RECENT JUDGMENTS

M/s Consolidated Construction Consortium Ltd v. M/s Hitro Energy Solutions Pvt Ltd

Supreme Court | Judgment dated February 04, 2022 [Civil Appeal No. 2839 of 2020

Background facts

  • M/s Consolidated Construction Consortium Ltd (Appellant) entered into a contract with Chennai Metro Rail Ltd (CMRL) for supply of light fittings, pursuant to which the Appellant placed  purchase orders with M/s Hitro Energy Solutions (Proprietary Concern) for the supply of light  
  • Upon request of the Appellant, CMRL issued a cheque amounting to INR 50,00,000 to the Proprietary Concern on behalf of the Appellant as an advance for its order; however, it subsequently cancelled its contract with the Appellant since the project that CMRL was working on was terminated. Thereafter, the contract with CMRL was cancelled, and the Appellant repaid  the sum of INR 50,00,000 to CMRL. However, the Appellant was not able to recover the said  amount from the Proprietary Concern as the Proprietary Concern had encashed the cheque for  INR 50,00,000. In the interregnum, Hitro Energy Solutions Pvt Ltd (Respondent) was  incorporated basis a Memorandum of Association (MOA), wherein one of the main objects was  that the Respondent would take over the Proprietary Concern.
  • Thereafter, the Appellant addressed a Demand Notice under Section 8 of IBC to the Respondent, to which the Respondent denied that any debt was owed by them to the Appellant. Accordingly,  the Appellant filed an Application under Section 9 of IBC against the Respondent on the ground  that the Proprietary Concern had defaulted in repaying the sum of INR 50,00,000 and as per the  MOA, the Respondent was to take over the Proprietary Concern. NCLT opined that the  Respondent owed the Appellant an outstanding operational debt to the tune of INR 50,00,000,  and therefore vide Order dated December 06, 2018, admitted the Application and declared a  
  • Aggrieved by the same, the Respondent preferred an Appeal before the NCLAT. Vide its Order dated December 12, 2019 (Impugned Order), the NCLAT set aside the decision of the NCLT.  NCLAT dismissed the Appellant's application under Section 9 of IBC and released the Respondent  from the rigors of insolvency on the ground that the Appellant was a 'purchaser', and thus, did  not come under the definition of 'operational creditor' since it did not supply any goods or  services to the Respondent.
  • Aggrieved by the Impugned Order of NCLAT, the Appellants filed the present Appeal before the Supreme Court of India (SC).

Issues at hand?

  • Whether the Appellant is an operational creditor within the meaning of IBC, even though it was a purchaser?
  • Whether the Application filed by the Appellant under Section 9 of IBC is barred by limitation?

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