TMI Blog2019 (1) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Creditor’ within the meaning of Section 5(20) read with Section 5(21) of the ‘I&B Code’. The money claim do not relate to supply of goods or services and, therefore, the application under Section 9 by the Appellants against the ‘Corporate Debtor’ was not maintainable. The Adjudicating Authority has no jurisdiction to decide the question of legality and propriety of a foreign judgment and decree in an application under Sections 7 or 9 or 10 of the ‘I&B Code’ - question relating to maintainability is answered against the Appellants, they being not the ‘Operational Creditor’ - Appeal dismissed. - Company Appeal (AT) (Insolvency) No. 44 of 2018 - - - Dated:- 30-11-2018 - Mr S.J. Mukhopadhaya, Chairperson And Mr Bansi Lal Bhat, Member (Judicial) For The Appellants : Mr. Siddharth Bhatnagar, Mr. Utsav Trivedi, Mr. Vishal Gehrana and Mr. Shubham Saigal, Advocates. For The Respondent : Mr. Rupinder Singh Suri, Senior Advocate with Mr. Rohit Aggarwal, Mr. Anant Singh, Ms. Rekha Dwivedi, Mr. Varun Khanna and Mr. Mitash Charan, Advocates JUDGMENT SUDHANSU JYOTI MUKHOPADHAYA, J. This appeal has been preferred by the Appellants against the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority while rejected the application under Section 9 of the I B Code preferred by the Appellants for the grounds mentioned above, also held that the Appellants do not come within the meaning of Operational Creditor as the amount due has not been regarded as an Operational Debt within the meaning of Section 5(21) of the I B Code . 4. Learned counsel appearing on behalf of the Appellants submitted that the Adjudicating Authority has no jurisdiction to decide the legality and viability of foreign decree and no right finding can be given by it. On the other hand, according to learned counsel for the Respondent, not only the foreign decree is ex parte, the said judgment and decree dated 5th October, 2015 cannot be treated to be a decree on merits for the following reasons: i. The judgment dated 5th October, 2015 is not a decree on merits: No finding as to how a sum of USD 1,661,743 has become due and payable. No evidence adduced. Decree in the nature of imposing penalty. The Appellant does not hold any money decree in its favour. Even the order dated 27th March, 2014 only decided preliminary objections with regard to jurisdiction, defec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corporate debtor as a going concern, every effort must be made to try and see that this is made possible . 3. Financial Creditors as members of the Committee of Creditors and their Role. a. The Bankruptcy Law Reforms Committee (BLRC), which conceptualised the I B Code , reasoned as under: i. Under Para 5.3.1, sub-para 4, the BLRC provided rationale for Financial Creditors as under: 4. Creation of the creditors committee The Committee deliberated on who should be on the creditors committee, given the power of the creditors committee to ultimately keep the entity as a going concern or liquidate it. The Committee reasoned that members of the creditors committee have to be creditors both with the capability to assess viability, as well as to be willing to modify terms of existing liabilities in negotiations. Typically, Operational Creditors are neither able to decide on matters regarding the insolvency of the entity, nor willing to take the risk of postponing payments for better future prospects for the entity. The Committee concluded that for the process to be rapid and efficient, the I B Code will provide that the creditors committee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ype of credit is given preferential treatment, the other type of credit will disappear from market. This will be against the objective of promoting availability of credit. v. The I B Code aims to balance the interests of all stakeholders and does not maximise value for Financial Creditors . vi. Therefore, the dues of creditors of Operational Creditors must get at least similar treatment as compared to the due of Financial Creditors . 3. Resolution Plan The I B Code defines Resolution Plan as a plan for insolvency resolution of the Corporate Debtor as a going concern. It does not spell out the shape, colour and texture of Resolution Plan , which is left to imagination of stakeholders. Read with long title of the I B Code , functionally, the Resolution Plan must resolve insolvency (rescue a failing, but viable business); should maximise the value of assets of the Corporate Debtor , and should promote entrepreneurship, availability of credit, and balance the interests of all the stakeholders. It is not a sale. No one is selling or buying the Corporate Debtor through a Resolution Plan . It is resolution of the Corporate Debtor a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not allow liquidation of a Corporate Debtor directly. It allows liquidation only on failure of Corporate Insolvency Resolution Process . It rather facilitates and encourages resolution in several ways. 7. In view of the aforesaid decision in Binani Industries Limited (Supra) , we hold that the Adjudicating Authority not being a Court or Tribunal and Insolvency Resolution Process not being a litigation, it has no jurisdiction to decide whether a foreign decree is legal or illegal. Whatever findings the Adjudicating Authority has given with regard to legality and propriety of foreign decree in question being without jurisdiction is nullity in the eye of law. 8. In so far as second issue is concerned, we agree with the submissions made by the counsel for the Respondent that the debt due to the Appellant does not come within the meaning of Operational Debt and thereby, the Appellant cannot be held to be the Operational Creditor within the meaning of Section 5(20) read with Section 5(21) of the I B Code for the following reasons. 9. From the record we find that a private and confidential terms of the Memorandum of Understanding ( MOU ) has been enclosed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecember, 2012 filed a suit in the US District Court, praying for reliefs for a money judgment to the tune of USD 5,300,000 due to Mr. Gaurav Marya s breach of License Agreement was sought. Further, a money judgment in the amount of USD 10,000,000/- and punitive damages in the amount of USD 3,00,000/- due to Mr. Gaurav Marya s conversion and a declaration about 2nd Appellant that he has 50% ownership in the license has been sought for in the suit. 13. From plain pleadings of the appeal and the statement made by the Appellant and the decree, we find that the money claim do not relate to supply of goods or services and, therefore, the application under Section 9 by the Appellants against the Corporate Debtor was not maintainable. 14. In the circumstances, we answer the first question in favour of the Appellant and hold that the Adjudicating Authority has no jurisdiction to decide the question of legality and propriety of a foreign judgment and decree in an application under Sections 7 or 9 or 10 of the I B Code . The second question relating to maintainability is answered against the Appellants, they being not the Operational Creditor . 15. In view of the aforesaid find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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