Case Law Details
Carestream Health India Private Limited Vs Seaview Mercantile LLP (NCLAT Delhi)
Introduction: In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) in Delhi addressed the issue of whether a claim for a refund of a security deposit, contingent upon executing a leave and license agreement, constitutes an operational debt under the Insolvency and Bankruptcy Code (IBC), 2016. The case, Carestream Health India Private Limited (“Appellant”) vs. Seaview Mercantile LLP (“Respondent”), highlighted key aspects of operational debt and the applicability of the IBC in contractual disputes.
Background of the Case: On May 7, 2019, Carestream Health India and Seaview Mercantile LLP entered into a “Without Prejudice” Letter of Intent (WP-LOI) for leasing a unit in the Silver Metropolis building. Carestream Health paid a security deposit of Rs. 25,68,280/-. Upon discovering that the premises were not eligible for IT/ITES/STPI registration, despite initial representations, Carestream sought to terminate the LOI and requested a refund of the security deposit. Multiple notices were sent to Seaview Mercantile LLP, culminating in a demand notice under Section 8 of the IBC on February 10, 2020.
NCLT Decision: The National Company Law Tribunal (NCLT), Mumbai Bench-V, dismissed Carestream Health’s application under Section 9 of the IBC, stating that the appellant did not qualify as an “Operational Creditor.” According to the NCLT, the claim did not arise from the provision of goods or services.
Appellant’s Argument: Carestream Health contended that the security deposit qualified as an operational debt under Section 5(21) of the IBC, referencing the Supreme Court’s ruling in Consolidated Construction Consortium Limited vs. Hitro Energy Solutions Private Limited. They argued that advance payments for the supply of goods or services should be considered operational debts. Furthermore, they cited the NCLAT’s decision in Jaipur Trade Expocentre Private Limited vs. Metro Jet Airways Training Private Limited, which categorized unpaid license fees as operational debts.
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