NCLAT held that the appellant does not qualify as an operational creditor under the IBC due to the absence of proof of debt as per the contractual terms agreed upon.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Rakesh Kumar Jain (Judicial Member) and Naresh Salecha & Indevar Pandey (Technical Members) was hearing an appeal and observed that for an operational creditor to initiate CIRP under Section 9 of the IBC, it is imperative to substantiate a clear and undisputed operational debt as defined by the contractual terms agreed upon, and the failure to establish such clarity or resolve pre-existing disputes renders the petition unsustainable.
In the present case, the appeal was brought before the National Company Law Appellate Tribunal (NCLAT) against the order of the Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench) rejecting the appellant's petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) for initiating Corporate Insolvency Resolution Process (CIRP) against Ktex Nonwovens Pvt. Ltd. The Adjudicating Authority's decision was based on the grounds that the appellant, an operational creditor, had failed to demonstrate a debt as per the IBC's definition of operational debt and that there was a pre-existing dispute between the parties.
The appellant had advanced USD 200,000 to Ktex for the purchase of 10 tonnes of non-woven fabric, expecting delivery by March 19, 2020. However, due to the COVID-19 pandemic, the export of materials was restricted, leading to a delay. The appellant claimed that the goods were to be delivered in Hong Kong, while Ktex argued that the terms were for ex-plant delivery from Rajkot. The Adjudicating Authority observed that the purchase order and invoices clearly stated the goods were to be supplied from Rajkot, India, and that there was no documented agreement for delivery in Hong Kong.
During the appeal, the appellant argued that the advance payment constituted operational debt under the IBC, citing precedents where advance payments for goods were considered operational debts. They also contended that Ktex did not dispute the debt in response to the demand notice under Section 8 of the IBC.
The NCLAT analyzed the documents and submissions from both parties and upheld the Adjudicating Authority's decision. It found that the appellant failed to prove a clear agreement for delivery in Hong Kong, as asserted. Moreover, the introduction of a different purchase order during the appeal, not submitted before the Adjudicating Authority, undermined their case. The Tribunal also noted the exchange of emails between the parties, showing the existence of a pre-existing dispute regarding the terms of delivery and payment.
Ultimately, the NCLAT dismissed the appeal, affirming that the appellant did not qualify as an operational creditor under the IBC due to the absence of proof of a debt as per the contractual terms agreed upon.
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