Operational debt under insolvency law excludes a recorded loan; limitation and pre-existing dispute also defeated the application.

A section 9 insolvency application failed because the claimed Rs. 30,00,000 was treated as a loan recorded in ledger entries, not as an operational debt arising from goods, services, or other statutory dues; the petition was therefore not maintainable. The Tribunal also found that the petition was filed in December 2019 for a payment allegedly made on 31/12/2014, with no accepted acknowledgment extending limitation, and that the corporate debtor had already raised a genuine dispute about the nature and adjustment of the payment under an earlier memorandum of understanding. The application was accordingly barred by limitation and hit by a pre-existing dispute, so CIRP was refused.

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Issues: (i) Whether the amount of Rs. 30,00,000 paid by the petitioner constituted an operational debt under the Insolvency and Bankruptcy Code, 2016. (ii) Whether the section 9 petition was barred by limitation and involved a pre-existing dispute.

Issue (i): Whether the amount of Rs. 30,00,000 paid by the petitioner constituted an operational debt under the Insolvency and Bankruptcy Code, 2016.

Analysis: The claim was founded on the ledger entries and surrounding correspondence. The entries showed that the larger payment of Rs. 30,00,000 was recorded as a loan, while the smaller commission-related payment was separately reflected with deduction of TDS. The Tribunal also found the debit notes for postage and courier charges to be self-serving and disputed by the corporate debtor. A loan does not answer the statutory description of operational debt, which is confined to claims arising from the provision of goods or services or other specified dues.

Conclusion: The amount did not constitute operational debt and the petition was not maintainable.

Issue (ii): Whether the section 9 petition was barred by limitation and involved a pre-existing dispute.

Analysis: The alleged payment was made on 31/12/2014, while the petition was filed in December 2019, with no accepted payment or acknowledgment extending limitation. The corporate debtor had already raised a dispute regarding the nature of the payment and its adjustment against the earlier memorandum of understanding, and that dispute had also surfaced in prior proceedings. These circumstances showed a genuine pre-existing dispute as to the existence of the debt.

Conclusion: The petition was barred by limitation and was hit by a pre-existing dispute.

Final Conclusion: The insolvency application failed on both maintainability and dispute grounds, and the Corporate Insolvency Resolution Process was refused.

Ratio Decidendi: A section 9 application cannot be maintained where the claimed amount is a loan and not an operational debt, and where a genuine pre-existing dispute and limitation objection are established on the material before the Tribunal.

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