In a matter successfully represented by Trust Legal for BW, NCLAT has upheld the ruling of NCLT Delhi concerning ‘Operational Debt’ under IBC

NCLAT upholds the ruling of NCLT Delhi: Payment made towards investment in a joint venture cannot be treated as ‘Operational Debt’ 

NCLAT Bench of Hon’ble Justice Jarat Kumar Jain and Hon’ble Member Kanthi Narahari, dismissed the appeal and upheld the finding of NCLT, Delhi that payment made towards performance guarantee or any such business preposition cannot be treated as Operational Debt under S-5(21) of the I&B Code.

The Hon’ble National Companies Law Appellate Tribunal vide its ruling dated 12.02.2021 in a matter titled R. K. Associates Private Limited versus BW Businessworld Media Private Limited upheld the Judgement passed by National Company Law Tribunal – Delhi by inter alia stating that the payment made towards performance guarantee or any such business proposition cannot be treated as Operational Debt under Section 5 (21) of the I&B Code.

National Company Law Tribunal, Delhi Bench in its Judgement passed in November 2020 had inter alia held that the debt that arises out of payment made by the Operational Creditor as its share for the purpose of submission of Performance Guarantee is neither arising out of any payment due towards supply of goods and services not out of any employment, thus is not an Operational Debt.  

The NCLAT in the Appeal, examined the Memorandum of Understanding (MoU) between the two parties wherein they had mutually agreed that they wish to cooperate for the purpose of jointly qualifying, developing, bidding, successful execution, and operating the projects in publication, printing and media.

NCLAT had reiterated its previous ruling inter alia stating that being parties to a joint venture project, the Appellant cannot claim to be ‘Operational Creditor’ as it does not relate to supply of goods nor service rendered by the Appellant, in view of which the Appeal was dismissed by NCLAT.

R.K. Associates Pvt. Ltd. was represented by Senior Advocate Nikhil Nayyar, Advocate Gagan Gupta and Advocate Umang Raj.

BW Businessworld Media Pvt. Ltd. (BW) was represented by Advocate Major Sudhanshu Pandey, instructed by Trust Legal, Advocates & Consultant through Partner Ms Petal Chandhok and Senior Associate Ms Rupali Gupta.