NCLT Chandigarh: Buyer Who Makes Advance Payments for Goods Qualifies as Operational Creditor under IBC
Pranav B Prem
The National Company Law Tribunal (NCLT), Chandigarh Bench comprising Shri Harnam Singh Thakur (Judicial Member) and Shri Ashish Verma (Technical Member), has reiterated a significant legal principle by holding that a party who makes advance payments for procurement of goods qualifies as an “Operational Creditor” under the Insolvency and Bankruptcy Code, 2016. This decision was rendered in the matter of Kiranakart Technologies Pvt. Ltd. v. Hyretail Technologies Pvt. Ltd.
Background of the Dispute
Kiranakart Technologies Pvt. Ltd., also known by its brand name “Zepto,” is engaged in the B2B trading of consumer goods. The Corporate Debtor, Hyretail Technologies Pvt. Ltd., provides warehousing, logistics, and distribution services for grocery and dairy products. The two entities entered into a commercial relationship for the procurement of dairy items like milk, curd, yogurt, and paneer. This was formalized through a series of purchase orders raised by the Operational Creditor.
According to the petitioner, substantial advance payments were made to the Corporate Debtor through intermediary payment platforms—namely, Nehat Tech Solutions Pvt. Ltd. and Interropac Private Limited. However, the supplies made were inadequate and disproportionate to the advances paid. Consequently, the Operational Creditor discontinued business dealings and sought repayment of the excess funds, amounting to ₹7,57,60,073. Despite repeated communications and follow-ups, no repayment was made.
Upon receiving no response to a demand notice issued under Section 8 of the IBC, the Operational Creditor initiated proceedings under Section 9, citing non-payment of an undisputed operational debt. The Corporate Debtor, however, raised multiple defenses in opposition to the petition.
Defense by the Corporate Debtor
The Corporate Debtor contested the maintainability of the petition by arguing that the amounts received were not advances for goods but funds meant for business expansion of the Operational Creditor. It claimed that the money was used to establish infrastructure in Delhi-NCR, including Gurgaon, where eight stores were opened. The Corporate Debtor further asserted that ₹12.50 crore and ₹4.20 crore were received from Interropac Private Limited and Nehat Tech Solutions Pvt. Ltd., respectively, not from the Operational Creditor itself.
It was alleged that these payments were for setting up infrastructure and not linked to any supply of goods. The Corporate Debtor also emphasized that no purchase orders were issued by these entities and there was no formal agreement covering these transactions. It claimed that all transactions were based on oral assurances and mutual understanding.
Additionally, it accused the Operational Creditor of abandoning the venture after forcing expansion, leading to substantial losses. It asserted that it had invested in refrigerated trucks, storage facilities, and borrowed ₹3 crores from the market, relying on business continuity which did not materialize.
Rebuttal by the Operational Creditor
In its rejoinder and supporting documents, the Operational Creditor established that the funds routed through Nehat Tech and Interropac were indeed payments made by it using these platforms as intermediaries. It submitted extensive documentary evidence such as:
Payment confirmation letters
Terms and conditions of the payment platforms
MCA data, MoA, and AoA of both Nehat Tech and Interropac
Emails and communication showing acknowledgment of these payments by the Corporate Debtor
Ledger accounts and reconciliation statements
It was submitted that the payments were directly tied to purchase orders and invoices for the supply of dairy products. The Operational Creditor argued that the Corporate Debtor had, on several occasions, admitted the outstanding liability—particularly in email communications dated 30.07.2023 and 03.08.2023—where it agreed to pay ₹1 crore if business resumed. The ledger shared by the Corporate Debtor on 07.09.2023 acknowledged an outstanding amount of ₹5.90 crore.
Tribunal’s Observations and Findings
The NCLT found that the petition was filed within the limitation period and that the claim arose from operational debt linked to the supply of goods. The Tribunal carefully analyzed the nature of transactions and found that the Operational Creditor had made advance payments to the Corporate Debtor against the supply of goods, and such supplies had indeed occurred, supported by invoices and reconciliation statements.
Significantly, the Tribunal rejected the Corporate Debtor’s claim that the ₹16.7 crore received was for business expansion. It observed that no balance sheet or accounting records were submitted to reflect these transactions as equity infusion or loans. The assertion that these were infrastructure investments was unsupported and therefore lacked merit.
The Tribunal noted that multiple reconciliations had been conducted, and emails from the Corporate Debtor acknowledged the outstanding balances. It concluded that the defense raised was an afterthought intended to delay proceedings. The Tribunal emphasized that the Corporate Debtor’s own records showed an outstanding advance amount exceeding ₹1 crore even after adjusting the supplies made.
The NCLT referred to the Supreme Court’s ruling in Consolidated Construction Consortium Ltd. v. Hitro Energy Solutions Pvt. Ltd. [(2022) 7 SCC 164], which categorically held that an advance payment made for supply of goods qualifies the payer as an Operational Creditor.
Verdict
The Bench admitted the Section 9 petition after finding that the claim of the Operational Creditor was undisputed, exceeded the minimum threshold of ₹1 crore, and arose from operational transactions. The moratorium under Section 14 of the IBC was imposed with immediate effect, restraining any proceedings or recovery actions against the Corporate Debtor.
Mr. Arunava Sikdar was appointed as the Interim Resolution Professional (IRP) to carry forward the Corporate Insolvency Resolution Process (CIRP). The Operational Creditor was directed to deposit ₹3 lakhs to cover immediate expenses of the CIRP, which would be reimbursable as part of the insolvency cost.
The NCLT, Chandigarh, held that the advance payments made by Kiranakart Technologies for the supply of goods clearly established a commercial transaction, qualifying it as an Operational Creditor under the IBC. Finding that the admitted unpaid debt exceeded the statutory threshold, the Tribunal allowed the insolvency petition and initiated CIRP against Hyretail Technologies Pvt. Ltd.
Appearance
For Operational Creditor: Mr. Vineet Bhagat, Advocate
For Corporate Debtor: Mr. Sumit Sharma, Director (Through VC)
Cause Title: Kiranakart Technologies Pvt. Ltd. V. Hyretail Technologies Pvt. Ltd.
Case No: CP (IB) No. 301/CHD/HRY/2023
Coram: Sh. Harnam Singh Thakur [Hon’ble Member (Judicial)], Sh. Ashish Verma [Hon’ble Member (Technical)]
[Read/Download order]
