Judgment Summaries (Supreme Court) – Hitro Energy Solutions

  February 16, 2022

CASE SUMMARY

In the matter of M/s Consolidated Construction Consortium Limited v. M/s Hitro Energy Solutions Private Limited

{Supreme Court; February 04, 2022}

FACTS: To understand the facts of the matter in brief refer to the following-

Sr. No. Party Remarks
1. Chennai Metro Rail Limited (“CMRL”)
2. M/s Consolidated Construction Consortium Limited (“Appellant”) The Appellant executed a project with CMRL.
3. Proprietary Concern of the Corporate Debtor To execute the project with CMRL, the Appellant placed orders with the Proprietary Concern through three purchase orders dated June 24, 2013.

The Proprietary Concern requested for an advance of Rs. 50,00,000/- which was paid by CMRL.

The project between CMRL and the Appellant was terminated on January 2, 2014, and the advance amount was repaid to CMRL by the Appellant.

4. M/s Hitro Energy Solutions Private Limited (“Corporate Debtor”) The Corporate Debtor was incorporated on January 28, 2014, based on a Memorandum of Association (“MOA”) taking over the rights and liabilities of the Proprietary Concern.

On default, the Appellant filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“Code”) initiating Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor before the NCLT, Chennai and this application was admitted by an order dated December 6, 2018. However, by an order dated December 12, 2019, the NCLAT reversed the decision of the NCLT. Thus, the present appeal was filed by the Appellant before the Supreme Court under Section 62 of the Code.

ISSUES: The issues before the Supreme Court were as follows-

  1. Whether the Appellant being a purchaser of the Corporate Debtor can be an Operational Creditor under the Code?
  2. Whether the Corporate Debtor was responsible for the debts of the Proprietary Concern?
  3. The issue of limitation in filing the CIRP Application under Section 9 of the Code.

HELD: The Supreme Court while construing the provisions of the Coder liberally and relying on the judgment of Pioneer Urban Land and Infrastructure Limited v. Union of India held that even though the Appellant is a purchaser it can be an Operational Creditor for providing an advance to the Corporate Debtor. The Supreme Court observed that as per the definition of ‘operational debt’ in Section 5(21) of the Code, the claim must have a relation with provision of goods and services, the definition does not specify who is to be the supplier or purchaser. Further, under Section 8(1) of the Code read with Rule 5(1) and Form 3 of the Application Rules, 2016, an Operational Creditor can issue either demand notice or an invoice. The Court held that as per the MOA, the Corporate Debtor took over the Proprietary Concern and will be liable to pay its debts.

Lastly, for the issue of limitation, the Court relied on the judgment of B.K. Educational Services Private Limited v. Parag Gupta & Associates and held that limitation commences on the date of default and not on the date when debt becomes due. Thus, the Section 9 Application was not barred by limitation. The appeal was allowed, and the order passed by the NCLAT was set aside.

Full text of the order accessible here.

 

 

 

 

 

 

 

 

 

 

 

 

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