Whether construction of flats for Corporate Debtor falls under definition of Operational Debt u/s 5(21) of IBC and whether the Contractor can be considered as operational creditor – K.Lakshma Reddy v. Telangana State Rajiv Swagruha Corporation Ltd. – NCLT Hyderabad Bench
December 28, 2023
NCLT Hyderabad Bench held that: (i) An application under Section 9 of the Code, requires a 'strict proof' of debt and default. (ii) An operational creditor can send the demand notice through two methods: (i) a demand notice in Form 3; or (ii) a copy of an invoice attached with a notice in Form 4. (iii) As such, the applicant has to prove that claim regarding the construction of flats would fall either under the term ‘goods’ or ‘services’. Word ‘goods’ has not been defined under the IBC. However, this term has been defined under the Sale of Goods Act, 1930. Similarly, the term “services” used in the definition of 5(21) has not been defined under the IBC. (iv) The applicant has constructed flats for the corporate debtor and the dispute is about payment of dues for constructing flats. However, on that basis, the applicant can’t claim himself as operational creditor as dues to be paid does not relate to goods or services.