NCLAT rejects operational creditor's insolvency petition due to pre-existing contractual dispute over delivery terms under Section 8 IBC

The NCLAT dismissed an operational creditor's appeal seeking to initiate CIRP against a corporate debtor. While the NCLAT held that the appellant qualified as an operational creditor under IBC due to advance payment for goods supply, it found a pre-existing contractual dispute existed between parties regarding delivery terms and transportation obligations. The appellant had misled authorities about delivery location (claiming Hong Kong instead of actual Ex-plant Rajkot terms). Since the dispute predated the demand notice under Section 8 IBC, citing Mobilox Innovations precedent, the CIRP application was properly rejected by the Adjudicating Authority.

---

---

Issues Involved:
1. Whether the appellant is an Operational Creditor as per IBCRs.
2. Whether there has been a breach of terms and conditions of the contract leading to pre-existing disputeRs.

Summary:

Issue 1: Whether the appellant is an Operational Creditor as per IBCRs.

The appellant argued that the advance payment made for the purchase of goods qualifies as an operational debt u/s 5(21) of the Insolvency & Bankruptcy Code (IBC), 2016. They cited the Supreme Court judgment in 'Consolidated Construction Consortium Ltd. Vs. Hitro Energy Solutions Pvt. Ltd.' [(2022) 7 SCC 164], which clarified that operational debt includes amounts paid in advance for goods and services. The Tribunal agreed, stating, "a debt arising from advance payment made to a corporate debtor for the supply of goods or services qualifies as an operational debt." Thus, the appellant is to be treated as an Operational Creditor.

Issue 2: Whether there has been a breach of terms and conditions of the contract leading to pre-existing disputeRs.

The appellant claimed that the goods were to be delivered to Hong Kong and that the respondent failed to deliver them on time. However, the Adjudicating Authority found that the terms of delivery were "Ex-Plant Rajkot, India," and that the goods were ready for pickup, as evidenced by emails. The Tribunal noted that the appellant introduced a different purchase order in the appeal, which was not presented before the Adjudicating Authority. The Tribunal concluded that there was a pre-existing dispute regarding the place of delivery and transportation obligations. Citing 'Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd.' [(2018) 1 SCC 353] and 'Kay Bouvet Engg. Ltd. v. Overseas Infrastructure Alliance (India) (P) Ltd.' [(2021) 10 SCC 483], the Tribunal emphasized that a pre-existing dispute is sufficient to reject the application for CIRP.

Conclusion:

The Tribunal held that the appellant is an operational creditor but dismissed the appeal due to the pre-existing dispute between the parties. The application for CIRP against the Corporate Debtor was correctly rejected by the Adjudicating Authority. The appeal was dismissed with no order as to costs.

---