Supreme Court has ruled that the New Okhla Industrial Development Authority (NOIDA) would constitute an operational creditor under the insolvency and bankruptcy code (IBC) 2016, and dismissed the appeal filed by NOIDA against both the NCLAT orders.
NCLAT had held that NOIDA is an operational Creditor under IBC and cannot be considered as a Financial Creditor of the Corporate Debtor under the provisions of the Code.
National Company Law Tribunal (NCLT) (Bench IV in New Delhi) had while adjudicating an application filed by NOIDA held that the NOIDA is an operational creditor as there is no financial lease executed between NOIDA and the Corporate Debtor as per the Indian accounting standards and the same was affirmed by NCLAT on April 16. The NCLT Principal Bench in New Delhi in another case held that the NOIDA is a Financial Creditor and the order was stayed by NCLAT.
NOIDA filed an appeal before Supreme Court against both these orders passed by NCLAT.
NOIDA had contended before the Supreme Court that the lease deed executed between the NOIDA and Corporate Debtor is a financial lease as per the Indian Accounting Standard and therefore by the virtue of Section 5(8)(d) of IBC, NOIDA should qualify as a Financial Creditor.
The Apex Court has ruled that the Appellant ( NOIDA) is not the financial lessor under section 5(8)(d) of the Code. However, it has made an interesting observation indicating that the Centre could always bring a prospective amendment to classify NOIDA as a financial creditor.
“Therefore, we would find on the whole that the appellant is not the financial lessor under section 5(8)(d) of the IBC. No doubt, we would observe that we have arrived at the findings based on the prevailing statutory regime. Needless to say, there is always power to amend the provisions which essentially consist of the Indian Accounting Standards in the absence of any rules prescribed under Section 5(8)(d) of the IBC by the Central Government”, said the judgement of the apex court Bench comprising of Justice KM Joseph and Justice Hrishikesh Roy