Recently the National Company Law Tribunal ( NCLT ), New Delhi bench in a recent case has dismissed petition filed by Bollywood actor Akshay Kumar, seeking initiation of insolvency proceedings against Cue Learn Private Limited, an ed tech company.
The Tribunal noted that the claim in question pertained to a breach of contract and was at best, a claim for liquidated damages and such claims require adjudication before a competent civil court and do not constitute crystallized debts that can be pursued under the insolvency resolution process. Akshay Kumar (Applicant/Operational Creditor) filed the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 ( IBC ) against M/s Cue Learn Private Limited (Respondent/Corporate Debtor) for initiating the Corporate Insolvency Resolution Process (CIRP) due to a default in payment of Rs. 4,83,24,201.
The Future of Tax and Finance: Upskill with Us The Respondent and the Applicant signed an Endorsement Agreement, which required the Applicant to provide endorsement services. The Respondent failed to pay the second payment of Rs. 4,05,00,000 that was due on April 15, 2022, despite the Applicant providing the services for Day 1 as promised. According to the agreement, the applicant claimed Rs. 4,83,24,201 as “Operational Debt,” which included Rs. 4.05 cr. with GST and interest. Under Section 8 of the IBC, a Demand Notice was sent out. Even though the Applicant fulfilled his responsibilities, the Respondent failed to pay the second tranche. Payment was made without waiting for the applicant to be available for more days. The second payment was required regardless of whether the Respondent used the second day, according to clause 5.1.2 of the Agreement. Because it resulted from services rendered by the applicant, the obligation is classified as a “operational debt.”
\The Future of Tax and Finance: Upskill with Us The Tribunal noted that the claim of an operational debt was refuted by the Operational Creditor’s failure to execute the necessary services. According to the Agreement, the Respondent’s responsibilities will terminate in the case of default. As a result, the claim was for damages. “
Claims for damages, however, do not fall within the ambit of operational debt as defined under the IBC,” the Tribunal ruled. A two member bench comprising Justice Manni Sankariah Shanmuga Sundaram (Judicial Member) and Dr. Sanjeev Ranjan (Technical Member) found that the claim pertained to a breach of contract and was at best, a claim for liquidated damages. It was observed that such claims require adjudication before a competent civil court and do not constitute crystallized debts that can be pursued under the insolvency resolution process.