NCLT Dismisses IBC S.9 Plea: Pre-Existing Dispute & Revenue-Sharing Agreement Negate 'Operational Debt' Claim - 2025-05-29

NCLT Dismisses Insolvency Plea Against RoadE Labs , Cites Pre-Existing Dispute and Revenue-Sharing Pact

Hyderabad, Telangana - The National Company Law Tribunal (NCLT), Hyderabad Bench, comprising Smt. Madhu Sinha (Member Technical ) and Shri. Vinay Goel (Member Judicial), has dismissed a petition filed by Valiant Cinque Private Limited seeking to initiate Corporate Insolvency Resolution Process (CIRP) against RoadE Labs Private Limited under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Tribunal, in its order dated May 27, 2025, found that a pre-existing dispute and the nature of the financial arrangement, governed by a Master Channel Partner Agreement (MCPA), did not qualify the alleged dues as "operational debt."

Case Background: A Claim of Unpaid Software Services

Valiant Cinque Private Limited ("Petitioner") filed the petition on January 24, 2024, claiming a default of Rs. 1,42,71,294.06 by RoadE Labs Private Limited ("Respondent") for purported "software services" rendered. The Petitioner had issued a demand notice under Form 4 of the IBC on September 25, 2023.

Petitioner's Contentions: Operational Debt and Undisclosed Interests

The Petitioner argued that:

* The outstanding amount constituted an operational debt for services provided.

* The Respondent had acknowledged the debt by making partial payments towards GST liabilities.

* A Master Channel Partner Agreement (MCPA) dated September 10, 2021, was questioned, with allegations that Ms. Liz Thomas , a common director in both companies, had an undisclosed interest in the Respondent company and that the agreement was not properly ratified.

* Any disputes raised by the Respondent were an afterthought, emerging only after the issuance of the demand notice.

* Ongoing arbitration proceedings did not bar the admission of the IBC petition.

Respondent's Defense: Pre-Existing Disputes and Revenue-Sharing Model

RoadE Labs countered the petition by highlighting:

* Pre-existing Disputes: Disputes existed since December 15, 2022, when the Petitioner communicated its board's resolution to dissolve the company. Consequently, on March 23, 2023, RoadE Labs invoked the penalty clause of the MCPA (for Rs. 10 Crores) due to alleged breach of contract and concerns over business continuity, reserving the right to withhold payments. This significantly predated the Petitioner's demand notice.

* Nature of Relationship: The relationship was governed by the MCPA, signed on September 10, 2021 (the same day the Petitioner company was incorporated). This agreement stipulated a revenue-sharing model (80% to Petitioner, 20% to Respondent) where RoadE Labs front-ended projects for IBM on behalf of Valiant Cinque . Thus, the invoices were for the Petitioner's revenue share, not for services directly rendered to RoadE Labs , meaning the claim was not an "operational debt."

* Suppression of Facts: The Petitioner failed to disclose the MCPA in its initial petition.

* Internal Conflicts: The insolvency petition was allegedly a result of internal disputes among the Petitioner's directors. The authority of Ms. Zara Siraj , who signed the insolvency petition on behalf of Valiant Cinque , was also questioned, as her appointment as director on March 8, 2024, post-dated the petition filing (January 24, 2024) and was itself under challenge in a separate NCLT proceeding.

* Arbitration Invoked: RoadE Labs had already initiated arbitration proceedings related to the MCPA.

Tribunal's Observations and Findings

The NCLT meticulously examined the arguments and evidence, making several key observations:

Master Channel Partner Agreement (MCPA): The Tribunal noted the Petitioner's initial failure to mention the MCPA and subsequent attempts to dispute its validity. However, it found that signatures on the MCPA were admitted, and an email from the Petitioner dated March 8, 2023, acknowledged the agreement. The Tribunal stated: > "The Master Channel Partner Agreement reflects that it was a joint venture with a profit-sharing ratio of 80:20. Accordingly, both the Petitioner and the Respondent were working for IBM, and the Respondent had agreed to act as the front end for IBM OpenPages GRC Project on behalf of the Petitioner. Therefore, there was no direct creditor-debtor relationship between the Petitioner and the Respondent companies. As such, the alleged amount would not fall within the ambit of operational debt."

Pre-Existing Dispute: The Tribunal found clear evidence of a pre-existing dispute, citing a chain of correspondence starting with the Petitioner’s dissolution notice on December 15, 2022, and the Respondent's invocation of the MCPA's penalty clause on March 23, 2023. > "The criss-cross exchange of emails between the parties reflects that there was pre-existing dispute between the parties... This dispute is further substantiated by the respondent’s notice sent through email dated March 23, 2023... halting payments until further notice... Notably, this pre-existing dispute predates the issuance of the Form 4 notice under Section 8(1) of the Insolvency and Bankruptcy Code, 2016, dated 25.09.2023." The Tribunal referred to the Supreme Court's decision in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited , which clarifies that a "dispute" under IBC is not limited to pending legal proceedings.

Suppression of Material Facts: The NCLT criticized the Petitioner for not disclosing the MCPA at the outset. > "It can be said that Petitioner Company has not come to this Tribunal with clean hands and has suppressed material facts at first instance." The Tribunal cited Ramjas Foundation v. Union of India (2010) 14 SCC 38 , emphasizing that a litigant must approach the court with clean hands.

Petitioner Bound by Director's Actions: The Tribunal dismissed the Petitioner's attempt to disown communications made by its former directors, stating it was an "afterthought to wriggle out from the communications."

Decision: Petition Dismissed

Based on these findings, the NCLT concluded that a pre-existing dispute was evident and that the claimed amount did not qualify as an operational debt under the IBC due to the revenue-sharing nature of the MCPA. Consequently, the petition was dismissed.

The Tribunal directed the Registry to send copies of the order to all parties involved. This judgment underscores the NCLT's rigorous scrutiny of claims to ensure that the IBC process is not misused for debt recovery where genuine disputes or differing contractual relationships exist.