Operational debt and default established on acknowledged liability, with technical objections to stamping and notice rejected.

An acknowledged liability under a tripartite arrangement, supported by correspondence, a credit note and cheques issued towards part payment, was held to constitute operational debt and the applicant was treated as an operational creditor. Non-payment after the debt became due established default under the Insolvency Code, and the petition was admitted for initiation of corporate insolvency resolution proceedings. Objections based on stamping, registration and service of the demand notice were rejected because the transaction did not involve underlying security, notice on a director was sufficient, and technical objections could not defeat admitted substantive liability.

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Issues: (i) whether the applicant qualified as an operational creditor and the debt claimed under the tripartite arrangement was recoverable under the insolvency framework; (ii) whether default in payment of the operational debt was established so as to justify admission under the Code; (iii) whether objections regarding stamping, registration and service of demand notice defeated the petition.

Issue (i): whether the applicant qualified as an operational creditor and the debt claimed under the tripartite arrangement was recoverable under the insolvency framework.

Analysis: The correspondence between the parties, the credit note issued by the corporate debtor, and the tripartite agreement showed that the corporate debtor acknowledged liability to pay the amount assigned in favour of the applicant. The underlying transaction was for supply of goods and services, bringing the claim within the definition of operational debt and the applicant within the definition of operational creditor.

Conclusion: The issue was decided in favour of the applicant.

Issue (ii): whether default in payment of the operational debt was established so as to justify admission under the Code.

Analysis: The agreement, the issuance of cheques towards part payment, and their subsequent return established that the amount had become due and remained unpaid. On these facts, non-payment of debt after it became due constituted default within the meaning of the Code.

Conclusion: The issue was decided in favour of the applicant.

Issue (iii): whether objections regarding stamping, registration and service of demand notice defeated the petition.

Analysis: The assignment did not involve any underlying security so the stamp-duty objection did not apply. Service of demand notice on a director satisfied the prescribed mode of service. In any event, the debt stood admitted and technical objections could not override the substantive liability.

Conclusion: The objections were rejected and the issue was decided in favour of the applicant.

Final Conclusion: The petition for initiation of corporate insolvency resolution process was admitted, an interim resolution professional was appointed, and moratorium was in terms of the Code.

Ratio Decidendi: An acknowledged operational debt supported by correspondence, a tripartite assignment and part-payment cheques, followed by non-payment after the debt became due, establishes default and warrants admission under Section 9 despite technical objections as to stamping or service.

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