Tech Lads India’s appeal succeeds as NCLAT identifies operational debt in consortium dealings, granting Satnam Global a chance to settle.
In a significant judgment from the National Company Law Appellate Tribunal (NCLAT), the tribunal has overturned a previous decision by the National Company Law Tribunal (NCLT) that dismissed an insolvency application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). The application, originally filed by Tech Lads India Private Limited, sought to initiate a Corporate Insolvency Resolution Process (CIRP) against Satnam Global Infraprojects Limited due to a claimed default in operational debt.
Justice Ashok Bhushan, Chairperson, and Barun Mitra, Member (Technical), presiding over the appellate tribunal, found that the consortium agreement between the parties clearly outlined commercial transactions involving supply and service obligations. A pivotal point in the judgment was the acknowledgment of Rs. 8 crores paid by Tech Lads India to Satnam Global as an advance for supply of goods, thus constituting an operational debt under Section 5(21) of the IBC.
The NCLAT’s decision comes after the NCLT dismissed the Section 9 application, arguing that there was no operational debt due to the nature of the consortium agreement, which was deemed to focus solely on obligations towards the project awarded by Telecommunications Consultants India Ltd. However, the appellate tribunal found this interpretation erroneous, highlighting the inter-se commercial transactions stipulated in the consortium agreement.
An important aspect of the NCLAT judgment was the acknowledgment of the issuance and subsequent withdrawal of invoices by Satnam Global on the GST portal, which initially indicated a supply of goods. The tribunal noted that the absence of a pre-existing dispute before the issuance of the demand notice further validated the operational debt claim.
The appellate tribunal has directed the NCLT to admit the Section 9 application within three months, allowing Satnam Global an opportunity to settle the debt with Tech Lads India. If Satnam Global successfully liquidates the debt within this period and provides proof of settlement, the CIRP application may be closed.
The judgment is a reminder of the importance of thoroughly examining contractual agreements and the nature of transactions in insolvency proceedings. It underscores the NCLAT’s stance that operational debt can arise from both supply and receipt of goods and services, provided there is a clear nexus with commercial obligations.
Bottom line:-
Insolvency and Bankruptcy Code (IBC) - Operational Debt - A claim can be considered as an operational debt under Section 5(21) of the IBC if it has a nexus with the provision of goods or services, regardless of whether the claimant is a supplier or receiver of goods or services.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 5(21), 8, 9
