Liquidated damages are not operational debt unless they crystallise into a payable claim under insolvency law.

A claim for liquidated damages arising from delay or non-performance of a contract does not become an operational debt under the Insolvency and Bankruptcy Code unless it arises from supply of goods, rendering of services, employment, or government dues. Because the damages claim remained unadjudicated and had not crystallised into a debt due and payable, it fell outside the scope of section 9. The availability of a contractual recovery remedy under other law did not alter its character. The application under section 9 was therefore not maintainable.

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Issues: Whether a claim for liquidated damages arising from non-performance of a contract constitutes an operational debt so as to maintain an application under section 9 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The claim arose from a contractual stipulation for liquidated damages for delay in commissioning the project. The liability had not been shown to arise from supply of goods, rendering of services, employment, or government dues within the meaning of operational debt. The claim for damages was treated as requiring adjudication and crystallisation before it could assume the character of a debt due and payable. As the tribunal's jurisdiction under section 9 is confined to operational debt, a claim essentially for unadjudicated liquidated damages was held to lie outside the statutory framework. The existence of a contractual recovery remedy under other law did not convert the claim into an operational debt.

Conclusion: The claim for liquidated damages was not an operational debt and the application under section 9 was not maintainable.

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