Operational debt under IBC requires proof of goods or services supply; acknowledgements and dishonoured cheques alone are insufficient.

Operational debt under the Insolvency and Bankruptcy Code, 2016 must be shown by cogent evidence to arise from the provision of goods or services within Section 5(21). The invoices relied on had already been paid, and the alleged delayed payment charges and additional claims were unsupported by any agreement, invoice, or other documentary proof. Denied confirmatory letters, unilateral journal entries, and mere acknowledgements of liability were insufficient to establish a debt due and payable. Dishonoured cheques, by themselves, remained a matter under the Negotiable Instruments Act, 1881 and did not prove an operational debt for insolvency purposes.

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Issues: Whether the appellant established an operational debt due and payable under the Insolvency and Bankruptcy Code, 2016 on the basis of invoices, account statements, alleged acknowledgements of liability, dishonoured cheques and journal entries.

Analysis: The claim under Section 9 of the Insolvency and Bankruptcy Code, 2016 required proof that the debt arose from the provision of goods or services within the meaning of Section 5(21). The record showed that the 37 invoices relied upon by the appellant had been paid, and the alleged delayed payment charges and other additional claims were unsupported by any agreement, invoice or other documentary proof. The alleged confirmatory letters were denied by the respondent, and mere acknowledgement of an amount did not by itself establish an operational debt. The journal entries were unilateral adjustments and could not independently prove a debt arising from supply of goods or services. The dishonour of cheques was held to fall within the domain of the Negotiable Instruments Act, 1881 and did not establish an operational debt for insolvency purposes.

Conclusion: The appellant failed to prove the existence of an operational debt due and payable. The appeal was liable to be dismissed and the respondent succeeded.

Ratio Decidendi: Mere acknowledgement of liability or dishonour of cheques does not constitute proof of an operational debt unless the debt is shown by cogent evidence to arise from the provision of goods or services or another qualifying statutory basis under Section 5(21) of the Insolvency and Bankruptcy Code, 2016.

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