Share purchase claims may fall outside operational debt where a genuine pre-existing dispute exists before notice.

A claim for payment under a share purchase arrangement was treated as outside operational debt because it did not arise from the supply of goods or services in the statutory sense, so the claimant was not an operational creditor on that basis. The materials also showed correspondence, prior proceedings and objections raised before the demand notice, which amounted to a real pre-existing dispute. Under the insolvency admission test, the adjudicating authority does not decide the merits of that dispute, and the existence of a genuine prior dispute barred admission of the insolvency application.

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Issues: (i) Whether the claim arising from the share purchase arrangement qualified as an operational debt so as to make the applicant an operational creditor under the Insolvency and Bankruptcy Code, 2016; (ii) Whether a pre-existing dispute existed between the parties before the demand notice, barring admission of the insolvency application.

Issue (i): Whether the claim arising from the share purchase arrangement qualified as an operational debt so as to make the applicant an operational creditor under the Insolvency and Bankruptcy Code, 2016.

Analysis: The definition of operational debt covers claims arising from the provision of goods or services, including employment. The claim in question arose from a share purchase agreement under which the corporate debtor agreed to pay consideration for acquisition of shares. The transaction was not one of supplying goods or services in the ordinary course of business, and the mere fact that shares may be treated as goods in a different legal context did not convert this contractual payment claim into an operational debt. The claim therefore did not satisfy the statutory requirement for operational debt.

Conclusion: The claim was not an operational debt and the applicant did not qualify as an operational creditor in relation to that claim.

Issue (ii): Whether a pre-existing dispute existed between the parties before the demand notice, barring admission of the insolvency application.

Analysis: The record showed correspondence, prior proceedings and objections raised by the corporate debtor before the demand notice, including disputes concerning the underlying contractual obligations and the amount claimed. Applying the settled test for admission of an application under the insolvency code, the adjudicating authority is only to see whether a real and plausible dispute existed before notice and not to decide the dispute on merits. The materials disclosed a genuine dispute and not a feeble or illusory defence.

Conclusion: A pre-existing dispute existed before the demand notice, and the insolvency application could not be admitted on that basis.

Final Conclusion: The application failed on both the statutory character of the claim and the existence of a prior dispute, and therefore could not proceed to initiation of insolvency against the corporate debtor.

Ratio Decidendi: A contractual payment claim arising from a share acquisition arrangement does not constitute operational debt unless it is a claim for the provision of goods or services in the statutory sense, and admission under the insolvency code is barred where a real dispute existed before the demand notice.

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