The National Company Law Appellate Tribunal has clarified that an advance payment made under a consortium agreement for the supply of goods qualifies as operational debt under the Insolvency and Bankruptcy Code, 2016, even where the parties are joint bidders for a third-party project. This ruling reinforces that the nature of the transaction, not the structure of the consortium, determines the existence of operational debt.
Background & Facts
The Dispute
Tech Lads India Private Limited (Appellant) and Satnam Global Infraprojects Limited (Corporate Debtor or CD) entered into a Consortium Agreement on 29.05.2020 to jointly bid for a tender floated by Telecommunication Consultants India Limited (TCIL) for the supply, installation, and integration of the Meghalaya Multi-Lane Free Flow Vehicle Monitoring System (MLFF-VMS). The Appellant was designated as the lead bidder responsible for supply and implementation of the system, while the CD was responsible for financial management and provision of Performance Bank Guarantee (PBG). The Consortium Agreement explicitly provided that the Appellant would make payments to the CD for supplies and services rendered by the CD under its scope of work.
Key Facts
- Consortium Agreement executed on 29.05.2020
- TCIL issued Letter of Intent (LoI) on 26.10.2020 for project value of Rs.41,06,40,000
- Appellant made RTGS payment of Rs.8,00,00,000 to CD on 20.04.2021 as advance for supply of goods
- CD failed to deliver goods or refund the advance
- CD issued four cheques of Rs.2,00,00,000 each (total Rs.8,00,00,000) on 05.09.2023, which were returned by the Appellant at CD’s request for RTGS payment
- CD uploaded a fake GST invoice dated 26.03.2024 for Rs.4,72,66,500 claiming supply to the Appellant
- Appellant filed a formal complaint with the Commissioner of GST on 06.05.2024 alleging fraudulent invoicing
- CD withdrew the GST invoice after the complaint
- Appellant issued a Demand Notice under Section 8 of IBC on 08.04.2024, demanding Rs.9,29,55,562 (principal Rs.6,20,00,000 + interest)
- CD received the Demand Notice on 15.04.2024 and responded only via email on 24.04.2024 stating it was reconciling accounts
- CD denied the existence of operational debt in its reply to the Section 9 application, claiming Rs.8 crores was a security deposit
- No documentary evidence was produced by CD to substantiate the security deposit claim
- NCLT rejected the Section 9 application on 24.09.2025, holding no inter se commercial transaction existed
Procedural History
- 29.05.2020: Consortium Agreement executed between Appellant and CD
- 26.10.2020: TCIL issued LoI accepting consortium bid
- 20.04.2021: Appellant paid Rs.8,00,00,000 to CD via RTGS
- 05.09.2023: CD issued four cheques of Rs.2,00,00,000 each to Appellant
- 06.05.2024: Appellant filed GST fraud complaint against CD
- 08.04.2024: Demand Notice issued under Section 8 of IBC
- 15.04.2024: Demand Notice received by CD
- 24.04.2024: CD sent email acknowledging reconciliation of accounts, no denial of debt
- 24.09.2025: NCLT (Bench V, New Delhi) dismissed Section 9 application (CP(IB) No.329/ND/2024)
- 24.09.2025: Appeal filed before NCLAT (Company Appeal (AT) (Ins.) No.1751 of 2025)
- 03.07.2026: NCLAT delivered judgment
The Parties' Positions
For the Appellant
- Rs.8 crores was an advance payment for supply of goods under Clause (k) of the Consortium Agreement
- CD’s failure to deliver goods constituted default
- Issuance of cheques and subsequent withdrawal of GST invoice confirmed liability
- Email dated 24.04.2024 was not a dispute but an admission of pending reconciliation
- Relied on Consolidated Construction Consortium Ltd. v. Hitro Energy Solutions (2022) 7 SCC 164 to establish that operational debt includes claims arising from contracts for supply, regardless of who is supplier or receiver
For the Respondent (CD)
- Rs.8 crores was a security deposit to secure financial facilities provided by CD
- No supply agreement existed between parties; obligations were only towards TCIL
- No purchase order, invoice, or delivery schedule supported claim of supply
- Alleged cheques were never physically handed over; only photocopies shared
- GST invoice was issued for financing services and withdrawn upon clarification
- Relied on Global Credit Capital Ltd. v. Sach Marketing Pvt. Ltd. (2024) 9 SCC 482 to argue real nature of transaction must be determined from written documents
- Claimed pre-existing dispute barred admission under Section 9
Relief Sought
The Appellant sought:
- Setting aside of NCLT’s order dated 24.09.2025
- Admission of Section 9 application for initiation of CIRP
- Direction to NCLT to admit the application within three months
- Opportunity for CD to liquidate the debt of Rs.9,29,55,562 within the stipulated period to avoid CIRP
The Legal Issue
Whether an advance payment made by one consortium member to another for the supply of goods, pursuant to a written consortium agreement, constitutes an "operational debt" under Section 5(21) of the Insolvency and Bankruptcy Code, 2016, even when the parties are jointly executing a third-party contract?
Arguments Presented
For the Appellant
The Appellant relied on Clause (k) of the Consortium Agreement, which explicitly required it to make payments to the CD for supplies and services rendered. The payment of Rs.8 crores was clearly an advance for goods, not a security deposit, as no such term existed in the agreement. The CD’s issuance of cheques for the same amount constituted an acknowledgment of liability. The subsequent withdrawal of the GST invoice, following a fraud complaint, further corroborated that no supply had occurred. The Appellant cited Consolidated Construction Consortium Ltd. v. Hitro Energy Solutions, where the Supreme Court held that operational debt includes claims arising from contracts for supply, irrespective of whether the creditor is the supplier or receiver. The email dated 24.04.2024 was not a dispute but a non-response, which under IBC jurisprudence, cannot defeat a valid claim.
For the Respondent
The CD contended that the Consortium Agreement was solely for bidding purposes and did not create inter se commercial obligations. It argued that Rs.8 crores was a security deposit to secure financial advances provided by CD, and that the cheques were never physically delivered. The CD relied on Global Credit Capital Ltd. v. Sach Marketing Pvt. Ltd., asserting that the real nature of the transaction must be determined from the written agreement, which, according to CD, showed no supply obligation. It further claimed that the GST invoice and the Appellant’s complaint established a pre-existing dispute, thereby disqualifying the Section 9 application under S.S. Engineers v. Hindustan Petroleum and Raj Ratan Babulal Agarwal v. Solartex India.
The Court's Analysis
The NCLAT undertook a detailed examination of the Consortium Agreement and the conduct of the parties. It emphasized that Section 5(21) defines operational debt as a claim "in respect of the provision of goods or services," without restricting the identity of the supplier or recipient. The Court held that the key inquiry is whether the claim has a nexus with the provision of goods or services, not whether the parties are joint bidders.
"The most crucial condition, which is relevant in the present case is condition (k), which says that the 'parties further agree that Tech Lads shall make the due payments to SGIL and other sub-vendors for the supplies and services rendered as per their scope of work'. Thus, the Agreement clearly contemplated supply by CD and payment by Tech Lads (Appellant)."
The Court rejected the CD’s claim that Rs.8 crores was a security deposit, noting the absence of any documentary evidence or contractual provision supporting such an understanding. The Consortium Agreement only required a PBG in favor of TCIL, not a security deposit from the Appellant to the CD.
The Court further held that the issuance of cheques by the CD, even if later returned, constituted an acknowledgment of debt under Section 8 of the IBC. The Appellant’s complaint regarding the fake GST invoice and its subsequent withdrawal by the CD further supported the claim that no supply had occurred. The email dated 24.04.2024, stating only that accounts were being reconciled, did not constitute a dispute under Section 8(2) of the IBC, as it failed to contest the nature or existence of the debt.
The NCLAT distinguished the facts from Global Credit Capital Ltd., noting that in that case, the transaction was clearly financial in nature. Here, the transaction was commercial and supply-based, as evidenced by the Consortium Agreement and the GST invoice. The Court also relied on its own recent judgment in Amarendra Mohapatra v. Daga Power Systems, where a similar consortium arrangement was held to create operational debt for supply components.
The Court concluded that the NCLT erred in rejecting the Section 9 application on the ground that no inter se commercial transaction existed. The existence of a consortium does not negate the presence of independent contractual obligations between members.
The Verdict
The Appellant succeeded. The NCLAT set aside the NCLT’s order dated 24.09.2025 and held that an operational debt of Rs.9,29,55,562 exists, exceeding the statutory threshold of Rs.1 crore. The Section 9 application (CP(IB) No.329/ND/2024) is revived and must be admitted by the NCLT within three months of receipt of this order. The CD is granted an opportunity to liquidate the debt within this period by paying the full amount of Rs.9,29,55,562 and submitting proof of payment to the NCLT. If the debt is liquidated, the Section 9 application shall be closed. Parties shall bear their own costs.
What This Means For Similar Cases
Consortium Agreements Do Not Automatically Exclude Operational Debt
- Practitioners must analyze the specific contractual obligations between consortium members, not merely the existence of a joint bid
- Clause (k)-type provisions creating payment obligations for supplies/services create actionable operational debt
- The nature of the transaction, not the structure of the arrangement, determines debt classification
Non-Response to Demand Notice Is Not a Dispute
- A mere statement of "reconciling accounts" without contesting the debt’s existence or amount does not constitute a pre-existing dispute under Section 8(2)
- Silence or non-denial after receipt of a demand notice may be treated as acquiescence
- Parties must raise specific, documented objections to avoid Section 9 admission
GST Invoices and Cheques Are Critical Evidence
- Issuance of cheques for the claimed amount, even if returned, constitutes acknowledgment of liability
- Fraudulent GST invoicing followed by withdrawal supports claims of non-supply
- Such conduct can be used to rebut claims of pre-existing disputes
- Practitioners should always collect and preserve digital audit trails from GST portal and payment records
