Limitation and operational debt principles bar a section 9 insolvency application based on unpaid advance payments.

For a section 9 insolvency application, limitation runs from the date of default and Article 137 of the Limitation Act applies; where more than three years had elapsed and no extension or condonation was shown, the claim was treated as time-barred. Advance payment made for goods that were not supplied, by itself, was treated as not constituting operational debt for section 9 purposes, so it could not support maintainability of the insolvency application. The application was therefore rejected as both time-barred and not maintainable, without prejudice to other remedies in law.

---

---

Issues: (i) Whether the application under section 9 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation; (ii) whether advance payment made for supply of goods, which were not supplied, constituted an operational debt so as to maintain the section 9 application.

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

Analysis: The limitation for applications under the Insolvency and Bankruptcy Code, 2016 runs from the date of default, and Article 137 of the Limitation Act applies. On the dates of default stated in the application, more than three years had elapsed before filing. In the absence of material to show extension or condonation, the claim had become time-barred.

Conclusion: The application was barred by limitation.

Issue (ii): Whether advance payment made for supply of goods, which were not supplied, constituted an operational debt so as to maintain the section 9 application.

Analysis: The admitted claim was founded on advance amounts paid for goods that were not supplied. Such advance payment, by itself, was treated as not amounting to operational debt for the purpose of section 9, and therefore could not sustain the insolvency application.

Conclusion: The application was not maintainable on this ground as well.

Final Conclusion: The section 9 application was rejected as both time-barred and not maintainable, while leaving the claimant free to pursue other remedies in accordance with law.

Ratio Decidendi: For a section 9 insolvency application, limitation begins from the date of default, and an advance paid for undelivered goods does not, by itself, constitute operational debt.

---