Athena Demwe Power Ltd (Appellant) .Vs. Abir Infrastructure Private Limited and Ors. (Respondent)
Company Appeal (AT) (Insolvency) No.158 of 2022
Facts:
1.In year 2010 Appellant awarded a contract to Corporate Debtor for execution of 1750 MW Demwe Lower Hydroelectric Project, Arunachal Pradesh. Mobilization advance of Rs. 7,48,40,06,136/- was transferred by the Appellant to the Corporate Debtor through the Bank Transfer. On 14.02.2011, Corporate Debtor (Respondent)issued Corporate Guarantee in favour of the AppellantRespondent was admitted into CIRP and appellant filed its claims for an amount of Rs. 1784,99,28,651/- as a Financial Creditor.
2.The Appellant received an Email from RP to attend meeting of the Committee of Creditors on 21st June, 2019. On 25th June, 2019, the Resolution Professional informed the Appellant that his claim does not fall as a Financial Creditor rather it falls as an Operational Creditor. On 24th July, 2019, the Appellant filed his claim as an Operational Creditor. On 3rd June, 2020, the Resolution Professional informed the Appellant that his claim does not fall under the category of Operational Creditor. The Appellant on 05th June, 2020 filed his claim as an other creditor reserving his right to approach the Adjudicating Authority.
3.Claim was rejected by the RP and Appellant filed application against rejection of claim. In January 2021 Committee of Creditors approved the Resolution Plan submitted by Respondent No. 2 which was approved by the Aa as well.
4.Appellant is challenging the above order
Issue: Whether the mobilization advance given by the Appellant to the Corporate Debtor is a Financial Debt within the meaning of Section 5(8) of the Code or Operational debt under section 5(21) of the code ?
Arguments:
For appellant:
1.Counsel for the Appellant submitted that appellant is a Financial Creditor having advanced an amount of Rs. 7,48,40,06,136/- as a mobilization advance. It is submitted that the Corporate Debtor has issued a Corporate Guarantee in favour of the Appellant on 14.02.2011 which was extended up to 23rd November, 2021
2.Counsel submitted that the Corporate Debtor having given guarantee towards the mobilization advance, the provisions of Section 5(8)(i) is fully attracted in the present case making the transaction as a Financial Debt.
3.The mobilization advance was refundable any time before the adjustment of the said advance against the running bills.
For Respondent:
1.Counsel for the respondent submitted that mobilization advance is not aloan/borrowing raised and meant to be repaid by the Respondent. Mobilization advance was not a Financial Debt. The transaction does not come under Section 5(8)(i) since the Corporate Guarantee has not been provided to support any liability falling under or within the meaning of (a) to (h) clauses of Section 5(8) of the Code.
2. Counsel further submitted that The Appellant has not rendered any services or delivered any goods to the Corporate Debtor hence the Appellant is not an Operational Creditor.
Decision: Mobilization advance falls within the ambit of operational debt.
Rationale:
1.Mobilization advance which was given by the Appellant to the Corporate Debtor was for mobilization of material and workforce on the site. Mobilization advance was not disbursed against the consideration for the time value of money.
2.When we look into Section 5(8)(i) it is clear that the guaranteereferred to in Section 5(8)(i) relates to any of the items referred to in sub-clauses (a) to (h) of Section 5(8) of the Code. The mobilization advance is not covered by any of the sub-clauses (a) to (h) of sub-section 8 of Section 5 ofthe Code hence the provisions of Section 5(8) (i) does not lend any support to the Appellant.
3.The guarantee is included as one of the illustrations which define Financial Debt. As noted above, guarantee referred to in Section 5(8)(i) must relate to any of the items referred to in sub clauses (a) to (h).
4.Tribunal relying on the judgment in “M/s. Consolidated Construction Consortium Limited Vs. M/s. Hitro Energy Solutions Private Limited” attracted in the facts of the present case. In the present case, the amount of mobilization advance was given by the Appellant to the Corporate Debtor whereas in the case of M/s. Consolidated Construction Consortium Limited, the amount of Rs. 50 Lakhs was given by the CMRL to the Corporate Debtor on instruction of the Appellant in pursuance of Contract. Hon’ble Supreme Court held the words“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.
Order copy:
