The National Company Law Appellate Tribunal has clarified that a joint venture partner may qualify as an operational creditor under the Insolvency and Bankruptcy Code, 2016, if its claim arises from an independent supply obligation, distinct from profit-sharing arrangements. This ruling reinforces the principle that the nature of the transaction, not the relationship between parties, determines maintainability of a Section 9 application.
Background & Facts
The Dispute
The dispute arose between ASB Energy Systems and Construction Pvt. Ltd. (the corporate debtor) and Daga Power Systems & Engineers Pvt. Ltd. (the operational creditor), who were joint bidders for a major transmission line project awarded by Orissa Power Transmission Corporation Ltd. (OPTCL). The corporate debtor was the lead member of the consortium. While both parties entered into a Joint Venture/Consortium Agreement to bid for and execute the OPTCL contract, they subsequently entered into a separate Internal Agreement dated 04.01.2019, which allocated distinct responsibilities: the corporate debtor was to handle erection and civil works, while the operational creditor was exclusively responsible for the supply of materials.
Key Facts
- OPTCL issued a Letter of Award on 20.08.2018 to the consortium for a contract valued at ₹32.40 crore, later enhanced to ₹36.88 crore on 23.04.2020.
- The Contract Agreement dated 22.02.2019 bifurcated the work into three components: supply (₹18.90 crore), erection (₹2.22 crore), and civil works (₹11.27 crore).
- The Internal Agreement dated 04.01.2019 assigned the supply component to the operational creditor and the erection/civil works to the corporate debtor.
- An Addendum dated 11.02.2020 explicitly stated: "The second party [Daga] shall supply materials... and the first party [ASB] shall be responsible for payments to the second party for total quantity supplied."
- The operational creditor raised tax invoices from 30.04.2019 to 30.10.2021, naming the corporate debtor as buyer and OPTCL as consignee.
- The corporate debtor availed Input Tax Credit on these invoices in its GST returns.
- On 25.07.2022, the operational creditor issued a demand notice for ₹3.19 crore.
- On 21.10.2022, the corporate debtor acknowledged in writing: "We have received ₹11,38,65,869/- from OPTCL... and our liability of balance payment to M/s Daga Power Systems & Engineers Pvt. Ltd. is ₹1,52,26,153/- for supply of materials."
- On 31.03.2023, the operational creditor issued a statutory demand notice under Section 8 of the IBC, claiming ₹3.19 crore principal and ₹1.09 crore interest.
- No reply was received by the corporate debtor within the statutory 10-day period.
- On 23.05.2025, the operational creditor filed a Section 9 application, alleging default as of 31.10.2021 (date of last invoice).
Procedural History
- 20.08.2018: OPTCL issues Letter of Award to consortium.
- 04.01.2019: Internal Agreement executed between corporate debtor and operational creditor.
- 11.02.2020: First Addendum to Internal Agreement executed, clarifying payment obligations.
- 23.04.2020: OPTCL enhances contract value to ₹36.88 crore.
- 30.04.2019 to 30.10.2021: Operational creditor raises 40+ invoices for supply.
- 25.07.2022: Operational creditor issues first demand notice for ₹3.19 crore.
- 21.10.2022: Corporate debtor acknowledges liability of ₹1.52 crore in writing.
- 31.03.2023: Statutory demand notice under Section 8 issued and served on 03.04.2023.
- 23.05.2025: Section 9 application filed before NCLT Cuttack Bench.
- 15.10.2025: NCLT admits Section 9 application, holding operational debt established.
- 16.10.2025: Appellant files appeal before NCLAT.
- 04.05.2026: NCLAT delivers judgment.
The Parties' Positions
The appellant, Amarendra Mohapatra (suspended director of the corporate debtor), contended that the operational creditor was not a true supplier but a JV partner sharing profits in a 60:40 ratio, and therefore could not claim operational debt. He argued that payments were contingent on OPTCL’s disbursements and that the claim was barred by Section 10A of the IBC, as most invoices fell within the COVID-era moratorium period (25.03.2020 to 24.03.2021). He further claimed a pre-existing dispute existed, evidenced by the operational creditor’s letter to OPTCL dated 01.03.2023.
The respondents (operational creditor and IRP) countered that the Internal Agreement and Addendum created a clear buyer-supplier relationship. They emphasized that the corporate debtor had acknowledged liability in writing, availed GST credit, and made partial payments. They argued that Section 10A did not apply because the default occurred after the moratorium period (31.10.2021), and the claim was confined to supply obligations, not profit-sharing.
Relief Sought
The appellant sought quashing of the NCLT’s order dated 15.10.2025, arguing that the Section 9 application was not maintainable. The respondents sought dismissal of the appeal and continuation of the Corporate Insolvency Resolution Process (CIRP).
The Legal Issue
Can a party to a joint venture qualify as an operational creditor under Section 9 of the IBC when it supplies goods under a separate, independent agreement that creates a buyer-supplier relationship, even if the parties are co-bidders on a third-party contract?
Arguments Presented
For the Appellant
The appellant relied on Prashanth Shekara Shetty v. Alcuris Healthcare and Sree Sankeshwara Foundation v. Dugar Housing, arguing that where parties are joint venturers with shared control, mutual investment, and profit-sharing, no operational debt arises. He contended that the supply was made to OPTCL, not the corporate debtor, and payments were contingent on OPTCL’s releases. He further argued that invoices issued between 25.03.2020 and 24.03.2021 (valued at ₹4 crore) rendered the claim barred under Section 10A, and that the letter dated 01.03.2023 to OPTCL disclosed a pre-existing dispute.
For the Respondent
The respondents argued that the Internal Agreement and Addendum created a distinct contractual obligation: the corporate debtor was bound to pay for supplies received, irrespective of OPTCL’s payments. They emphasized that the corporate debtor had accepted the goods, claimed GST credit, and acknowledged liability in writing on 21.10.2022. They contended that Section 10A did not apply because the default date (31.10.2021) fell outside the moratorium period, and the claim was for unpaid supply invoices, not profit shares. The letter to OPTCL was merely a request for mediation, not a dispute over the debt’s existence.
The Court's Analysis
The NCLAT undertook a detailed examination of the contractual framework, distinguishing between joint venture arrangements and independent commercial obligations. It held that the mere existence of a JV does not preclude the creation of a buyer-supplier relationship under a separate agreement.
"The facts of the present case thus are clearly distinguishable from the above judgement where obligations of both the parties were clearly differentiated and obligation and liabilities were clearly spelled out in the Agreement dated 04.01.2019 and the Addendum as noted above."
The Tribunal emphasized that the Addendum dated 11.02.2020 explicitly made the corporate debtor responsible for payment to the operational creditor for supplies made, regardless of whether OPTCL had paid. The corporate debtor’s availing of Input Tax Credit on the invoices and its written acknowledgment on 21.10.2022 constituted clear evidence of debt and default.
The Court rejected the Section 10A argument, noting that the default date claimed (31.10.2021) was after the moratorium period, and the claim was not based on invoices issued during the prohibited period. The Tribunal held that Section 10A bars only defaults occurring during the moratorium, not the mere issuance of invoices. The corporate debtor had not pleaded Section 10A in its reply to the Section 9 application, and the Tribunal declined to entertain it for the first time on appeal.
Regarding the alleged pre-existing dispute, the Court found that the letter dated 01.03.2023 to OPTCL was a request for intervention and mediation, not a denial of liability. The corporate debtor’s own letter of 21.10.2022 confirmed the debt, thereby negating any claim of dispute.
The Court also distinguished Decor Paper Mills by noting that in that case, the debtor had acknowledged debt during the moratorium period, whereas here, the acknowledgment occurred after the moratorium and pertained to post-moratorium default.
The Verdict
The appeal was dismissed. The NCLAT upheld the NCLT’s order dated 15.10.2025 admitting the Section 9 application. The interim stay was discharged. The Interim Resolution Professional was directed to constitute the Committee of Creditors and proceed with the Corporate Insolvency Resolution Process. The period from 31.10.2025 to the date of judgment was excluded from the 270-day CIRP timeline. The parties were directed to bear their own costs. The Court affirmed that the operational debt of ₹3,19,92,738/- was validly established and that the CIRP may be withdrawn under Section 12A if a settlement is reached.
What This Means For Similar Cases
JV Partners Can Be Operational Creditors
- Practitioners must now assess whether a JV partner’s claim arises from an independent supply or service obligation, not merely profit-sharing.
- A written agreement allocating specific roles (e.g., supply vs. execution) creates a buyer-supplier relationship, even if parties are co-bidders.
- GST credit availed and written acknowledgments are strong evidence of operational debt.
Section 10A Requires Precise Default Date Analysis
- The default date, not the invoice date, determines applicability of Section 10A.
- If the default occurs after 24.03.2021, Section 10A does not bar the application, even if some invoices were issued during the moratorium.
- Parties must plead Section 10A in their reply to the Section 9 application; failure to do so waives the defense.
Acknowledgment of Debt Overrides Dispute Claims
- A written acknowledgment of liability, even partial, negates claims of pre-existing dispute under Section 8(2).
- Letters to third parties (e.g., OPTCL) requesting mediation do not constitute a dispute over the debt’s existence.
- Operational creditors should preserve all acknowledgments and GST records to substantiate claims.
