Does Transaction of Sale of Equity shares fall under the category of “operational debt “?

·     In the matter of Viakunth Motor Finance Pvt Ltd Vs Endless Properties Pvt Ltd

The Operational Creditor (Viakunth Motor Finance Private Limited) sold certain shares of a Company to the Corporate Debtor (Endless Properties Private Limited) and transferred the shares to the Corporate Debtors Account after executing a number of documents.

The Operational Debtor despite receiving several reminders from the Corporate Creditor failed to repay the sale consideration of shares amounting to Rs.25 lakh.The Operational creditor filed an application u/s 9 of IBC for initiating CIRP against Corporate Debtor.

We need to first go through the wordings of the word ‘Debt’ , ‘Operational Debt’ and ‘Operational Creditor ‘ as per IB&C to have a comprehensive view 

“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.’
‘Operational Debt- means a claim in respect of the provision of goods or services including employment or a debt in respect of the 1 [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.’
‘Operational Creditor - means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred.’

On referring to the concerned sections it is understood that “ a person seeking CIRP initiation  under Section 9 of I &B Code must be a person to whom a claim in respect of section 5 (21 )i.e. in the present case in respect of the provision of goods or services including employment or a debt in respect of repayment of dues arising under any law and payable to the Central Government ,State Government or local authority is owed . Therefore ,in the case at hand whether the claim in respect of the provision of goods or services also has to be ascertained for which the learned counsel appearing for applicant relied upon section 2 (7) of the Sale of Goods Act 1930.

Section 2(7) defines goods as “every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass and things attached to or forming a part of the land which are agreed to be served before sale or under contract of sale.”

Considering the above it is clear that shares fall within the meaning and ambit of goods. Hence,the application was admitted at NCLT initiated CIRP against the Corporate Debtor on being satisfied that Operation debt is due to operational Creditor and Corporate Debtor Committed a default in payment.
NCLT declared moratorium.