PURCHASER CAN ALSO BE OPERATIONAL CREDITOR

 

Can You Ignore the Liability Arising out of an Object clause In MOA in absence of any alteration been made in MOA?	NO
Can you prove Operational Debt in absence of any Invoice?	YES
Whether purchaser of Goods can also be an operational creditor under IBC?	YES

Shubham Budhiraja

(LLB, ACS, BCOM(H))

ShubhamBudhiraja02@gmail.com , 9654055315

A and B enter into a contract to execute a project, A contracted with C (proprietor concern)  and placed purchased order for getting supply of light fitting to the A's premises.  B on A's behalf paid 50 Lakh to C. A paid 50 Lakh to B, However, later B terminated the contract with A. Thus, A issued letter to C asking for refund of advance amount stating that A's contract is terminated with B. C case is that I will pay directly to B if B ask from me. A said I will indemnify you if B claim in future course but for now Refund the amount to A because A have made the payment to B. C denied agreeing on it. Subsequently, C converted into a company with an object clause in its MOA that it will take over the erstwhile proprietor concern. C (company) denied the payment to A stating that there is no contract between A & C (Company) because C (Company) had no intentions to take over the business of C (proprietor concern).   NCLT admitted the section 9 petition filed by A against C but NCLAT set aside the same holding that there is no operational debt. The apex court set aside NCLAT order and holding that; (I) the essence of operational debt is operational requirements. It not only includes the one who supplies the goods or services but also those who purchase or hire them and give advance or make payment for them.  (II) MOA is constitutional document of a company. C cannot merely deny the object clause. In absence of any alteration in MOA, the C cannot take a stand that they have had no intention to take over the proprietor concern[1]. 

 

(i)                  The object clause in an MOA is considered to be representative of the purpose of a company and it is expected that the company will fulfill/attempt to fulfill the objects it has laid out in its MOA.

 

(ii)                The phrase “in respect of” in Section 5(21) has to be interpreted in a broad and purposive manner in order to include all those who provide or receive operational services from the corporate debtor, which ultimately lead to an operational debt

 

(iii)               Section 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. Such an interpretation is also supported by the observations in the BLRC Report, which specifies that operational debt is in relation to operational requirements of an entity. Second, 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 operational creditor can issue a notice in relation to an operational debt either through a demand notice or an invoice. As such, the presence of an invoice (for having supplied goods or services) is not a sine qua non, since a demand notice can also be issued on the basis of other documents which prove the existence of the debt.

 

(iv)              This is made even more clear by Regulation 7(2)(b)(i) and (ii) of the CIRP Regulations 2016 which provides an operational creditor, seeking to claim an operational debt in a CIRP, an option between relying on a contract for the supply of goods and services with the corporate debtor or an invoice demanding payment for the goods and services supplied to the corporate debtor. While the latter indicates that the operational creditor should have supplied goods or services to the corporate debtor, the former is broad enough to include all forms of contracts for the supply of goods and services between the operational creditor and corporate debtor, including ones where the operational creditor may have been the receiver of goods or services from the corporate debtor.

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[1] Civil Appeal No 2839 of 2020