Code ('I&B' Code), 2016 for initiation of Corporate Insolvency
Resolution Process against it. The Adjudicating Authority, National Company
Law Tribunal (in short 'NCLT'), Mumbai Bench by impugned order dated 12th
February, 2019 rejected the application on the ground that the 'Corporate
Debtor' is earning sufficient income. Therefore, prima facie, it appears that there
is no reason for the Appellant or the 'Corporate Debtor' to declare itself eligible
for filing an application u/s 10 of Insolvency & Bankruptcy Code ('I&B' Code),
2016. ....contd./ 2
Learned counsel appearing on behalf of the Respondent submits that the
Adjudicating Authority has also stated that the Securities and Exchange Board
of India (SEBI) is not Operational Creditor but we are not accepting such an
issue in view of decision of this Appellate Tribunal in "Pr. Director General of
Income Tax (Admn. & TPS) Vs. M/s. Synergies Dooray Automotive Ltd. &
Ors. etc. - Company Appeal (AT)(Insolvency) No. 205 of 2017 etc. dated 20th
March, 2019" wherein this Appellate Tribunal held and observed as
follows:-
27. In "Swiss Ribbons Pvt. Ltd. & Anr. vs.
Union of India & Ors.─ Writ Petition (Civil) No. 99
of 2018", the Hon'ble Supreme Court while dealing
with the different provisions of the 'I&B Code',
including Section 5(20), observed as follows:
"23. A perusal of the definition of "financial creditor"
and "financial debt" makes it clear that a financial
debt is a debt together with interest, if any, which is
disbursed against the consideration for time value of
money. It may further be money that is borrowed or
raised in any of the manners prescribed in Section
5(8) or otherwise, as Section 5(8) is an inclusive
Company Appeal (AT) (Insolvency)No.258 of 2019 admin 2 definition. On the other hand, an 'operational debt"
would include a claim in respect of the provision of
goods or services, including employment, or a debt in
respect of payment of goods or services, including
employment, or a debt in respect of payment of dues
arising under any law and payable to the Government
or any local authority."
28. From the plain reading of sub-section (21) of
Section 5, we find that there is no ambiguity in the said
provision and the legislature has not used the word
'and' but chose the word 'or' between 'goods or
services' including employment and before 'a debt in
respect of the payment of dues arising under any law
for the time being in force and payable to the Central
Government, and State Government or any local
authority'.
29. 'Operational Debt' in normal course means a debt
arising during the operation of the Company ('Corporate
Debtor'). The 'goods' and 'services' including
employment are required to keep the Company
('Corporate Debtor') operational as a going concern. If
Company Appeal (AT) (Insolvency)No.258 of 2019 admin 3 the Company ('Corporate Debtor') is operational and
remains a going concern, only in such case, the statutory
liability, such as payment of Income Tax, Value Added
Tax etc., will arise. As the 'Income Tax', 'Value Added
Tax' and other statutory dues arising out of the existing
law, arises when the Company is operational, we hold
such statutory dues has direct nexus with operation of
the Company. For the said reason also, we hold that all
statutory dues including 'Income Tax', 'Value Added
Tax' etc. come within the meaning of 'Operational Debt'.
30. For the said very reason, we also hold that 'Income
Tax Department of the Central Government' and the
'Sales Tax Department(s) of the State Government' and
'local authority', who are entitled for dues arising out of
the existing law are 'Operational Creditor' within the
meaning of Section 5(20) of the 'I&B Code'."
Learned counsel for the Appellant submitted that the Company is in loss
and is not in a position to pay the amount.
Company Appeal (AT) (Insolvency)No.258 of 2019 admin 4 However, from the record, it appears that there is income and profit
generated by the Company in the financial year 31st March, 2017, we are not
inclined to interfere with the impugned order. The appeal is dismissed. No
Costs.
[Justice S. J. Mukhopadhaya] Chairperson
[Justice A. I. S. Cheema] Member (Judicial)
[Kanthi Narahari] Member (Technical)
ss/gc
Company Appeal (AT) (Insolvency)No.258 of 2019 admin 5
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