The definition of “operation debt” in Section 5(21) of the IBC is broad enough to include debts arising from contracts for the supply of goods or services, regardless of who was the supplier or receiver.

JUDGMENT :

Dhananjaya Y Chandrachud, J.

This judgment has been divided into the following sections to facilitate analysis:

A The Appeal

B Factual Background

C Submissions of counsel

D Whether the appellant is an operational creditor

D.1 Statutory Provisions

D.2 Legislative History

D.3 Judicial Precedent

D.4 Analysis

E Evidentiary value of respondent’s MOA

F Whether the application under Section 9 is barred by limitation

G Conclusion

A The Appeal

1. The present appeal under Section 62 of the Insolvency and Bankruptcy Code 2016¹[“IBC”] arises from a judgment and order dated 12 December 2019 of the National Company Law Appellate Tribunal²[“NCLAT”] by which it reversed the decision of the National Company Law Tribunal, Chennai³[“NCLT”] dated 6 December 2018.

2. By its judgment and order dated 6 December 2018, the NCLT admitted an application⁴[CP/708/(IB)/CB/2017] filed by the appellant, Consolidated Construction Consortium Limited⁵[“Appellant”/“Operational Creditor”], under Section 9 of the IBC for the initiation of the Corporate Insolvency Resolution Process⁶[“CIRP”] against the respondent, Hitro Energy Solutions Private Limited⁷[“Respondent”/“Corporate Debtor”]. While admitting the application, the NCLT held that the respondent’s Memorandum of Association⁸[“MOA”], without evidence to the contrary, proved that it took over a proprietary concern, Hitro Energy Solutions⁹[“Proprietary Concern”], and that the Proprietary Concern did owe the appellant an outstanding operational debt. Further, the NCLT declared a moratorium under Section 14 of the IBC and appointed an Interim Resolution Professional¹⁰[“IRP”].

3. In appeal¹¹[Company Appeal (AT) No 19 of 2019], the NCLAT set aside the NCLT’s decision, dismissed the application of the appellant under Section 9 of the IBC and released the respondent from the ongoing CIRP. In support of its conclusions, it held: (i) the appellant was a ‘purchaser’, and thus did not come under the definition of ‘operational creditor’ under the IBC since it did not supply any goods or services to the Proprietary Concern/respondent; (ii) there is nothing on record to suggest that the respondent has taken over the Proprietary Concern; and (iii) in any case, the appellant cannot move an application under Sections 7 or 9 of the IBC since all purchase orders were issued on 24 June 2013 and advance cheques were issued subsequently.

4. While issuing notice by its order dated 18 November 2020, this Court stayed the operation of NCLAT’s judgment and order dated 12 December 2019. The following issues now arise before this Court in the present appeal:

(i) Whether the appellant is an operational creditor under the IBC even though it was a ‘purchaser’;

(ii) Whether the respondent took over the debt from the Proprietary Concern; and

(iii) Whether the application under Section 9 of the IBC is barred by limitation.

B Factual Background

5. The genesis of the appeal arises from a project which was being executed by the appellant with Chennai Metro Rail Limited¹²[“CMRL”], in the course of which the latter placed an order for supply of light fittings. In turn, the appellant placed orders with the Proprietary Concern, which was the supplier of Thorn Lighting India Private Limited¹³[“TLIPL”], through three purchase orders dated 24 June 2013. It was noted in these purchase orders that the delivery of the light fittings would strictly be in accordance with the schedule provided by the appellant.

6. The Proprietary Concern requested the appellant for an advance payment of Rs 50,00,000. CMRL issued a cheque of Rs 50,00,000 in favor of the respondent, with the condition that the delivery of the light fittings should be in compliance with the schedule provided by the appellant.

7. On 2 January 2014, CMRL informed the appellant that the project they had been working on stood terminated. According to the appellant, this information was communicated to the P