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Debt arising from advance to corporate debtor for supply of goods qualifies as operational debt

Case Law Details

TaxGuru Citation
2025 taxguru.in 12582
Case Name
Rakesh Bhailalbhai Patel Vs Vasundhara Seamless Stainless Tubes Private Limited (NCLAT Delhi)
Date of Judgement/Order
Only available for paid members
Courts
Delhi NCLAT, NCLAT
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Rakesh Bhailalbhai Patel Vs Vasundhara Seamless Stainless Tubes Private Limited (NCLAT Delhi)

NCLAT Delhi held that debt arising from advance payment to corporate debtor for the supply of goods qualifies as operational debt under section 5(21) of the Insolvency and Bankruptcy Code, [IBC]. Accordingly, operational debt and default established hence section 9 application rightly admitted.

Facts- This appeal has arisen from the order dated 22.08.2024 passed by the National Company Law Tribunal, (Adjudicating Authority) Ahmedabad Bench. The Adjudicating Authority admitted the petition filed u/s. 9 of the Insolvency and Bankruptcy Code, 2016 filed by Mr. Hiralal Bhimjibhai Kumavat, the proprietor of B.N. Enterprises (Operational Creditor) and Respondent No. 2 herein. The Adjudicating Authority vide the impugned order directed the initiation of the Corporate Insolvency Resolution Process (CIRP) against Vasundhara Seamless Stainless Tubes Private Limited, the Corporate Debtor (CD).

Conclusion- Held that the Hon’ble Supreme Court in Consolidated Construction Consortium Ltd. v. Hitro Energy Solutions Pvt. Ltd. (2022) 7 SCC 164, has held that a purchaser who has made advance payments for supply of goods is an operational creditor, when such goods are not supplied.

Held that the Operational Creditor has satisfactorily established: (a) the payment of Rs. 1 crore constituted advance consideration for supply of goods, (b) the goods were neither delivered nor the consideration refunded, and (c) the Corporate Debtor’s balance sheets and conduct confirm continuing acknowledgment of liability. Thus existence of “operational debt” and “default” as defined under Section 5(21) and Section 3(12) respectively of the Code have been clearly established.

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