Neelkanth Medicare Private Limited Vs Azzurra Pharmaconutrition Private Limited

Harnam Singh Thakur, Member (Judicial); Umesh Kumar Shukla, Member (Technical)

1. The instant application has been filed by Neelkanth Medicare Private Limited, (hereinafter referred to as “Petitioner/Operational Creditor”) against Azzurra Pharmaconutrition Private Limited (hereinafter referred to as “Respondent/Corporate Debtor”) under Section 9 of The Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the Code"), read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, seeking initiation of the Corporate Insolvency Resolution Process in respect of the Corporate Debtor, on default of repayment of Rs.1,09,21,500/- (Rupees One Crore Nine Lakh Twenty-One Thousand Five Hundred only) as on 13.09.2021, on the part of Corporate Debtor.

2. It is averred that:

i. The Operational Creditor entered into an Agreement with the Corporate Debtor for a period of one year, i.e., from 01.04.2015 to 31.03.2016 (“Initial Agreement”), whereby the Operational Creditor agreed to act as a central assignee agent of the Corporate Debtor in respect of dispatch of products as per the instructions given by the Corporate Debtor from time to time.

ii. The Operational Creditor was required to deposit an amount of Rs.20,00,000/- (Rupees Twenty Lakh only) towards the security deposit and received agency commission at the rate of 1.5% on the net realizable value.

iii. Subsequently, the Operational Creditor and the Corporate Debtor, under 1st Amendment Agreement, extended the validity of the Initial agreement until 31.03.2018, and thereafter, the 2nd Amendment Agreement was executed w.e.f. 01.07.2019 and the validity of the 1st Amendment Agreement was extended up to 30.06.2021.

iv. The Operational Creditor was entitled to receive a commission at the rate of 2.5% on the minimum sales guarantee under the 2nd Amendment Agreement and the amount of refundable security deposit was recorded as Rs.65,00,000/- (Rupees Sixty-Five Lakh) (“Outstanding Security Deposit”), which was received by the Corporate Debtor on several occasions between 2015 to July 2016.

v. The Operational Creditor vide letter dated 21.06.2021 intimated to the Corporate Debtor that the Agreement would expire on 30.06.2021 and requested a payment of Rs.1,11,21,500/- (Rupees One Crore Eleven Lakh Twenty-One Thousand and Five Hundred) comprising of Rs.65,00,000/- towards unrefunded security deposit and Rs.46,21,500/- towards unpaid invoices for commission and interest on the said security deposit upto 30.06.2021. Despite requests sent via letter/emails, only a sum of Rs.2,00,000/-(Rupees Two Lakhs only) was paid by the Corporate Debtor.

vi. The Operational Creditor issued a statutory Demand Notice dated 25.08.2021 under Section 8 of the Code to the Corporate Debtor, to which the Corporate Debtor replied on 03.09.2021 stating that debt claimed of Rs.1,11,21,500/- comprises Rs.65,00,000/- as security deposit (Financial debt) plus interest of Rs.11,70,000/-and only Rs.34,51,500/- as the amount of Operational Debt on account of commission for the services rendered that has been admitted by it in good faith after having deliberate discussion with operational creditor in July 2021, for settlement with reduced amount of the commission amount due to shortcoming in sales due to substantial reduction of sales during period beginning from 01.02.2020 to 30.06.2021, as the market affected very badly due to Pandemic Covid-19. The Corporate Debtor paid Rs.2,00,000/- on 19.08.2021 on account of interest payable keeping the invoice amount left to be paid on final settlement, which was discussed to be done considering the pandemic issue. In its reply, the Corporate Debtor has also submitted that as per the fresh agreement executed on 01.07.2019, the revision of commission payable as 2.5% per month was agreed on the minimum sale of Rs.65/- lakh, however the net sales effected from February 2020 to June 2021 was Rs.12,07,678/- as against the claim of invoices raised for Rs.32,59750/- by the Operational Creditor. Further, the settlement of the invoices was to be done subject to confirmation of Form F submission for an amount of Rs.1,61,81,152.47/-, which has not been received causing the Corporate Debtor to pay additional VAT/ GST payable thereon including interest and penalty and the same needs to be adjusted against the amount payable by it.

3. The Operational Creditor while refuting the Corporate Debtor’s contentions raised in the reply to the demand notice, submitted that the entire debt is an operational debt as the security deposit is deposited towards receipt and maintenance of stock from the Corporate Debtor and no financial contract exists between the parties. In respect of settlement and Form F, there has not been any settlement between the parties, and the payment of Rs.2,00,000/- by the Corporate Debtor is an acknowledgment of the entire debt outstanding.

4. The Corporate Debtor filed its reply dated 18.08.2022, vide diary no. 01136/3, wherein it has been stated that the petition is not maintainable in terms of Section 10A of the Code as the Central Government suspended the initiation of the corporate insolvency resolution process for any default arising on or after 25th March 2020 till 25th March 2021. The Corporate Debtor further stated that the amount of security deposit and interest thereon claimed by the Operational Creditor is a financial debt as per decisions of Hon’ble NCLAT and NCLT. It was also submitted that as per Clause 8 of the Initial Agreement, required “F” Form is to be given by the Central Consignee Agent to Consignor for the stocks transferred made during the period, however, the Corporate Debtor has not received Form F for the sales effected/ made during the years 2015-16, 2016-17, and 2017-18 amounting to Rs.1,61,81,152.47 causing it to pay additional VAT/ GST payable thereon including interest and penalty.

5. The Corporate Debtor further submitted that in July 2021, management of the Operational Creditor and the Corporate Debtor met wherein it was accepted between both the parties to reduce the invoice amount based on the actual sales volume effected during the period. Therefore, after the settlement, the Corporate Debtor paid Rs.2,00,000/- on 19.08.2021 to the Petitioner.

6. The Corporate Debtor alleged that the Operational Creditor has clubbed the Security Deposit (Financial Debt), Interest on Financial Debt, and Invoice amount with a single application to reach the minimum threshold limit of Rs. One crore as specified under Section 4 of the Code. The total amount needs to be divided as tabled below:

Thus, the total amount in default is only Rs.13,266 (Rupees Thirteen Thousand Two Hundred and Sixty-Six only), which is below the threshold limit of Rs. One crore.

7. Written submissions dated 10.04.2023 were filed by the Operational Creditor vide diary no. 01136/4 and the Corporate Debtor filed its written submissions dated 05.07.2023 vide diary no. 01136/6.

8. During the course of arguments, the Ld. Counsel for the Operational Creditor submitted that Section 10A states that no application can be filed upon “default” that has occurred during the time stipulated under Section 10A of the Code. The Operational Creditor has itself claimed that the Operational Debt accrued on 21.06.2021, which could not have been defaulted any time prior. Further, the same was not disputed by the Corporate Debtor in its response to the Demand Notice issued by the Operational Creditor. Thus, Section 10A of the Code has no applicability to the present matter.

9. The Ld. Counsel for the Operational Creditor further submitted that the amount under default claimed as Operational Debt comprises Rs.44,21,500/- against unpaid invoices and Rs. 65,00,000/- against unrefunded security deposit, which is an operational Debt as in The Report of the Bankruptcy Law Reforms Committee Volume I: Rationale and Design dated 04.11.2015 (hereinafter referred to as “BLRC Report”), the differentiating factor between a Financial Debt and an operational debt has been the nature of contract between the parties. The relevant extract of the BLRC Report is reproduced as under:

“Liabilities fall into two broad sets: liabilities based on financial contracts, and liabilities based on operational contracts. Financial contracts involve an exchange of funds between the entity and a counterparty which is a financial firm or intermediary. This can cover a broad array of types of liabilities: loan contracts secured by physical assets that can be centrally registered; loan contracts secured by floating charge on operational cash flows; loan contracts that are unsecured; debt securities that are secured by physical assets, cash flow or are unsecured. Operational contracts typically involve an exchange of goods and services for cash. For an enterprise, the latter includes payables for purchase of raw-materials, other inputs or services, taxation and statutory liabilities, and wages and benefits to employees.”

It was also argued that the above-mentioned part of the BLRC Report has been relied upon by the Ld. Bench of NCLT, Ahmedabad in its judgment in Saiom Developers Pvt. Ltd. vs. R Square Shri Saibaba Abhikaran Pvt. Ltd., TP/MP/30 of 2019 in CP (IB) No. 510 of 2018, wherein it was observed as under:

“From perusal of these comments/observations it is apparent that rental obligation are to be considered as operational debt and consequently claim of operational creditor. Secondly, observation in para 4.3.3 make it absolutely clear that raw material and other inputs cannot be sole criterion to define the scope of term "services". We are, further. of the view that if a restricted meaning is given, then the amount payable to consultancy, adviser etc., who play an important role in running of organisation will not be able to initiate CIRP and which cannot surely be an intention of legislature.”

10. Further, the Ld. Counsel for the Operational Creditor submitted that the Supreme Court also relied on the same BLRC Report and delineated the distinction in the case of Consolidated Construction Consortium Ltd. Vs. Hitro Energy Solutions (P) (Ltd.) reported in (2022) 7 SCC 164 (“Hitro Energy Case”) and observed:

"36. Operational creditors are those, whose debt arises from operational transactions i.e., transactions which are undertaken in relation to the operation of an enterprise. As the examples in the BLRC Report suggest, these generally include transactions involving goods or services which are considered necessary for the operational functioning of an entity.

……………………

38. Another point of difference between financial and operational creditors would be in the nature of their role in the Committee of Creditors ("CoC"), because it is assumed the operational creditors will be unwilling to take the risk of restructuring their debts in order to make the corporate debtor a going concern. Thus, their debt is not seen as a long-term investment in the going concern status of the corporate debtor, which would incentivize them to restructure it, but merely as a one-off transaction with the corporate debtor for certain goods or services.

39. Financial creditors generally lend finance on a term loan or for working capital that enables the corporate debtor to either set up and/or operate its business. On the other hand, contracts with operational creditors are relatable to supply of goods and services in the operation of business.

………………………….

50.3 Hence, this leaves no doubt that a debt which arises out of advance payment made to a corporate debtor for supply of goods or services would be considered as an operational debt.”

It was also argued by him that the Hon’ble NCLAT in the case of Mr. Rashpal  Singh  Todd  vs.  M/s  Volkswagen  Finance  Pvt.  Ltd., Company Appeal (AT) (Insolvency) No. 312 of 2021, observed that the judgment in the Hitro Energy case is an authoritative law on the subject matter and made the following observation:

“21. Learned Sr. Counsel for the Appellant asserted that the amount claimed could be classified as an 'operational debt' and not a 'financial debt' and only to skirt the 'Pre-Existing Dispute' i.e. the pending Arbitration Proceedings, the First Respondent has with a malafide intention filed this Application under Section 7. To address this issue, at this point, we find it apropos to rely on the recent Judgement dated 04th February, 2022 of the Hon'ble Supreme Court in 'M/s. Consolidated Construction Consortium Limited Vs. M/s. Hitro Energy Solutions Private Limited.’ (Civil Appeal No. 2839 of 2020) in which the Hon'ble Apex Court has discussed in detail the provisions in IBC relating to two different class of creditors: 'operational and financial'.”

11. Lastly, it was submitted by the Ld. Counsel for the Operational Creditor that no settlement was arrived at between the parties and the payment of Rs. 2,00,000/- by the Corporate Debtor is an acknowledgment of its debt.

12. On the other hand, the Ld. Counsel for the Corporate Debtor, during the course of arguments, reiterated that the amount of Rs.23,01,000/- fell due during the suspended period mentioned in Section 10A of the Code and hence, cannot be claimed by the Operational Creditor. Reliance is placed upon the judgment in the case of M/s Pontika Aerotech Ltd. vs. M/s Premendium Pharmaceuticals Pvt. Ltd. CP (IB) No. 318/ND/2022, wherein the Hon’ble NCLT Delhi Bench V held that the proviso of section makes it clear that if any default arising on or after 25.03.2020, in that case, no application shall ever be filed for the initiation of Corporate Insolvency Resolution Process of a Corporate Debtor for the said default.

13. The Ld. Counsel for the Corporate Debtor further contended that the amount of Rs. 65,00,000 towards the Security Deposit and interest on the deposit of security deposit, is in fact, a financial debt and not an operational debt. Reference is made to Hon’ble NCLAT’s judgment in the case of Sach Marketing Private Limited vs. Resolution professional of Mount Shivalik Industries Limited, [Company Appeal (AT) (Insolvency) No. 180 of 2021] wherein it was held that ‘Security Deposit’ and the interest thereon would fall within the ambit of the definition of ‘Financial Debt’ as defined under Section 5(8)(f) of the Code. The relevant paragraph of the above-mentioned judgment is reproduced below:

“22. The 'Corporate Debtor' had accepted the 'Security Deposit' from the Appellant and credited the interest for some time against such amounts for the period 2014-15, and bearing in mind the payment of interest on the amounts borrowed by the 'Corporate Debtor' is nothing but a consideration for the time value of money and the interest is being paid to the Appellant for using the money belonging to the Appellant over a period of time and hence we arrive at the conclusion that the status of Appellant is that of a Financial Creditor vis-à-vis the amount of 'Security Deposit' as per Section 5(7) read with Section 5(8) of the Code. We are of the considered view that the ratio of the Judgement of the Hon'ble Supreme Court in 'M/s. Orator Marketing Put. Ltd.' (Supra) is squarely applicable to the facts of this case and we hold that the 'debt' in question is a ‘Financial Debt'.”

The Ld. Counsel for the Corporate Debtor also referred to Hon’ble NCLT New Delhi’s judgment dated 19.01.2022 in CBRE South Asia Private Limited vs. M/s United Concepts and Solutions Private Limited, CP (IB)-797(ND)2021, to assert that interest can be claimed as financial debt.

14. The Ld. Counsel for the Corporate Debtor further contended that the actual sales effected during January 2020 to June 2021 were much lower as compared to what has been claimed by the Operational Creditor and the amount mentioned in the invoices by the Operational Creditor, is thus, misleading.

15. We have heard from both parties. Since the registered office of the Corporate Debtor is situated in the State of Haryana, this Adjudicating Authority has the jurisdiction to preside over the matter. From the discussions preceding, the moot issues involved in the present case are:

i. Whether the petition is filed within the period of limitation of three years.

The date of default as mentioned in Part IV of the petition is stated as 13.09.2021, on the basis of which the amount of Rs.1,09,21,500/- is claimed by the Operational Creditor and the petition was filed on 28.10.2021. Hence, we find the present petition well within the period of limitation, though this contention has not been raised by either party.

ii. Whether there is a pre-existing dispute between the parties.

The Corporate Debtor in its response dated 03.09.2021 (Annexure-K of the petition) to the statutory demand notice dated 25.08.2021 has referred to the deliberate discussion in July, 2021, some of which may amount to pre-existing dispute between the parties, but have failed to submit the documentary evidence in that regard. Further, in para 2 of its reply to demand notice, it has submitted as below, which may amount to admission of its liability:

“That the amount claimed as per your demand notice of Rs.1,11,21,500/, which is comprising of Rs.65,00,000/- as security deposit (Financial Debt) plus interest of Rs.11,70,000/- and only Rs.34,51,500/-, the operational debt, as invoice received on account of commission for the services rendered, that has been admitted by our client in good faith after having deliberate discussion with your management in July 2021…”

Thus, it is reasonable to conclude that the parties did not have a dispute.

iii. Whether any amount claimed by the petitioner falls under Section 10A period of the Code.

The Ld. Counsel for the Corporate Debtor has relied heavily on Section 10A of the Code to assert that some of the invoices fell due in the time stipulated under the said section. For reference, Section 10A of the Code is reproduced as under:

“10A. Suspension of initiation of corporate insolvency resolution process.

Notwithstanding anything contained in sections 7, 9 and 10, no application for initiation of corporate insolvency resolution process of a corporate debtor shall be filed, for any default arising on or after 25th March, 2020 for a period of six months or such further period, not exceeding one year from such date, as may be notified in this behalf:

Provided that no application shall ever be filed for initiation of corporate insolvency resolution process of a corporate debtor for the said default occurring during the said period.

Explanation. - For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply to any default committed under the said sections before 25th March, 2020.”

The operation of Section 10A of IBC was extended for three months, upon the expiry of statutory period of six months in September 2020, till December 2020 and for further three months in December 2020, till March 2021, thereby enforcing the suspension of Sections 7, 9 and 10 of IBC for one whole year.

The Petitioner has claimed the security deposit, interest on security deposit and commission payable to it on the net sales effected during the period. Since there is no time period specified for refund of security deposit and the Operation Creditor vide letter dated 21.06.2021 has requested for refund of the security deposit in view of expiry of the agreement on 30.06.2021, it is safe to assume that it becomes due and payable on 01.07.2021. With regard to interest and commission, the agreement executed w.e.f. 01.07.2019 provides that standard 12% interest would be paid quarterly and commission would be paid on monthly basis before 14th of every calendar month. The due dates of amount claimed by the petitioner have been worked out in the Table as below:

It may be seen from the above Table that the amount of Rs.7,80,000 towards Interest on Security Deposit and Rs.23,01,000/- towards Commission has become due and payable but has not been paid, Thus, the default for the above amounts has occurred during section 10A period.

iv. Is the Security Deposit and Interest thereon is financial or operational debt?

The Ld. Counsel for the Corporate Debtor in support of its principal defense that the security deposit amount of Rs.65,00,000/- and Rs.11,70,000/- as interest thereon, claimed as a part of the operational debt, is in fact a financial debt, has placed reliance on the authority laid down in Sach Marketing Private Limited vs. Resolution professional of Mount Shivalik Industries Limited, Ms. Pratibha Khandelwal (supra), whereby the Hon’ble NCLAT held that ‘Security Deposit’ and the interest thereon would fall within the ambit of the definition of “Financial Debt’ as defined under Section 5(8)(f) of the Code. The same has been upheld by the Hon’ble Supreme Court in its recent judgment dated 25.04.2024 in Global Credit Capital Limited & Anr Vs. Sach Marketing Pvt. Ltd. & Anr., 2024, Civil Appeal No. 1143 OF 2022 SCC OnLine SC 649:

“14. Where one party owes a debt to another and when the creditor is claiming under a written agreement/arrangement providing for rendering 'service', the debt is an operational debt only if the claim subject matter of the debt has some connection or co-relation with the ‘service’ subject matter of the transaction. The written document cannot be taken for its face value. Therefore, it is necessary to determine the real nature of the transaction on a plain reading of the agreements…..

……. Though clause (10) provides for the payment of the security deposit by the first respondent, it is pertinent to note that there is no clause for the forfeiture of the security deposit. The amount specified in clause (10) has no correlation whatsoever with the performance of the other conditions of the contract by the first respondent. As there is no clause regarding forfeiture of the security deposit or part thereof, the corporate debtor was liable to refund the security deposit after the period specified therein was over with interest @21% per annum. Since the security deposit payment had no correlation with any other clause under the agreements, as held by the NCLAT, the security deposit amounts represent debts covered by subsection (11) of Section 3 of the IBC. The reason is that the right of the first respondent to seek a refund of the security deposit with interest is a claim within the meaning of subsection (6) of Section 3 of the IBC as the first respondent is seeking a right to payment of the deposit amount with interest. Therefore, there is no manner of doubt that there is a debt in the form of a security deposit mentioned in the said two agreements.

15. Sub-section (21) of Section 5 defines “operational debt”, which reads thus:

“5. In this Part, unless the context otherwise requires,-

.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..

(21) “operational debt” means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority; .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .”

The second part of the definition which deals with the payment of dues arising under any law, will not apply. However, for the applicability of the first part, the claim must be concerning the provisions of goods or services. Therefore, in the case of a contract of service, there must be a correlation between the service as agreed to be provided under the agreement and the claim. The reason is that the definition uses the phraseology “a claim in respect of the provision of goods or services”. Assuming that both the agreements are genuine in the sense that they reflect the true nature of the transaction, the only claim under the agreements which will have any connection with the services rendered by the first respondent will be the claim of Rs.4,000/- per month as provided in clause (1) of both the agreements. Only this claim can be said to be concerning the provision of services. Therefore, by no stretch of imagination, the debt claimed by the first respondent can be an operational debt. We are conscious of the fact that the provision for payment of interest by the corporate debtor by itself is not only material factor in deciding the nature of the debt. But, in the facts of the case, the payment of the amount mentioned in clause (10) of the letter has no relation with the service supposed to be rendered by the first respondent.

16. Now, coming back to the definition of a financial debt under sub-section (8) of Section 5 of the IBC, in the facts of the case, there is no doubt that there is a debt with interest @21% per annum. The provision made for interest payment shows that it represents consideration for the time value of money. Now, we come to clause

(f) of sub-section (8) of Section 5 of the IBC. The first condition of applicability of clause (f) is that the amount must be raised under any other transaction. Any other transaction means a transaction which is not covered by clauses (a) to (e). Clause (f) covers all those transactions not covered by any of these sub-clauses of sub-section

(8) that satisfy the test in the first part of Section 8. The condition for the applicability of clause (f) is that the transaction must have the commercial effect of borrowing. “Transaction” has been defined in sub-section (33) of Section 3 of the IBC, which includes an agreement or arrangement in writing for the transfer of assets, funds, goods, etc., from or to the corporate debtor. In this case, there is an arrangement in writing for the transfer of funds to the corporate debtor. Therefore, the first condition incorporated in clause (f) is fulfilled.

17. To decide whether the second condition had been fulfilled, it is necessary to refer to the factual findings recorded in the impugned judgment. The NCLAT has referred to the letter dated 26th October 2017 addressed by the corporate debtor to the first respondent. We have perused a copy of the said letter annexed to the counter. By the said letter, the corporate debtor informed the first respondent that for the year 2016-2017, the corporate debtor had provided the interest amounting to Rs.18,06,000/- in the books of the corporate debtor and that the sum will be credited to the account of the first respondent on the date of payment of TDS. In paragraph 21 of the impugned judgment, it is held that the financial statement of the first respondent for the Financial Year 2017-2018 shows revenue from the interest on the security deposit. It is also held that the amounts were treated as long-term loans and advances in the financial statement of the corporate debtor for the Financial Year 2015- 2016.

Moreover, in the financial statement of the corporate debtor for the Financial Year 2016-17, the amounts paid by the first respondent were shown as “other long-term liabilities”. Therefore, if the letter mentioned above and the financial statements of the corporate debtor are considered, it is evident that the amount raised under the said two agreements has the commercial effect of borrowing as the corporate debtor treated the said amount as borrowed from the first respondent.”

As mentioned in Clause 21 of the initial agreement executed between the parties, the Operational Creditor was required to deposit the security amount at the time of its appointment as Central Consignee Agent, on which interest at the rate of 12% on a quarterly basis was to be paid by the Corporate Debtor. The said clause demonstrates that the nature of the transaction of the deposit of the security amount was not towards the security of the goods to be supplied but was to be paid on the event of the appointment of the Operational Creditor as Central Consignee Agent, which is nowhere related to the supply of services by the Operational Creditor. The amount guaranteed to the Operational Creditor as commission on the sales made by it can only be claimed as an Operational Debt as it is in lieu of the services rendered by the Operational Creditor to the Corporate Debtor.

Further, as held by the Hon’ble Supreme Court in Global Credit Capital Limited & Anr Vs. Sach Marketing Pvt. Ltd. & Anr. (supra), the right to seek a refund of the security deposit with interest represents debts covered by sub-section (11) of section 3 of the Code and is a claim within the meaning of sub-section (6) of Section 3 of the Code, as defined below:

(6) “claim” means – (a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured, or unsecured; (b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured;

(11) “debt” means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt.

We are of the considered view that the authorities: (i) Saiom Developers Pvt. Ltd. vs. R Square Shri Saibaba Abhikaran Pvt. Ltd., (ii) Consolidated Construction Consortium Ltd. Vs. Hitro Energy Solutions (P) (Ltd.), and; (iii) Mr. Rashpal Singh Todd vs. M/s Volkswagen Finance Pvt. Ltd., Company Appeal (AT) (Insolvency) No. 312 of 2021, (supra) relied upon by the Ld. Counsel for the operational Creditor are not applicable to the facts and circumstances of the present case. Rather, the Hon’ble Supreme Court in its recent judgment Global Credit Capital Limited & Anr. Vs. Sach Marketing Pvt. Ltd. & Anr. (supra), dated 25.04.2024, cleared the ambiguity with respect to the categorization of Security Deposit as financial debt or operational debt and has laid down an authoritative law on the said subject matter and held Security Deposit to be considered as a Financial Debt.

Thus, in light of the discussion above and the relevant provisions of the Code, the amount of Rs. 65,00,000/- towards the security deposit along with Rs. 11,50,000/- as interest claimed by the Operational Creditor is a financial debt, not an operational debt.

v. Whether the amount claimed by the Petitioner/Operational Creditor exceeds the threshold limit of Rs. One crore as prescribed under Section 4 of the Code.

After deducting the amount falling under section 10A period and financial debt as discussed above, the remaining amount falls below the threshold limit of Rs. One crore. Thus, the issue of the amount claimed in default exceeding the threshold limit of Rs. One crore as prescribed under the Code, stands wiped out.

16. In light of the discussion foregoing, the present petition is not maintainable as the amount claimed by the Operational Creditor, after excluding the amount falling under section 10A of the Code and financial debt as discussed in preceding paras, falls short of the minimum threshold value of Rs. One crore as prescribed under Section 4 of the Code.

17. Thus, the present petition stands dismissed and disposed of accordingly, however, without any order as to costs.