Relief under IBC cannot be claimed if relationship of Corporate Debtor and Operational Creditor does not exist

Relief under IBC cannot be claimed if relationship of Corporate Debtor and Operational Creditor does not exist

The Appeal filed under Section 61(1) of the Insolvency and Bankruptcy Code, 2016 (IBC) arising out of Impugned Order passed by the Adjudicating Authority/National Company Law Tribunal (NCLT), Guwahati Bench has been dismissed by the National Company Law Appellate Tribunal (NCLAT).

Herein, an Application was filed by M/s. Shruti Impex, Appellant, Operational Creditor (OC) under Section 9 of the IBC on the ground that a dispute existed between the Appellant and the Respondent but the Adjudicating Authority had dismissed the same.

In this matter, the Appellant supplied polymer granules as OC to the Corporate Debtor (CD), N.R. Commercials Private Limited, on verbal orders against 14 different invoices. As per the facts, the OC had agreed to deliver the material as per oral contract with the CD and the CD has received the delivery of the material, but it has paid only an amount of Rs.21,00,000 out of total amount due of Rs.2,40,95,981/-.

The CD, had replied to the notice sent by the Creditor denying existence of any business relationship between him and the creditor. It had also denied existence of any claim and unpaid operational debt. The OC then, filed an application under Section 9 of the IBC as OC in initiation of Corporate Resolution Process (CIRP) in respect of M/s. N.R. Commercials Private Limited.

In view of the complete denial by the CD and the discrepancies found in various documents submitted by the OC, Adjudicating Authority inferred that the OC has not been able to, prima facie, prove her case and hence, dismissed the application filed under Section 9. It had, however, not precluded the OC from initiating recovery proceedings before the appropriate legal firm, provided she can establish her case.

The Appellate Tribunal found that that all the invoices produced by the Appellant contain just a stamp of N.R. Commercials Pvt. Ltd. stating "Stocks Received". There were no signatures above the stamp and no clear identification of the person receiving the supplies has been mentioned, neither there is any evidence of transportation of the said supplies.

The Appellate Authority observed that the appellant failed to establish a seller-buyer relationship between her and the respondent and hence no relationship of CD and OC could be proved by the appellant.

With respect to Section 5 (21) of the IBC it has been put forth that it defines operational debt to mean a claim in respect of the provision of goods or services including employment or a debt in respect of the repayment of dues. Quite obviously provision of goods or services is a prerequisite for the existence of operational debt.

In this case, it has been affirmed that the only evidence that the OC has produced in support of her claim are a total of fourteen invoices (out of which only one is found under limitation for the purposes of IBC) which she has not been able to corroborate through any other document such as way bill, transportation document, tax invoice or tax remittance receipts.

The OC was not able to prove any purchase order being given by the Respondent for supply of polymer granules by her and rebut the averment and argument of CDcalling the claim false and fabricated.

According to the NCLAT, since the supply of goods could not be established as required under Section 5(21) of the IBC, the existence of any payment towards such purchase cannot established. There is most certainly a dispute regarding the existence of purchase and sale of polymer granules as claimed by the seller and hence the facts provided by the Appellant in her application under section 9 of the IBC are in dispute.

The NCLAT decided that the appellant had not been able to establish that she is an operational creditor in the case and a relationship of corporate debtor and operational creditor exists between the Appellant and the Respondent as required in the IBC. Thus, any relief under Section 9 of the IBC cannot be claimed.