Operational debt under insolvency law includes unpaid service claims backed by an unchallenged arbitral award and valid demand notice

Claims for manpower and facility management services, supported by invoices and an unchallenged arbitral award, were treated as operational debt under the Insolvency and Bankruptcy Code, and default was held established because unpaid dues continued to subsist. The limitation objection failed because the award had attained finality and execution proceedings did not prevent insolvency action. The notice objection also failed since demand was served at the registered office recorded in corporate filings, which satisfied the statutory requirement. On that basis, the section 9 application was admitted, moratorium was imposed, and an interim resolution professional was appointed.

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Issues: (i) Whether the claim arising from supply of manpower and facility management services, supported by invoices and an arbitral award, constituted an operational debt and established default under the Insolvency and Bankruptcy Code, 2016; (ii) Whether the petition was barred by limitation or defeated by objection to service of the demand notice.

Issue (i): Whether the claim arising from supply of manpower and facility management services, supported by invoices and an arbitral award, constituted an operational debt and established default under the Insolvency and Bankruptcy Code, 2016.

Analysis: Services supplied for housekeeping and engineering/building work fall within the definition of services, and a claim for such services is an operational debt. The arbitral award had quantified the amount due and the record showed unpaid dues continuing to subsist. The Code treats such unpaid service claims as operational debt, and the existence of an executed or executable award did not detract from the debt once no challenge to the award remained pending.

Conclusion: The claim was an operational debt and default was established in favour of the petitioner.

Issue (ii): Whether the petition was barred by limitation or defeated by objection to service of the demand notice.

Analysis: The limitation objection failed because the award had attained finality and execution had been initiated, so the debt remained payable within the meaning of the Code. The service objection also failed because notice was sent to the registered office reflected in the corporate records, and service at the registered office satisfied the statutory requirement. The pendency of execution proceedings did not bar initiation of the insolvency process, and the objection based on an alternative address was not accepted.

Conclusion: The petition was not barred by limitation and the notice requirement was complied with, against the respondent.

Final Conclusion: The application under section 9 was admitted, moratorium was imposed, and an interim resolution professional was appointed for commencement of the corporate insolvency resolution process.

Ratio Decidendi: A claim for services supported by an enforceable and unchallenged arbitral award constitutes an operational debt, and where statutory demand is served at the registered office and default is shown, section 9 proceedings may be admitted despite pending execution of the award.

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