The appeal was dismissed as the claimed amount did not constitute operational debt due to the absence of goods or services and the existence of a pre-existing dispute.

JUDGMENT

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

This judgment pertains to the appeal filed by Carestream Health India Private Limited (“Appellant”) against the order dated 24 March 2023 issued by the Adjudicating Authority (National Company Law Tribunal, Mumbai, Bench-V), which dismissed the Appellant’s application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) to initiate Corporate Insolvency Resolution Process (CIRP) against Seaview Mercantile LLP ("Respondent"). The NCLT held that the Appellant did not qualify as an "Operational Creditor" under the IBC as the claim did not arise from the provision of goods or services to the Respondent.

Brief facts of the case:

2. The facts of the case as relevant to decide the matter are noted herein. On 7 May 2019, the Appellant and Respondent entered into a "Without Prejudice" Letter of Intent (WP-LOI) for leasing unit no. 702 in the Silver Metropolis building. The Appellant paid a security deposit of Rs. 25,68,280/. The Appellant discovered that the premises were not eligible for IT/ITES/STPI registration after due diligence, despite the initial representation. Consequently, the Appellant sought to terminate the LOI and requested a refund of the security deposit. The Appellant issued several notices and reminders to the Respondent seeking a refund, including:

o Email dated 4 June 2019 for cancellation and refund.

o Reminders on 18 June 2019 and 27 August 2019.

o Legal notice on 14 November 2019.

o Demand Notice under Section 8 of the IBC on 10 February 2020.

3. The Respondent replied on 17 February 2020, disputing the Appellant’s claims and contending the right to forfeit the security deposit due to non-compliance by the Appellant. Thereafter, the Appellant filed a Section 9 petition on 20 February 2020, which the Learned NCLT dismissed on grounds that the Appellant did not qualify as an "Operational Creditor."

Case of the Appellant:

4. On 24 March 2023, the Adjudicating Authority (Learned NCLT, Mumbai, Bench-V) issued an impugned order holding that the Appellant does not qualify as an "Operational Creditor" because it has neither supplied goods nor provided services to the Respondent Corporate Debtor. It also held that the Appellant also does not meet the criteria of an "Operational Creditor" under Section 5 (20) of the IBC, which specifies it must be the Central Government, State Government, or a local authority, according to the definition in (21). This interpretation is legally incorrect as the claimed amount does not qualify as ’operational debt’ under (21) of the Code, implying no ’default’ under Section 3 (12).

5. Carestream Health India Private Limited ("Appellant") initiated Section 9 proceedings against Seaview Mercantile LLP ("Respondent") for a security deposit refund following the termination of a "Without Prejudice" Letter of Intent (WP-LOI) dated 07 May 2019 for unit no. 702 in the Silver Metropolis building. The termination arose because the premises, initially represented as suitable for IT/ITES/STPI activities (Clause 6), were found to be ineligible for such registration upon due diligence. Despite a revised "Without Prejudice" Letter of Intent (WP-LOI) draft on 21 May 2019 that removed Clauses 6 and 25, the licensing mandate granted to Cushman and Wakefield failed due to the lack of IT/ITES/STPI certification.

6. In a related proceeding taken up by the Appellant, a parallel WP-LOI with Calvin Associates LLP for adjacent premises 701 in the same building also resulted in the non-return of the security deposit. Section 9 proceedings (CP (IB) No. 764/MB-IV/2020) were instituted and adjudicated on 28 April 20