Chipsan Aviation Private Limited Vs Punj Llyod Aviation Limited (NCLAT Delhi)
NCLAT Delhi held that rejection of Section 9 application holding that advance payment made by Operational Creditor to the Corporate Debtor does not fall within the four corners of the Operational Debt is unsustainable as it is settled low that advance payment is covered within the definition of Operational Debt.
Facts- The appellant advanced an amount to the Respondent. Appellant filed a complaint against Corporate Debtor with the Registrar of Companies.
A demand notice u/s 8 of the Insolvency and Bankruptcy Code, 2016 was issued, which was delivered to the Corporate Debtor. Section 9 Application was filed by the appellant demanding the amount. A reply was filed by the Corporate Debtor to Section 9 Application refuting the claims of the Appellant. The Adjudicating Authority by the impugned order has rejected the Section 9 Application holding that advance payment made by Operational Creditor to the Corporate Debtor does not fall within the four corners of the Operational Debt. Aggrieved by the said order, this Appeal has been filed.
Conclusion- Hon’ble Supreme Court in the case of Construction Consortium Limited held that advance payment is covered within the definition of Operational Debt.
In the facts of the present case, the advance payment of Rs.60 lakhs was clearly an Operational Debt and the Adjudicating Authority committed error in rejecting Section 9 Application on the above ground.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
This Appeal by an Operational Creditor has been filed against the order dated 06.01.2022 passed by National Company Law Tribunal, New Delhi, Court-III rejecting Section 9 Application filed by the Appellant.
2. Brief facts of the case, necessary for deciding this Appeal are:
(i) The Appellant was engaged in business with the Corporate Debtor for charter services of aeroplanes and helicopter, hired on long term basis from non-scheduled operators/ owners from the Corporate Debtor. On the assurance received from the Corporate Debtor, the Appellant on 28.03.2016 advanced an amount of Rs.60 lakhs to the Respondent – Corporate Debtor for aviation related services, which services were not provided by the Corporate Debtor nor the advance paid by the Appellant was refunded. After payment of the advance amount, there has been several emails correspondence between the Appellant and the officials of the Corporate Debtor. The advance payment made by the Appellant to the Corporate Debtor was reflected in the Balance Sheets of the Corporate Debtor as on 31.03.2016 under the head current liabilities. The amount of Rs.60 lakhs was continuously shown as advance received from the customers during 2015-16, 2016-17 and 2017-18. The Appellant on 08.11.2017 wrote to the Corporate Debtor to return back the amount at the earliest.
(ii) On 26.03.2019, the Appellant filed a complaint against the Corporate Debtor with the Registrar of Companies Delhi and Haryana, where entire sequence of the facts was narrated and prayer was made to carry on investigation, so the amount of Rs.60 lakhs be refunded and action be taken against the Director, agents and officials of the Corporate Debtor.
(iii) On 19.09.2019, a Demand Notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “Code”) was issued, which was delivered on Corporate Debtor on 21.09.2019. Section 9 Application was filed by the Appellant demanding an amount of Rs.97,40,055/-, out of which Rs.60 lakhs as principal amount and rest interest.
(iv) A reply was filed by the Corporate Debtor to Section 9 Application refuting the claims of the Appellant. It was pleaded that there was no privity of contract between the Appellant and the Corporate Debtor and there is no Operational Debt in existence under Section 5(21) of the Code. The contract of the Appellant dated 01.04.2016 was with M/s Buildarch Aviation. It was further pleaded that Application under Section 9 is barred by limitation as the advance payment was made on 28.03.2016 and the Application has been filed after expiry of the three years.
(v) The Adjudicating Authority by the impugned order has rejected the Section 9 Application holding that advance payment made by Operational Creditor to the Corporate Debtor does not fall within the four corners of the Operational Debt.
(vi) Aggrieved by the said order, this Appeal has been filed.
3. The learned Counsel for the Appellant challenging the impugned order contends that advance payment of Rs.60 lakhs on 28.03.2016 was made for the purposes of providing aviation services by the Corporate Debtor. The Draft Agreement was forwarded to the Corporate Debtor, which was never signed by the Corporate Debtor. The advance amount was towards obtaining goods and services, hence it falls within the Operational Debt. The Adjudicating Authority committed error in holding that advance payment does not fall within the definition of Operational Debt. It is submitted that in the Balance Sheets of the Corporate Debtor, the amount of Rs.60 lakhs has been shown as “advance received from customers”, which contains clear acknowledgement of the advance received for providing goods and services, hence, the view of the Adjudicating Authority that it is not an Operational Debt is erroneous.
4. The learned Counsel for the Appellant relying on the judgment of the Hon’ble Supreme Court in Consolidated Construction Consortium Limited vs. Hitro Energy Solutions Private Limited – (2022) SCC OnLine SC 142 submits that Hon’ble Supreme Court has held that advance payment for goods and services is an Operational Debt, hence, the very foundation of the order of the Adjudicating Authority is knocked out and the Application under Section 9 was liable to be admitted.
5. The learned Counsel for the Respondent refuting the submission of learned Counsel for the Appellant contends that there is no evidence on record to indicate that there is any contract between the Appellant and the Corporate Debtor. In Section 9 Application, the Appellant has come up with a case that the amount of Rs.60 lakhs was advanced on the assurance/ advice of direct dealing with the Corporate Debtor, but in the Appeal, now the Appellant has improved its case by stating that the amount of Rs.60 lakhs was advanced under an oral contract with the Corporate Debtor. It is submitted that there being no privity of contract between the Appellant and the Corporate Debtor, advance payment of Rs.60 lakhs cannot be held to be an Operational Debt. It is further submitted that Application filed by the Appellant under Section 9 was barred by limitation and the submission was raised before the Adjudicating Authority that Application was barred by limitation, but in the impugned order, there is no consideration with regard to question of limitation.
6. We have heard learned Counsel for the parties and have perused the records.
7. From the materials brought on record, it is clear that there is no contract between the Appellant and the Corporate Debtor for providing an aviation services. However, the payment of Rs.60 lakhs to the Corporate Debtor, which is reflected by Bank transaction is not denied. The amount of Rs.60 lakhs was paid through Bank transfer dated 28.03.2016 to the Corporate Debtor. The statement Annexure-2 to the Appeal, which is Statement of Account of HDFC Bank, clearly mentions that:
