SC directs AA to reconsider case as defenses were not considered while interpreting S. 5(20) & 5(21)

Case Details: Punj Lloyd Aviation Ltd. v. Chipsan Aviation Private Ltd. - [2023] 147 taxmann.com 336 (SC)

Judiciary and Counsel Details

• • Dr Dhananjaya Y Chandrachud, CJI. & Dipankar Datta, J.
  • Neeraj Kishan Kaul, Sr. Adv. Karan Luthra, Ms Pritha Suri, Vijetha Ravi, Ms Namisha Chaddha, Advs. & E.C. Agrawala, AOR for the Appellant.
  • Barun Kumar Sinha, Ms Pratibha Sinha, Raghav Sharma, Ms Nidhi Vardhan, Kanishk Arora, Ms Shakshi Goyal, Advs. & Salvador Santosh Rebello, AOR for the Respondent.

Facts of the Case

In the instant case, the Adjudicating Authority (NCLT), while construing provisions of section 5(20) and section 5(21) of IBC held that in instant case, it was the corporate debtor who was the service provider and not the operational creditor.

The operational creditor had only filed the petition on the basis of an advance payment made by him, which was not refunded by the corporate debtor. The said advance payment didn’t fall within four corners of operational debt and therefore, alleged debt was not an operational debt as defined under section 5(21) of IBC. As a result, the petition was dismissed without any cost.

The decision mentioned above was reversed by the National Company Law Appellate Tribunal (NCLAT) which relied on the decision in Consolidated Construction Consortium Limited v. Hitro Energy Solutions Private Limited[2022] 7 SCC 164. The NCLAT held that Section 5(21) had 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 leads to an operational debt.

Thereafter, an appeal was made to the Supreme Court against the order passed by the NCLAT.

Supreme Court Held

The Supreme Court held that the NCLT, in its original order, had not considered the other defences that were raised by the applicant regarding the application under Section 9 of the IBC. Hence, on remand, all the rights and contentions of the parties regarding the merits of the case are kept open to be urged before and decided by the NCLT. Accordingly, the appeal stands disposed of.