Operational debt under the Insolvency Code requires reliable proof of services rendered; incomplete records cannot support admission.

The note explains that the enhanced minimum default threshold under the Insolvency and Bankruptcy Code was treated as inapplicable to defaults said to have occurred before the amendment date. It also states that a consultancy agreement was not excluded merely because of stamping objections where the corporate debtor had acted on it, accepted services, and made payments over time. On operational debt, the note emphasises that a Section 9 applicant must produce reliable documentary proof of services rendered and non-payment; incomplete invoices and informal emails were treated as insufficient, and insolvency was not to be used as a recovery device without proven debt.

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Issues: (i) Whether the enhancement of the minimum default threshold under Section 4 of the Insolvency and Bankruptcy Code, 2016 applied to the present petition; (ii) whether the consultancy agreement could be rejected as inadmissible for want of stamp duty under the Karnataka Stamp Act, 1957; and (iii) whether the operational creditor established an unpaid operational debt so as to warrant admission under Section 9 of the Insolvency and Bankruptcy Code, 2016.

Issue (i): Whether the enhancement of the minimum default threshold under Section 4 of the Insolvency and Bankruptcy Code, 2016 applied to the present petition?

Analysis: The objection based on the revised threshold was rejected because the alleged default was stated to have occurred prior to the amendment relied upon by the corporate debtor. The later enhancement of the default amount was treated as inapplicable to defaults already committed before the amendment date.

Conclusion: The objection failed and was decided against the respondent.

Issue (ii): Whether the consultancy agreement could be rejected as inadmissible for want of stamp duty under the Karnataka Stamp Act, 1957?

Analysis: The agreement was not treated as non-existent merely because of stamping objections. The corporate debtor had acted upon the agreement, accepted services under it, and made payments thereunder for a substantial period. In that factual setting, the stamping objection was held not to defeat consideration of the document for the present proceedings.

Conclusion: The objection failed and was decided against the respondent.

Issue (iii): Whether the operational creditor established an unpaid operational debt so as to warrant admission under Section 9 of the Insolvency and Bankruptcy Code, 2016?

Analysis: Although the existence of the consultancy arrangement was not denied, the decisive question was whether services were proved for the unpaid period. The Tribunal found that the material placed on record did not adequately establish rendering of services for September 2018 to February 2019. The solitary invoice was found incomplete and unacknowledged, the remaining invoices were absent, and informal email correspondence was held insufficient to prove the debt. On that basis, the claim was treated as unproved and the petition was viewed as an attempt to use insolvency as a recovery mechanism against a viable going concern.

Conclusion: The operational creditor did not establish a provable operational debt and the petition was liable to be rejected.

Final Conclusion: The application under Section 9 was held not fit for admission because the alleged liability was not supported by sufficient evidence of services rendered, and insolvency proceedings were not permitted to be used as a recovery forum in the circumstances.

Ratio Decidendi: For admission of a Section 9 application, the operational creditor must establish by reliable documentary material that services were rendered and that an unpaid operational debt exists; where such proof is lacking, insolvency cannot be invoked as a mere recovery device.

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