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Judgment
Abni Ranjan Kumar Sinha, J
The present application has been filed on behalf of Applicant claiming himself to be Financial Creditor under Section 7 of the IBC, 2016 and the facts of the case mentioned below.
Applicant had supplied the plywood, timber, laminate and other allied material/goods as per the requirement of the Corporate Debtor for its projects on different sites from 2011-2015 and it was agreed between the applicant and the corporate debtor that the payment of value of goods be made latest by 30 days from the date of bill and if bill is not paid within 30 days from the date of invoices, interest will be charged at the rate of 24 per cent per annum till the date of payment. Further, in January 2012, the terms of the billing were modified and it was mutually agreed between the parties that any dispute or issue of any nature concerning goods or value or invoice or in respect of any accounts past or present or any other earlier transaction/invoices shall only be adjudicated through by reference to sole arbitrator Mr. Satish Dhoot and shall be binding on them.
Further, the applicant has demanded a sum of Rs. 19,51,611/- along with the interest at the rate of 24 per cent per annum from the date of bills till the actual payment from the Corporate Debtor from time to time but when corporate Debtor failed to make the payment then legal notice was sent on 13.05.2016 demanding the said payments along with the interest at the rate of 24 per cent per annum. Thereafter, on 02.06.2016, Arbitration proceedings has been initiated against the Corporate Debtor and in that proceedings, the Arbitral Tribunal had proceeded ex-parte against the Corporate Debtor and passed an award of Rs. 28,77,980/- along with interest at the rate of 12 per cent per annum. Further, the applicant had filed the execution petition bearing No. Ex/61643/2016 before the court of District & Sessions Judge, Tis Hazari, Delhi but the same was sine die vide order dated 01.02.2019 with liberty to applicant to get the same revived as and when fresh address of the Corporate Debtor is available with the applicant. Further, the applicant has sent demand notice on 02.09.2019 under Section 8 of the IBC by speed post but the applicant has not received the payment from the Corporate Debtor nor any reply to the said demand notice. Thereafter, applicant has filed this application for initiation the proceedings under Section 7 of the IBC.
From the perusal of the records, it appears that when Corporate Debtor failed to appear then vide order dated 19.12.2019, proceeding was posted for ex-parte hearing and on 23.01.2020, arguments were heard.
We have heard the Ld. Counsel for applicant and perused the averments made in the application. Ld. Counsel for applicant in course of arguments submitted that the present application is filed on the basis of award passed by the Ld. Arbitrator in respect of goods supplied to the Corporate Debtor by the applicant that he sent the demand notice under Section 8 of the IBC but the same was not delivered as addressee left without instruction.
He further submitted that since the present application is filed on the basis of award passed by the Ld. Arbitrator. Therefore, the applicant may be treated as financial creditor.
Now, in the light of submissions made on the behalf of applicant, we would like to consider this aspect whether the applicant comes under the definition of Financial Creditor or not.
As we have already stated the facts of the case of the applicant and as per averments made in the application, the applicant referred the matter to the Ld. Arbitrator in respect of amount claimed from the Corporate Debtor for the supply of goods. We further noticed that when the amount was not paid by the Corporate Debtor then in terms of arbitration clause he referred the matter before the Ld. Arbitrator and Ld. Arbitrator considering the claim of the applicant passed an award of Rs. 28,77,980/- along with interest at the rate of 12 per cent per annum. Further, the applicant had filed the execution petition bearing No. Ex/61643/2016 before the court of District & Sessions Judge, Tis Hazari, Delhi but the same was sine die vide order dated 01.02.2019 because the address was not properly furnished by the applicant.
On the basis of the aforesaid facts, it is admitted fact that applicant is unable to find out the correct address of the respondents and that is the reasons the award passed by the Ld. Arbitrator also ex-parte and the execution was not done. Similarly, in that case, the demand notice was not delivered and even Corporate Debtor did not appear in this proceeding and this matter was also posted for ex-parte hearing.
Now, the question arises whether the applicant is the financial creditor or not.
At this juncture, we would like to refer the Section 5(8) and 5(21) of the IBC, 2016 and the same is quoted below:-
(8) "financial debt" means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes--
(a) money borrowed against the payment of interest;
(b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent;
(c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;
(d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed;
(e) receivables sold or discounted other than any receivables sold on nonrecourse basis;
(f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing;
(g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account;
(h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution;
(i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause;
(21) "operational debt" means a claim in respect of the provision of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority;
Mere plain reading of the provisions shows that there is difference between the Financial Debt and Operational Debt, Operational Debt means a claim in respect of the provisions of goods or services including employment or a debt in respect of the dues arising under any law for the time being in force whereas the "Financial Debt" means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes and the other conditions mentioned at Section 5(8) (a to i).
In the light of the aforesaid provisions, when we shall consider the case in hand, then we find that admittedly, there is no disbursal of money in this case rather the claim of the applicant is that he had supplied the plywood, timber, laminate and other allied material/goods as per the requirement of the Corporate Debtor for its projects on different sites from 2011-2015 and in lieu of that claim, when Corporate Debtor failed to make the payment then legal notice was sent on 13.05.2016 demanding the said payments along with the interest at the rate of 24 per cent per annum. Thereafter, on 02.06.2016, Arbitration proceedings has been initiated against the Corporate Debtor and in that proceedings the Arbitral Tribunal had proceeded ex-parte against the Corporate Debtor and passed an award of Rs. 28,77,980/- along with interest at the rate of 12 per cent per annum. Therefore, in our considered opinion, the claim of the applicant comes under the definition of "Operational Debt" and not under the Definition of "Financial Debt" because no money was disbursed rather goods were supplied to the Corporate Debtor.
Hence, we are of the considered view that applicant is not the Financial Creditor rather the amount claimed on the basis of award passed by the Ld. Arbitrator comes under the definition of "Operational Debt".
At this juncture, we would like to refer the facts, which we have discussed in aforementioned paras, in which the applicant sent the demand notice under Section 8 of the IBC, 2016, which shows that the applicant was well aware of this fact that present debt is Operational debt not the Financial Debt and he is operational creditor that is the reason, he sent the demand notice as required under Section 8 of the IBC, 2016 but it was not delivered rather returned unserved then he file present application under Section 7 in order to by pass the provision of Section 8 of the IBC, 2016, because if the application is filed under Section 7, then no demand notice is required to be issued under Section 8 of the IBC, 2016 and that is the reason it appears to us that the present application is filed under Section 7, instead of Under Section 9 of the IBC, 2016
Now, for the reasons discussed above, we shall consider the case in hand in view of provision contained under Section 9 of the IBC, 2016.
We have already held that demand notice was not delivered and the same was returned unserved. Therefore, applicant has not complied with the conditions contained under Section 8 of the IBC and in view of Section 8 read with Regulation 5 of the Adjudicating Authority Rules as required for the delivery of demand notice in the manner prescribed in Regulation 5(2) of the Adjudicating Authority Rules for Corporate Persons and same is quoted below:-
Demand notice by operational creditor.--(1) An operational creditor shall deliver to the corporate debtor, the following documents, namely.-
(a) a demand notice in Form 3; or
(b) a copy of an invoice attached with a notice in Form 4.
(2) The demand notice or the copy of the invoice demanding payment referred to in subsection (2) of section 8 of the Code, may be delivered to the corporate debtor,
(a) at the registered office by hand, registered post or speed post with acknowledgement due; or
(b) by electronic mail service to a whole time director or designated partner or key managerial personnel, if any, of the corporate debtor.
(3) A copy of demand notice or invoice demanding payment served under this rule by an operational creditor shall also be filed with an information utility, if any.
Mere plain reading of the Rule 5 of Adjudicating Authority Rule shows that applicant is required to deliver the demand notice mentioned in Rule 5(2)(a) either by hand, registered post or speed post with acknowledgment or as per Rule 5(2) (b) deliver the demand notice on the e-mail id of the whole time director or designated partner or key managerial personnel of the Corporate Debtor but herein this case, we find that the demand notice was not delivered as per Rule 5(2)(b) rather sent through the post which was returned unserved. Therefore, we are of the considered view that the applicant has failed to deliver the demand notice under Section 8 of the IBC which is the mandatory provisions of law.
Since the applicant has not delivered the demand notice, therefore, we have no option but to reject the application. Accordingly, we hereby dismissed the application. However, liberty is given to the petitioner to file fresh application, after service of demand notice in accordance with the provisions of law as per Rule 5 of Adjudicating Authority Rules, 2016.