The NCLAT upheld the Corporate Insolvency Resolution Process (CIRP) ruling, stating that an agreement to sell does not discharge operational debt of ₹5.73 crore, rejecting the 'moonshine' defence. The court found no genuine pre-existing dispute regarding goods supplied, confirming the obligations under the IBC.
NCLAT Ruling on Operational Debt
On September 7, 2026, the National Company Law Appellate Tribunal (NCLAT) delivered a significant ruling regarding the enforceability of operational debt under the Insolvency and Bankruptcy Code (IBC). The tribunal upheld a Corporate Insolvency Resolution Process (CIRP) initiated against a corporate debtor where an agreement to sell was rejected as a valid defence against outstanding operational debt amounting to ₹5.73 crore.
The NCLAT found that the corporate debtor's reliance on the 'moonshine' defence, asserting that the agreement to sell the goods discharged the operational debt, was unfounded. The tribunal observed that there was no genuine pre-existing dispute about the supply of goods. As a result, it confirmed that the operational debt remained due and payable, validating the CIRP initiation.
“The existence of an agreement is not sufficient to negate the operational debt unless a genuine dispute regarding the supply is established,” stated the NCLAT.
This ruling clarifies that operational debts cannot be easily discharged through agreements, emphasizing the importance of actual disputes over goods supplied. The tribunal pointed out that the IBC aims to facilitate the resolution of insolvency cases in a timely manner.
For practitioners, this ruling emphasizes the need for careful scrutiny of any defence claims related to operational debts in insolvency proceedings. The NCLAT's stringent stance on recognising the enforceability of debts reinforces the framework established under the IBC.
Citations
- Case Name (2026) NCLAT 5
