Operational debt under insolvency law requires proof of delivery and default; absence of proof defeated the section 9 claim.

An application under section 9 of the Insolvency and Bankruptcy Code was found not maintainable because the applicant failed to prove operational debt and default. The Tribunal examined invoices, bill of lading, correspondence and pleadings, but held that satisfactory proof of delivery of goods to the respondent was absent. Referring to section 46(2) of the Sale of Goods Act, it noted that where property in goods has not passed and payment is unpaid, the seller's remedies may include withholding delivery and seeking damages if goods are not delivered. On that basis, the claim was held not to qualify as operational debt for CIRP purposes and the petition was dismissed.

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Issues: Whether the applicant had proved the existence of operational debt and default so as to maintain an application under section 9 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The application was examined on the basis of the invoices, bill of lading, correspondence and the parties' pleadings. The Tribunal found that the applicant had not produced satisfactory proof of delivery of goods to the respondent. Relying on section 46(2) of the Sale of Goods Act, 1930, the Tribunal observed that where the property in goods has not passed and payment is not received, the unpaid seller has remedies including withholding delivery and, if goods are not delivered, the claim may lie in damages. On that basis, the Tribunal held that the default was not established to its satisfaction and that the claim did not qualify as an operational debt for the purpose of triggering CIRP.

Conclusion: The section 9 application was not maintainable because the operational debt and default were not proved, and the petition was dismissed in favour of the respondent.

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