Section 9 Application Valid Despite Decree Holder Not Being an Operational Creditor: NCLAT

Venus Buildtech India Pvt. Ltd. Vs Senbo Engineering Ltd. (NCLAT Delhi)

The National Company Law Appellate Tribunal (NCLAT) in Delhi has set aside an order that rejected an application under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016. The application was filed by Venus Buildtech India Pvt. Ltd., an operational creditor, against Senbo Engineering Ltd. The Adjudicating Authority had dismissed Venus Buildtech’s application solely on the ground that, having obtained a decree from a civil court for the outstanding operational debt, it could no longer be considered an operational creditor under the IBC. NCLAT disagreed with this reasoning.

NCLAT, after hearing the arguments from both sides, referred to its earlier judgment in the case of Mukul Agarwal vs. Royale Resinex Pvt. Ltd. In that case, the Tribunal had clearly stated that the mere fact that an operational creditor had obtained a decree for the unpaid amount does not alter the fundamental nature of the debt as an ‘operational debt’. The debt originated from the provision of goods or services, and the subsequent decree is simply a legal acknowledgment of that existing debt. NCLAT also distinguished the Tripura High Court’s view, which the Adjudicating Authority had relied upon, emphasizing that the IBC does not intend to create a separate class of ‘decree holders’ that would exclude them from being either financial or operational creditors based on the origin of the debt. The Tribunal highlighted that the definition of ‘operational debt’ under Section 5(21) of the IBC encompasses claims related to the provision of goods or services, and obtaining a decree does not change this underlying nature. Consequently, NCLAT allowed Venus Buildtech’s appeal, set aside the Adjudicating Authority’s order, and revived the Section 9 application, directing the Adjudicating Authority to hear and decide the application afresh in accordance with the law, without prejudice to the merits of the case.

FULL TEXT OF THE NCLAT JUDGMENT/ORDER