Tribunal holds royalty dues under publishing agreement can be operational debt, but rejects application due to lack of clear documentary evidence and improper use of insolvency proceedings as recovery tool
In a significant judgment dated 13th October 2026, the National Company Law Tribunal (NCLT), New Delhi Bench, presided by Mr. Ashok Kumar Bhardwaj (Judicial Member) and Mr. Atul Chaturvedi (Technical Member), rejected an insolvency petition filed by Dr. Ravi Gupta against M/s. Commercial Law Publishers (India) Pvt. Ltd. The dispute arose over alleged unpaid royalty dues amounting to Rs. 1.17 crore under a publishing agreement.
Dr. Gupta, the author and operational creditor, had entered into a publishing agreement with the corporate debtor in October 2020, granting publication and allied rights of specified books for five years. As per Clause 6 of the agreement, the corporate debtor was contractually obligated to pay a lump-sum assured monthly royalty irrespective of sales volume or profitability. The royalty was to be shared equally between Dr. Gupta and co-author Dr. Girish Ahuja.
The applicant claimed that the corporate debtor owed Rs. 1.17 crore in unpaid royalties. However, the ledger maintained by the corporate debtor showed an admitted outstanding of Rs. 43.8 lakh as of March 31, 2024. The applicant produced two invoices for Rs. 45 lakh and Rs. 22.5 lakh, totaling Rs. 67.5 lakh, for later periods. The tribunal observed discrepancies in the invoices, including a lower royalty rate reflected in the invoices for the fifth year than contractually agreed (Rs. 3.75 lakh per month versus Rs. 7.5 lakh per month).
The tribunal analyzed whether royalty payable under such a publishing contract constitutes an operational debt under Section 5(21) of the Insolvency and Bankruptcy Code, 2016 (IBC). Citing precedents from the National Company Law Appellate Tribunal (NCLAT), including Somesh Choudhary v. Knight Riders Sports Pvt. Ltd. and Jaipur Trade Expocentre v. Metro Jet Airways, the tribunal acknowledged that claims arising from grant of rights or licenses connected with business operations could fall within the ambit of operational debt depending on facts.
However, the tribunal emphasized that the applicant failed to substantiate the quantum of debt with clear, consistent, and credible documentary evidence as required under Section 9 of the IBC and related regulations. The anomalies in the invoices and the unexplained difference between ledger balances and claimed amount undermined the claim's credibility.
Importantly, the tribunal reiterated the well-settled principle that the Corporate Insolvency Resolution Process (CIRP) under the IBC is a mechanism for revival of the corporate debtor and not a debt recovery tool. Relying on Supreme Court judgments including Tottempudi Salalith v. State Bank of India and Glas Trust Company LLC v. BYJU Raveendran, the tribunal observed that misuse of the CIRP process for mere recovery of dues is impermissible.
Since the application appeared to be filed solely for recovery of alleged dues without a bona fide objective of corporate revival and was not supported by clear proof of default, the tribunal rejected the petition.
This judgment reinforces the necessity for operational creditors to furnish precise documentary evidence when invoking insolvency proceedings and underscores the purpose of the IBC as a revival mechanism rather than a debt enforcement forum.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Royalty payable under a publishing agreement can, depending on facts, fall within the ambit of operational debt, but a Section 9 application is liable to be rejected where the amount of default is not established by clear and consistent documentary evidence and CIRP is sought to be used as a debt recovery mechanism.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Section 5(21), Section 9, IBBI (Resolution Process for Corporate Persons) Regulations, 2016 Regulation 2B, Income-tax Act, 1961 Section 194J
