# In the matter of Sanam Fashion & Design Exchange Ltd. vs. Ktex Nonwovens Pvt. Ltd.

> NCLAT judgment dated 2024-05-06. Citation: TCN-2024-NCLAT-00455. This case involves an appeal against the Adjudicating Authority's order rejecting the…

- **Court:** NCLAT
- **Order date:** 6 May 2024
- **Citation:** TCN-2024-NCLAT-00455
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclat-new-delhi/sanam-fashion-design-exchange-ltd-vs-ktex-nonwovens-pvt-ltd-186db912

## Summary

### Background

This case involves an appeal against the Adjudicating Authority's order rejecting the initiation of Corporate Insolvency Resolution Process (CIRP) against Ktex Nonwovens Pvt. Ltd. The appellant, Sanam Fashion & Design Exchange Ltd., claimed to have given an advance of USD 200,000 to the corporate debtor for the purchase of goods, which the corporate debtor failed to deliver and refused to repay. The Adjudicating Authority rejected the CIRP application, leading to this appeal.

## Facts

Sanam Fashion & Design Exchange Ltd. (Appellant) advanced USD 200,000 to Ktex Nonwovens Pvt. Ltd. (Respondent/Corporate Debtor) in March 2020 for 10 tonnes of non-woven fabric. The goods were to be delivered by March 19, 2020. Due to COVID-19, export from India was banned. After the epidemic, emails were exchanged regarding supply, delivery, and refunds. The Appellant issued a demand notice under Section 8 of IBC, which the Respondent did not respond to. The Appellant filed a company petition under Section 9 of IBC, which was rejected by the Adjudicating Authority. The key point of contention is the delivery location: the Appellant claims it was Hong Kong, while the Respondent claims it was 'Ex-Plant Rajkot'. The Adjudicating Authority relied on a revised proforma

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## Issues and analysis

### Issue 1: Whether the appellant is an …

**Ratio:** The definition of 'operational debt' under Section 5(21) of the IBC encompasses amounts

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**Reasoning:** The court relied on the Supreme Court's interpretation of Section 5(21) of the IBC, which

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**Interpretation:** The phrase 'in respect of' in Section 5(21) must be interpreted broadly to

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**Application:** In this case, the appellant made an advance payment to the respondent for the

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## Parties

- **Judges:** Rakesh Kuma…; Naresh Sa…; +1 more
- **Appellants:** Sanam Fashion &…
- **Respondents:** Ktex Nonwovens…

## Timeline

- **2020-03-01 — Advance P…**: Appellant gave 100% advance of USD 200,000 to the Corporate Debtor for supply of 10…
- **2020-03-16 — Purchase…**: Appellant issued a Purchase Order for…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 5(21) — Definitions](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-5)

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