NCLT Delhi Rejects CIRP Plea Against Publisher Despite Holding Royalty Can Be Operational Debt

The Delhi bench of the National Company Law Tribunal (NCLT) has rejected an insolvency plea against Commercial Law Publishers (India) Pvt. Ltd. The tribunal held that royalty payable under a publishing agreement can qualify as “operational debt” under the Insolvency and Bankruptcy Code (IBC).

It rejected the plea after finding discrepancies in the amount claimed by the author, Dr Ravi Gupta, and the invoices submitted to support his claim.

The bench of Judicial Member Ashok Kumar Bhardwaj and Technical Member Atul Chaturvedi observed, “In terms of the aforementioned view taken by Hon'ble NCLAT in Jaipur Trade Expo Centre, one may not avoid to take a view that the Royalty Fee claimed by the Applicant falls in the category of Operational Debt.”

Gupta had entered into a publishing agreement with the company on October 8, 2020, granting it publication and allied rights over specified publications for five years.

Clause 6 provided for assured monthly royalty payments irrespective of sales, profitability, stock position or other commercial considerations. The royalty was to be shared equally between Gupta and his co-author, Dr Girish Ahuja.

Gupta claimed that the publisher had acknowledged its liability through its accounts and tax deductions. The company's ledger recorded unpaid royalties of ₹43.80 lakh as of March 31, 2024. He also alleged a shortfall of ₹6 lakh in royalties for FY 2023–24.

The NCLT examined whether royalty under a publishing agreement qualifies as operational debt. Relying on the NCLAT's ruling in Jaipur Trade Expocentre v. Metro Jet Airways Training, it held that the royalty claim fell within the category of operational debt.

However, Gupta's two invoices totalled ₹67.50 lakh. Adding the admitted dues of ₹43.80 lakh brought the total to ₹1.11 crore, short of the ₹1.17 crore claimed. The tribunal also questioned the royalty rate mentioned in one invoice and noted that the additional ₹6 lakh was unsupported by an invoice.

Observing that the IBC is meant for corporate revival, not debt recovery, the tribunal found that Gupta's claim lacked clear documentary support and rejected the insolvency petition.