Refund of advance is not operational debt; section 9 insolvency claim was also time-barred and pre-existing dispute failed.

A claim for refund of advance money under a supply arrangement was treated as outside the definition of operational debt because it did not arise from the provision of goods or services or from statutory dues. The section 9 application was also held barred by limitation, as Article 137 of the Limitation Act applied and the filing was beyond three years from the pleaded date of default, with no basis for extension or exclusion. The plea of prior dispute was rejected because the relied-on civil suit did not show a pre-existing dispute in the statutory sense, and the insolvency petition failed without initiation of CIRP.

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Issues: (i) Whether refund of advance paid under a supply arrangement constituted operational debt under the Insolvency and Bankruptcy Code, 2016. (ii) Whether the application under section 9 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation. (iii) Whether the plea of prior dispute was made out on the facts.

Issue (i): Whether refund of advance paid under a supply arrangement constituted operational debt under the Insolvency and Bankruptcy Code, 2016.

Analysis: The definition of operational debt requires a claim connected with the provision of goods or services or dues payable under law. A claim for refund of advance money does not arise from such provision and is not the type of debt covered by the statutory definition. On the facts, the claim was for repayment of advance and not for goods or services supplied by the operational creditor.

Conclusion: The claim did not constitute operational debt and the issue was decided against the petitioner.

Issue (ii): Whether the application under section 9 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation.

Analysis: For applications under the Code, Article 137 of the Limitation Act, 1963 applies, and limitation runs from the date of default. The default pleaded was of 2012 and even on the alternative date discussed, the application was filed beyond three years. No material was shown to attract extension or exclusion of limitation.

Conclusion: The application was barred by limitation and the issue was decided against the petitioner.

Issue (iii): Whether the plea of prior dispute was made out on the facts.

Analysis: The objection based on prior dispute was not accepted because the civil suit relied upon had been filed by the operational creditor itself and did not establish a pre-existing dispute in the statutory sense. The contradictory stands taken by the corporate debtor were also found unsustainable.

Conclusion: The plea of prior dispute was rejected.

Final Conclusion: The insolvency petition failed on the grounds of maintainability and limitation, and no CIRP was initiated.

Ratio Decidendi: A claim for refund of advance money, by itself, does not amount to operational debt, and an application under section 9 of the Insolvency and Bankruptcy Code, 2016 is governed by Article 137 of the Limitation Act, 1963 from the date of default.

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