# In the matter of Mohana Cotton Ginning Private Limited

> NCLT judgment dated 2023-09-01. Citation: TCN-2023-NCLT-01786. Posco Daewoo Corporation, the Operational Creditor (OC), filed a petition against Mohana Cotton…

- **Court:** NCLT
- **Order date:** 1 Sept 2023
- **Citation:** TCN-2023-NCLT-01786
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/mohana-cotton-ginning-private-limited-98ba12f1

## Summary

### Background

Posco Daewoo Corporation, the Operational Creditor (OC), filed a petition against Mohana Cotton Ginning Private Limited, the Corporate Debtor (CD), seeking to initiate Corporate Insolvency Resolution Process (CIRP) for a default of USD 30,000. The OC and CD had executed an International Shipment Contract on 2017-01-10 for the supply of 300 MT of Indian Raw Cotton. The CD supplied the goods, but due to certain compensation owed by the CD to the OC, they agreed the CD would pay USD 30,000. The OC raised a debit note, which the CD acknowledged via email on 2017-09-07. Despite reminders, the CD failed to pay, leading to the CIRP petition. The CD contended the petition was not maintainable, arguing the intention of the IBC was not to burden the Adjudicating Authority with

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## Facts

On 2017-01-10, Posco Daewoo Corporation (OC) and Mohana Cotton Ginning Private Limited (CD) entered into an International Shipment Contract for 300 MT of Indian Raw Cotton. The CD supplied the goods. Due to certain compensation owed by the CD to the OC, they agreed the CD would pay USD 30,000. The OC raised a debit note for this amount. The CD acknowledged the liability via email on 2017-09-07. Despite repeated reminders, the CD failed to pay the USD 30,000. The OC then filed a petition to initiate CIRP against the CD. The CD filed a counter, arguing the petition was not maintainable because the intention of the IBC was not to burden the Adjudicating Authority with contract disputes, and there was an arbitration clause. The OC argued that the unpaid debt arose out of a

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## Issues and analysis

### Issue 1: Whether the claim for compensation qualifies as an Operational Debt under Section 5(21) of the …

**Ratio:** Operational debt means a claim in respect of the provision of goods or services including

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**Reasoning:** The NCLT Amaravati Bench reasoned that the amount claimed in the petition was for

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**Interpretation:** Section 5(21) of the IBC defines 'operational debt' narrowly, requiring it to

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**Application:** In this case, the compensation was claimed for breach of certain terms of the

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## Parties

- **Judges:** TELAPROLU…
- **Appellants:** Posco Daewoo…
- **Respondents:** Mohana Cotton…

## Timeline

- **2017-01-10 — Contract Ex…**: Posco Daewoo Corporation and Mohana Cotton Ginning Private Limited executed an…
- **2017-09-07 — Debit Note Acknowledgmen…**: Mohana Cotton Ginning Private Limited acknowledged the debit note for USD 30,000 via…

## 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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