Munmun Kaur-
Published On: February 02, 2022 at 13:19 IST
National Company Law Tribunal (NCLT) Mumbai dismissed the Petition filed by the Hindu Group Publishing Private Limited (THG) u/s 9 of the Code to initiate the Corporate Insolvency Resolution Process (CIRP) against Deadline Advertising Private Limited (DAPL) on the ground that the dues payable by DAPL could not be considered operational debt.
A Bench of Judicial Member HV Subba Rao and Technical Member Chandra Bhan Singh, hearing the matter observed that DAPL was an agent of THG and the dues were owed by a client of THG which came through DAPL.
Therefore, debt due to THG did not qualify as an Operational Debt u/s 5(8) and is not a default u/s 3(12) of the Code since there existed a ‘principal-agent‘ relationship between the Operational Creditor and Respondent.
The facts of the Case were that DAPL gave a release order to a subsidiary of THG for publishing advertisements, for which the group was supposed to receive ₹8,16,000. Out of this due amount, THG only received ₹2,09,554 and hence issued two demand notices to DAPL.
The Bench observed that the arrangement between THG and DAPL was of principal-agent and not of operational creditor and respondent. Further, referring to the Indian Contract Act, the Bench observed that THG, being a principal, was always under an obligation to recover money from the client and not the agent, unless the latter had failed to perform a duty, which was not shown in the present case.
Dismissing the petition, the NCLT held, “Agent could not be held liable for default on the part of the client of the Operational Creditor”.