Sponsorship rights as operational debt, with unpaid invoices and acknowledgments establishing default and no pre-existing dispute.

An exclusive sponsorship arrangement granting advertising and promotional rights, use of intellectual property, match tickets and allied benefits for consideration can constitute a supply of services and give rise to operational debt under the Insolvency and Bankruptcy Code, 2016. Unpaid invoices, consent for bank guarantee encashment and repeated emails seeking payment established default, while the objection that no formal contract existed was not a genuine pre-existing dispute because it arose after the demand notice and did not dispute the specific dues. The petition was properly authorised and the Code prevails over referral to arbitration in a section 9 application.

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Issues: (i) Whether the petitioner was an operational creditor and the sponsorship arrangement gave rise to an operational debt; (ii) Whether the corporate debtor defaulted and whether there was any pre-existing dispute defeating the section 9 petition; (iii) Whether the petition was invalid for want of proper authorisation and whether the dispute had to be referred to arbitration.

Issue (i): Whether the petitioner was an operational creditor and the sponsorship arrangement gave rise to an operational debt.

Analysis: The claim arose from an arrangement under which the corporate debtor obtained advertising and promotional rights, use of intellectual property, match tickets and allied benefits in return for payment of rights fee. Those benefits were not merely bare contractual permissions but constituted services for the purpose of the Insolvency and Bankruptcy Code, 2016. The invoices also reflected GST, supporting the character of the transaction as a supply of services. The existence of a formal renewed written contract was not where the parties continued the arrangement through correspondence, invoices and conduct.

Conclusion: The petitioner was an operational creditor and the amount claimed constituted operational debt.

Issue (ii): Whether the corporate debtor defaulted and whether there was any pre-existing dispute defeating the section 9 petition.

Analysis: The unpaid invoices, bank guarantee encashment consent, and repeated emails seeking time for payment showed acknowledgment of liability and failure to pay when due. The correspondence demonstrated that the corporate debtor accepted the dues and proposed repayment timelines, which established default under section 3(12) of the Insolvency and Bankruptcy Code, 2016. The alleged dispute regarding absence of a contract did not amount to a genuine pre-existing dispute because it was not shown to exist before the demand notice and did not dispute the specific invoices or debt.

Conclusion: Default was established and no pre-existing dispute existed to bar admission of the petition.

Issue (iii): Whether the petition was invalid for want of proper authorisation and whether the dispute had to be referred to arbitration.

Analysis: The governing bye-laws and the internal authorisation chain permitted delegation for institution of legal proceedings, and the filing was supported by the relevant resolution and authority letter. Insolvency proceedings are not to be diverted to arbitration once the adjudicating authority is seized of a section 9 application, and the Code prevails over the arbitration clause in this context. Accordingly, the request to refer the matter to arbitration could not be entertained.

Conclusion: The petition was properly authorised and the arbitration request was rejected.

Final Conclusion: The section 9 application was admitted, moratorium was declared, an interim resolution professional was appointed, and the ancillary request for arbitration was dismissed.

Ratio Decidendi: An exclusive sponsorship arrangement conferring advertising and promotional rights for consideration can amount to a provision of services under the Insolvency and Bankruptcy Code, 2016, and repeated acknowledgments of dues through correspondence can establish default and negate a plea of pre-existing dispute when the objection is not shown to have arisen before the demand notice.

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