NCLAT Revives Insolvency Plea Against Satnam Global Over ₹8 Crore Advance Paid Under Consortium Agreement

The National Company Law Appellate Tribunal (NCLAT), New Delhi, has held that Tech Lads India Pvt. Ltd.'s claim arising from an advance payment of ₹8 crore made to its consortium partner, Satnam Global Infraprojects Ltd., towards the supply of goods constituted an operational debt under the Insolvency and Bankruptcy Code, 2016.

It found that the National Company Law Tribunal (NCLT) had erred in holding that the consortium agreement did not create any inter se commercial transaction between the parties.

A bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra observed, "The Adjudicating Authority committed error in observing in the impugned order that Consortium Agreement does not have any inter se commercial transaction between the parties."

The dispute arose from a consortium agreement executed between Tech Lads and Satnam Global Infraprojects Ltd. to bid for a project floated by Telecommunications Consultants India Ltd. (TCIL), which was later awarded to the consortium.

Under the agreement, Tech Lads was the lead bidder responsible for supplying and implementing the project, while Satnam Global was entrusted with financial management, furnishing the performance bank guarantee and supplying specified poles and related items. The agreement further provided that Tech Lads would make payments to Satnam Global for supplies and services rendered within its scope of work.

According to Tech Lads, it transferred ₹8 crore to Satnam Global as an advance towards the supply of goods. It alleged that the goods were never supplied and, despite repeated requests, the advance was not refunded.

After issuing a demand notice, Tech Lads filed an application under Section 9 of the IBC seeking initiation of the corporate insolvency resolution process. The NCLT dismissed the application, holding that the consortium agreement merely apportioned responsibilities for executing the TCIL project and did not create any inter se commercial transaction capable of giving rise to an operational debt.

In appeal, Tech Lads argued that the ₹8 crore had been paid as an advance for the supply of materials and relied on the consortium agreement to show that it expressly created commercial obligations between the parties, including payment for supplies.

It also submitted that Satnam Global had admitted receiving the amount and that, after receiving the demand notice, its email did not dispute the claim but only stated that it was finalising and reconciling its books of accounts.

Satnam Global resisted the appeal, contending that the consortium agreement was not an inter se supply contract. It maintained that the ₹8 crore was a security deposit furnished to secure financial facilities extended by it for the project and not an advance towards the supply of goods.

Examining the terms of the consortium agreement, the tribunal held that it governed not only the submission of the tender but also the parties' respective obligations after the project was awarded. It found that the agreement specifically contemplated the supply of goods by Satnam Global and payment by Tech Lads, thereby creating enforceable commercial obligations between the consortium partners.

"The payment of Rs.8 crores by RTGS by the Appellant to the CD is an admitted fact. The Appellant's categorical case in Demand Notice as well as in Section 9 application is that above amount was advanced payment to the CD for supply of goods, which goods were not supplied by the CD.", the tribunal ruled.

The tribunal also noted that the NCLT had itself rejected Satnam Global's defence that the amount represented a security deposit after finding that neither the consortium agreement nor any supporting material evidenced such an understanding.

It further observed that Satnam Global had admitted receiving the ₹8 crore and that the issuance of four cheques of ₹2 crore each in favour of Tech Lads supported the appellant's submission that the debt had been acknowledged.

Relying on the Supreme Court's decision in Consolidated Construction Consortium Ltd. v. Hitro Energy Solutions (P) Ltd., the tribunal reiterated that the operative requirement for an operational debt is that the claim bears a nexus with the provision of goods or services.

It also referred to its earlier decision in Amarendra Mohapatra v. Daga Power Systems & Engineers Pvt. Ltd., where it held that unpaid claims arising from clearly demarcated obligations to supply goods or services under a consortium arrangement qualify as operational debt.

Allowing the appeal, the tribunal set aside the NCLT's order and held that Tech Lads had successfully established the existence of an operational debt exceeding the statutory threshold.

It revived the Section 9 proceedings before the NCLT and directed it to pass an order admitting the insolvency application within three months. At the same time, it granted Satnam Global three months to liquidate the debt and observed that if the NCLT is satisfied that the liability has been discharged within that period, the Section 9 proceedings may be closed.