# In the matter of Maharaja Shree Umaid Mills Limited C.P. (IB) No. 1051-KB-2019

> NCLT judgment dated 2020-03-18. Citation: TCN-2020-NCLT-01478. The case involves an application for the initiation of a corporate insolvency resolution…

- **Court:** NCLT
- **Order date:** 18 Mar 2020
- **Citation:** TCN-2020-NCLT-01478
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/maharaja-shree-umaid-mills-limited-cp-ib-no-1051-kb-2019-079add05

## Summary

### Background

The case involves an application for the initiation of a corporate insolvency resolution process by Shree Karni PT. LTD. (Operational Creditor) against Maharaja Shree Umaid Mills Limited (Corporate Debtor) under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Operational Creditor claimed default in payment of Rs. 6,14,189 inclusive of interest till February 28, 2019, related to the purchase of hosiery yarn. The Corporate Debtor disputed the claim, asserting that the Operational Creditor was seeking a refund for goods already sold to its customers and that there was a pre-existing dispute regarding the quality of the supplied goods.

## Facts

Shree Karni PT. LTD. (Operational Creditor) filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, against Maharaja Shree Umaid Mills Limited (Corporate Debtor) for default in payment of Rs. 6,14,189, inclusive of interest, till February 28, 2019. The Operational Creditor had purchased 6,123.600 Kgs of Hosiery Yarn from the Corporate Debtor, paying Rs. 14,11,506 as advance on January 24, 2018. The goods were found defective, and the Corporate Debtor was informed. The Corporate Debtor requested the Operational Creditor to sell the defective material at a reduced price. The Operational Creditor sold 4122 Kgs of yarn at Rs. 10 per Kg. The remaining 2047.980 Kgs were not lifted by the Corporate Debtor, and the pending amount of Rs. 4,72,073 was

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## Issues and analysis

### Issue 1: Whether the claim of the applicant falls within the definition of 'operational debt' as defined …

**Ratio:** The definition of 'operational debt' under Section 5(21) of the I&B Code requires

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**Reasoning:** The court reasoned that the Corporate Debtor disputed the claim, asserting that the

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**Interpretation:** The court interpreted the definition of 'operational debt' strictly, requiring

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**Application:** In this case, the court found that the claim was essentially for a refund or

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## Parties

- **Judges:** Jinan…; Harish Chander…
- **Appellants:** Shree K…
- **Respondents:** M/S. MAHARAJA…; Maharaja Shree…
- **Advocates:** Pankaj Ag…; PARAMITA…; +1 more

## Timeline

- **2018-01-24 — Advance P…**: The Operational Creditor paid Rs. 14,11,506 as…
- **2018-11-05 — Communication Regarding…**: The Corporate Debtor communicated to the Operational Creditor verbally and via email that…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 9 — Application for initiation of corporate insolvency…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-9)

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