Barter Agreement Doesn't Constitute Operational Debtor: NCLAT [Read Order]

The National Company Law Appellate Tribunal ('NCLAT'), New Delhi Bench has held that barter agreement doesn't constitute an operational debtor. The Barter Agreement has already been declared as an unfair practice by RERA.

The Appellant - Aquacity Consumer and Societies Welfare Society claiming to be a society of homebuyers claimed to have filed two consumer complaints under Section 12(1)(b) of the Consumer Protection Act, 1986 for its members/homebuyers. The case of the Appellant was that his members had booked their respective units in the year 2014-17.

It was submitted that the Corporate Debtor has siphoned off the money collected from the buyers of the project. The NCDRC allowed both the Consumer Complaints and directed the Corporate Debtor to refund the amount collected from the homebuyers along with interest of 9% pa from the date of possession. The Corporate Debtor during the period 2010 to 13.08.2019 entered into various agreements titled Barter Agreements with M/s D. B. Corp Ltd. (‘Operational Creditor’).

The Operational Creditor is engaged in the business of publishing various newspapers, periodicals and other literary publications in print and non-print media. The Corporate Debtor entered into a Barter Agreement with the Operational Creditor for the extensive advertising campaign of its projects.

Under the Agreement, the Operational Creditor was to advertise in media for the projects of the Corporate Debtor as per the terms and conditions mentioned in the Agreement. Under the Agreement, the Operational Creditor was to publish an Advertisement for consideration which included a cash component and a Barter Component. The Cash Component against the advertising was to the paid and the Barter Component was to be utilized in the form of allotment of units which were required to be transferred in favour of the Operational Creditor.

It is submitted that the very basis of the Section 9 application i.e. Barter Agreement has already been declared as unfair practices by RERA by its order dated 12.05.2022. It is submitted that there was no operational debt due against the Corporate Debtor based on which application under Section 9 could have been maintained by the Operational Creditor. It is submitted that under the Barter Agreements which are the basis for the initiation of Section 9 proceeding, the cash component has already been paid to the Operational Creditor and against the Barter Component, the

The Corporate Debtor and the Operational Creditor have entered into unfair trade practices and relied on an illegal agreement to initiate CIRP against the Corporate Debtor.

The Two bench members comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) have held that non-discharge of the Barter Component by the Corporate Debtor shall not lead to any operational debt based on which payment of money can be demanded by the Operational Creditor from the Corporate Debtor. No operational debt was owed to the Operational Creditor in the facts of the present case hence initiation of proceedings under Section 9 by the Operational Creditor was contrary to the provisions of the IBC.

To Read the full text of the Order CLICK HERE

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