The Supreme Court on Tuesday ruled that New Okhla Industrial Development Authority (NOIDA) is not a financial creditor, but rather an operational creditor under the IBC.
In a 186-page judgment, a bench of Justices K.M. Joseph and Hrishikesh Roy said: "We would proceed on the basis that, while the appellant (NOIDA) is not a financial creditor, it would constitute an operational creditor."
It added that both the NCLT (National Company Law Tribunal) and the NCLAT (National Company Law Appellate Tribunal) have proceeded on the basis that NOIDA is an operational creditor, therefore the court need not stretch the exploration further and pronounce on the questions, which may otherwise arise.
"We must not be oblivious to the following prospect, should we find that the appellant is not an operational creditor, even under the IBC Regulations, apart from claims by financial creditors and operational creditors, claims can be made by other creditors. However, there are, undoubtedly, certain advantages, which an operational creditor enjoys over the other creditors."
The top court judgment came on appeals filed by NOIDA, where a common question arose -- whether the authority is entitled to be treated as a financial creditor within the meaning of the Insolvency and Bankruptcy Code (IBC).
The top court dismissed the appeals filed by NOIDA, which included an appeal challenging the NCLAT order, affirming the view taken by the NCLT, which said there was no financial lease in terms of the Indian Accounting Standards and there was no financial debt.
The bench said section 5(7) defines 'financial creditor' as person to whom a financial debt is due besides an assignee or transferee from such person. It added the word 'operational creditor', which means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred.
Operational debt also means a debt in respect of payment of dues arising under any law for the time being in force and payable to any Local Authority, inter alia. 'Operational creditor' is defined in Section 2(20) as meaning a person to whom operational debt is owed and includes any person to whom such debt has been legally assigned or transferred."
"We are of the view that, in the lease in question, there has been no disbursement of any debt (loan) or any sums by the appellant to the lessee. The appellant would, therefore, not be a financial creditor within the ambit of section 5(8)." The top court observed that NOIDA is the lessor described as the Authority under section 3 of the Uttar Pradesh Industrial Area Development Act, 1976 (UPIAD Act), as it noted that the lease in the matter was entered into in July 2010.
It noted that the lease deed recites that the leasehold property forms part of the land acquired under the Land Acquisition Act and developed by the lessor for the purposes of setting up of an 'Urban and Industrial Township'. "The purpose of the lease is the construction of the residential flats according to the building plan approved by the appellant," it said