M/S CONSOLIDATED CONSTRUCTION CONSORTIUM LIMITED versus M/S HITRO ENERGY SOLUTIONS PRIVATE LIMITED

Citation: [2022] 2 S.C.R. 212 · Decided: 04-02-2022 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 5 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 2 S.C.R.
[2022] 2 S.C.R. 212
212
M/S CONSOLIDATED CONSTRUCTION CONSORTIUM
LIMITED
v.
M/S HITRO ENERGY SOLUTIONS PRIVATE LIMITED
(Civil Appeal No. 2839 of 2020)
FEBRUARY 04, 2022
[DR. DHANANJAYA Y CHANDRACHUD, SURYA KANT
AND VIKRAM NATH, JJ.]
Insolvency and Bankruptcy Code, 2016: ss.5(20), 5(21), 8(1)
– Operational creditor – Meaning of – Appellant was engaged by
CMRL for a project – For the said project, appellant entered into a
contract for supply of light fittings with a Proprietary Concern (P.C.)
– CMRL, on appellant’s behalf, paid a sum of Rs 50 lakhs to P.C. as
an advance – However, CMRL terminated its project with the
appellant – The communication of termination was given to P.C.,
however P.C. encashed the cheque for Rs 50 lakhs – Appellant
paid the sum of Rs 50 lakhs to CMRL and requested P.C. to make
the payment – Meanwhile, respondent was incorporated and it took
over P.C. – Appellant sent demand notice under s.8 of the IBC to
the respondent – Respondent denied that any debt was owed by
them to the appellant – Appellant filed application u/s.9 of IBC r/w
r.6 IBC Rules 2016 which was admitted by NCLT and Interim
Resolution professional appointed – NCLAT set aside the NCLT’s
decision and dismissed the application of appellant – On appeal,
held: Operational creditors are those whose debt arises from
operational transactions i.e transactions involving goods or services
which are considered necessary for the operational functioning of
an entity – s.5(21) defines ‘operational debt’ as a “claim in respect
of the provision of goods or services – The operative requirement is
that the claim must bear some nexus with a provision of goods or
services, without specifying who is to be the supplier or receiver –
s.8(1) of the IBC r/w r.5(1) and Form 3 of the 2016 Application
Rules makes it abundantly clear that an operational creditor can
issue a notice in relation to an operational debt either through a
demand notice or an invoice – The presence of an invoice is not a
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sine qua non, since a demand notice can also be issued on the
basis of other documents which prove the existence of the debt – A
debt which arises out of advance payment made to a corporate
debtor for supply of goods or services would be considered as an
operational debt – Appellant had sought an operational service
from P.C. when it contracted with them for the supply of light fittings
– Enchashment of cheque by P.C., even though the contract was
terminated, gave rise to an operational debt in favor of the appellant
– Hence, the appellant is an operational creditor under s.5(20) of
the IBC.
Companies Act, 2013: Memorandum of Association (MOA)
– Evidentiary value of – A company’s MOA is its charter and
outlines the purpose for which the company has been created – In
the instant case, the MOA of the respondent unequivocally states
that one of its main objects is to take over a Proprietary Concern
(P.C.) – However, the respondent has produced a resolution
purportedly to not take over P.C. – s.13 of Companies Act, 2013
provides the procedure for amendment of MOA – In case of
amending an object clause, it requires the Registrar to register
the Special Resolution filed by the company – However, respondent
provided no proof for the above amendment – MOA of the
respondent still stands.
Limitation Act, 1963: Maintainability of IBC application –
Limitation does not commence when the debt becomes due but only
when a default occurs – Default is defined under s.3(12) of the
IBC as the non-payment of the debt by the corporate debtor when
it has become due – CMRL issued a cheque of Rs 50 lacs to a
Proprietary Concern (P.C.) on 7 November 2013 as an advance
payment for the purchase – After termination of contract,
correspondence was exchanged between the appellant and P.C. –
Final letter demanding payment from P.C. was addressed on 27
February 2017 which was refused by appellant on 2 March 2017
– On 1 November 2017, appellant filed an application u/s.9 of
IBC which is within three years from default – Hence, application
u/s.9 of IBC is not barred by limitation – Insolvency and
Bankruptcy Code, 2016 – s.9.
M/S CONSOLIDATED CONSTRUCTION CONSORTIUM LTD. v. M/S HITRO
ENERGY SOLUTIONS PVT. LTD.
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SUPREME COURT REPORTS
[2022] 2 S.C.R.
Allowing the appeal, the Court
HELD: 1. Section 8(1) of the IBC read with Rule 5(1) and
Form 3 of the 2016 Application Rules makes it abundantly clear
that an op

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