Jai International Pvt. Ltd Vs Jaroli Agro Pvt.Ltd. (NCLAT Delhi)
NCLAT Delhi held that an amount advanced by an operational creditor towards commission/brokerage and consultancy services could constitute an “operational debt” under Section 5(21) of the Insolvency and Bankruptcy Code, 2016, notwithstanding the description of the transaction as an advance or its treatment in the accounts. Jai International Pvt. Ltd. had advanced ₹40 lakh to Jaroli Agro Pvt. Ltd., and after adjustments an amount exceeding ₹30 lakh remained outstanding.
The NCLT had dismissed the Section 9 petition, inter alia, on the grounds that the amount represented a loan, the claim was barred by limitation and a dispute existed between the parties. NCLAT noted that receipt of ₹30 lakh was undisputed and that the corporate debtor’s ledger reflected the outstanding amount. The operational creditor’s audited balance sheet also recorded ₹30,71,903 as an advance recoverable in cash or kind. Since the advance was towards commission/brokerage payable for services, NCLAT held that it was connected with provision of services and consequently fell within Section 5(21).
On the alleged pre-existing dispute, NCLAT applied the principles in Mobilox Innovations Private Limited v. Kirusa Software Private Limited and observed that the corporate debtor raised the dispute only in its reply to the Section 8 demand notice without supporting material demonstrating an earlier dispute. The separate proceedings initiated by its director and the MOU relied upon were held unrelated because the corporate debtor was not a party thereto. On limitation, NCLAT found that transactions and debit/credit notes continued until 24 November 2017 and were accepted by the corporate debtor’s director. Consequently, Section 18 of the Limitation Act extended limitation and the petition filed in 2019 was within time. NCLAT therefore set aside the NCLT’s order and remanded the matter, directing that the parties be given 30 days to settle, failing which CIRP was to be initiated.
