Insolvency and BankruptcyNCLTRulingsTribunal & Appellate

“Tours on luxury train” fulfils the requirement of “services” u/s 5 (21) of IBC, states Operational Creditor to be illustrative definition

Maharashtra Tourism Development Corporation vs. Luxury Train Pvt. Ltd.

NCLT New Delhi, held that tours by luxurious train fulfil the requirement of word “services” u/s Section 5(21) of the Insolvency and Bankruptcy Code (‘IBC’). NCLT further clarifies that definition of operational debt should postulate that the claim should be under the provision of “ goods” and “services” including employment etc.

The present application was filed by Maharashtra Tourism Development Corporation (‘Operational Creditor/ Petitioner’) under Sec. 9 against Luxury Train Pvt. Ltd. (‘Corporate Debtor’). Corporate Debtor had signed an agreement for being the tour operator for the luxury train on which Petitioner had got an exclusive right from the railways. The respondent company had taken the luxury train on lease, to carry out business as tourist agent and consultant. Hence, as per the agreement respondent company had failed to pay an amount towards operational cost and profit and other charges i.e. Haulage charges and other applicable charges from or before December 12, 2013. Respondent company had also issued to cheques however all bounced back with the endorsement of ‘insufficient funds’.

Petitioner had avoided several times to accept the notice and did not choose to come before NCLT, hence Petitioner had to adopt the procedure laid down under Rule 38(4) of the NCLT Rules r/w Order V Rule 20 CPC. Thereafter publication in the two newspapers as per the rules went in vain.
After considering the fact and circumstances, NCLT appointed Mr. Manoj Kulshrestha as the Interim Insolvency Professional which was proposed by Operational Creditor.

NCLT interpreted the Operational Creditor and Operational debt. Wherein Operational Creditor is defined as a person to whom the operational debt is owed and includes any person to whom such debt has been assigned or transferred. NCLT further highlighted that,

“ The definition of Operational Creditor is not exhaustive but illustrative. It is capable of covering those heads which are not specifically mentioned in the definition. The definition of operational debt postulates that it is a claim in respect of the provision of ‘goods’ or ‘services’ including employment. “
Hence, NCLT held that tour operated by the respondent company fulfils the requirement of the word i.e. ‘ services’ as defined is Operational Creditors under Sec. 5 (21) of the IBC.”

NCLT further clarified that operational Debtor had also committed default u/s 3(12) read with Sec. 4 and 9 (1) of the IBC. As there was an ongoing proceeding before Metropolitan Magistrate under Section 138 of Negotiable Instrument Act and before High Court suit of money under Order XXVI of the Code of Civil Procedure, 1908 was pending.

Accordingly, NCLT appointed and directed Interim Resolution Professional to perform his functions religiously and instructed that moratorium should not be applied to the transaction which has been notified by the Central Govt. or to the supply of the essential goods or services to the Corporate Debtor.

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