Issue I: Whether NCLT and NCLAT had erred in admitting the Section 9 petition filed

by R2D2 against Naboo?

It is most humbly contended before the Hon’ble Supreme Court of India that the present
appeal challenges the admission of the petition filed under Section 9 of the Insolvency and
Bankruptcy Code, 2016 (hereinafter ‘Code’), wherein it is presented that the NCLT and
NCLAT had rightfully admitted the aforementioned petition. The same shall be explained in
a two-fold manner: [I.A.] The impugned claim in the present case is an operational debt and
not a financial debt. [I.B.] The essential conditions under Section 8 and Section 9 for
admission of the petition have been met.

[I.A.] THE IMPUGNED CLAIM IN THE PRESENT CASE IS AN OPERATIONAL DEBT AND NOT A
FINANCIAL DEBT.

It is humbly presented before the Hon’ble Supreme Court of India that the impugned claim in
the present case regarding the debt should be classified as an operational debt and not a
financial debt. The same shall be explained in a two-fold manner: [I.A.i.] The essentials of
the debt being classified as an ‘operational debt’ are met. [I.A.ii.] The essentials of the debt to
be classified as a ‘financial debt’ are not met.

[I.A.i.] The essentials of the debt being classified as an ‘operational debt’ are met.

According to Section 3(11) of the Code, a debt may be financial or operational in nature, 1
wherein as per Section 5(21) of the Code, an operational debt is defined as “a claim in
respect of the provision of goods or services including employment or a debt in respect of the
payment of dues arising under any law.”2 The ‘default’ of such debts is provided under
Section 3(12) of the Code, that lays down that non-payment of a debt either wholly or any
part of the instalment of the debt that is due, but has been unpaid by the corporate debtor.3

Sale of Goods Act [1930] Acts of Parliament, No. 3 of 1930.

Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016

Department of Telecommunications, _Guidelines for Trading of Access Spectrum by Access

Service Providers_ (2015) para 11.

1
Insolvency and Bankruptcy Code [2016] Acts of Parliament, No. 31 of 2016, s 3(11) (Insolvency and
Bankruptcy Code 2016).
2
Insolvency and Bankruptcy Code 2016, s 5(21).
3
Insolvency and Bankruptcy Code 2016, s 3(12).
According to Section 2(o) of the Consumer Protection Act, 1986, states that “service” means
services of any description which is made to potential users, including the supply of electrical
or other energy.4 An operational creditor’s claim usually arises out of a normal business
transaction that such creditor may have had with the corporate debtor.5

In the present case, it is observed that Naboo had been availing services for laying down fibre
cables from R2D2 since 2016, as provided under the Master Services Agreement. 6 This
clearly shows that the relation between parties was established due to the sole reason that
R2D2 had been supplying services to Naboo.

Furthermore, as on December 31, 2019 an amount Rs. 3,51,99,44,675/- was due and payable
by Naboo to R2D2 under the MSA, wherein a reminder was sent by R2D2 on January 26,
2022 for the payment of such dues that arises out the services provided by R2D2. As per the
‘General Business Terms’ agreed between the parties, the payment of the invoices was to be
made within 15 days, and any disputes regarding the same is to be raised within 3 days. On
February 22, 2020, Naboo failed to make the payment as they raised frivolous claims of the
invoices lacking necessary supporting documents.

Therefore, it is clearly witnessed that the default in payment of the dues arises out of the non-
payment of invoices and the subsequent interest thereon, wherein R2D2 has a claim in
respect to the provision of services provided to Naboo. The same had been communicated via
the demand notice sent on April 30, 2020. Hence, the claim in the present case arises out of
the ‘operational debt’ wherein R2D2 is therefore an operational creditor as per Section 5(20)
of the Code.

[I.A.ii.] The essentials of the debt to be classified as a ‘financial debt’ are not met.

According to Section 5(8) of the Code, ‘financial debt’ refers to a debt along with interest, if
any, which is disbursed against the consideration for the time value of money. 7 One of the
most essential conditions in determining that a debt is financial in nature is that of the
element of “time value of money”. Time value of money is defined as the “price associated
with the length of time that an investor must wait until an investment matures or the related

4
Consumer Protection Act 1986, s 2(o).
5
Wadhwa Law Chambers, Shorter Insolvency and Bankruptcy Code with Procedures (1st edn, 2020) 59.
6
Moot Proposition, para 14.
7
Insolvency and Bankruptcy Code 2016, s 5(8).
income is earned.”8 Moreover, Section 5(8) can be referred as “compensation or the price
paid for the length of time for which the money has been disbursed”.9

One of the crucial elements of a ‘financial debt’ is that the payment made to the creditor
regarding a debt is to be disbursed against the consideration of time value of money. It was
held by the NCLT court that the payment of interest being a component in a transaction shall
constitute as a consideration for the time value of money. 10 The amount given by the creditor
fell within the meaning of “financial debt”.11 The Appellate Tribunal in the case of Amrit
Kumar Agrawal v. Tempo Appliances Pvt. Ltd.,12 ad held that mere breach of the terms of
any agreement, including settlement agreement, wherein the obligation to make a payment,
does not bring in the liability within the ambit of ‘financial debt’. Such payments shall not
amount to disbursal of amount for consideration against the time value of money.

In the present case, R2D2 sent a demand notice under Section 8 of the Code, demanding
payment of balance amount under the invoices along with the interest thereon. 13 The claims
raised by R2D2 may arise either of the Master Services Agreement or the settlement
agreement, the mere breach and obligation to repay under the agreements does not constitute
as a ‘financial debt’. Such payments shall not amount to disbursal of amount for
consideration against the time value of money, which is an essential element for a financial
debt. Thus, such debts should not be classified as ‘financial debt’ in the present case.

[I.B.] ARGUENDO THAT THE DEBT IS CLASSIFIED AS AN “OPERATIONAL DEBT”, THE

ESSENTIAL CONDITIONS UNDER SECTION 8 AND SECTION 9 FOR DISMISSAL OF THE
PETITION HAVE BEEN MET.

It is humbly presented before the Hon’ble Supreme Court of India that arguendo, the
impugned claim in the present case being classified as an ‘operational debt’, the essentials for
such petition to be rejected have been met. The same shall be elaborated in a two-fold
manner: [I.B.i.] Grounds for admission of the petition under Section 9 are met. [I.B.ii.]
Grounds for rejection of the petition under Section 9 are not met.

[I.B.i.] Grounds for admission of the petition under Section 9 are met.

8
Black’s Law Dictionary, (9th edn, 2009).
9
Report of the Insolvency Law Committee (2018) para 1.1.
10
Anubhati Aggarwal v DPL Builders (P.) Ltd. [2018] 145 SCL 688.
11
Ibid.
12
[2020] SCC OnLine NCLAT 1202.
13
Moot Proposition, para 19.
According to Section 8(1) of the Code, an operational creditor on the occurrence of the
default, may deliver a demand notice of unpaid operational debtor of an invoice demanding
payment of the amount involved in the default to the corporate debtor. 14 In Mobilox
Innovations Private Ltd. v. Kirusa Software Private Ltd.,15 the Apex Court laid down the
following essentials were laid down for entertaining a Section 9 petition, wherein the
essentials are firstly, whether the "operational debt" is more than One Lakh, secondly,
Whether the documentary evidence provided with the application shows the debt is due and
payable and has not yet been paid and thirdly, whether there is an existence of a dispute
between the concerned parties or any record of pendency of suit or arbitration proceeding
filed before the receipt of Demand Notice. It was laid that an application would be dismissed,
if any of the aforementioned conditions are not met.

In the present case, as of 31 December, 2019, an amount of Rs. 3,51,99,44,675/- was due and
payable by Naboo to R2D2 under the MSA.16 Furthermore, as part of documentary evidence,
the invoices were sent to Naboo, which were firstly not paid in the duly stipulated time frame
by Naboo as given under the general business terms under the MSA, and secondly, even after
subsequent reminder asking for the payment, the assurance of timely payment of outstanding
dues was provided by Naboo on January 31, 2020.

Moreover, the Settlement agreement proposed by the promoters of Naboo implied an

acknowledgment towards such dues that are unpaid, an upon the execution of the same on
March 02, 2020, the relationship of the parties would henceforth be governed under such
agreement, Thus, the invoices being raised on an earlier date shall be governed under the
MSA. Lastly, there is neither a pre-existing dispute in the present matter as any issues
regarding the invoices would be in complete violation of clear instructions provided under the
‘general business terms’ of the MSA. Thus, the essentials conditions for the Section 9 petition
have been met.

[I.B.ii.] Grounds for rejection of the petition under Section 9 are not met.

Arguendo, if the grounds for rejection of the petition are being raised according to Section
9(5) of the Code along with Section 8(2)(a) of the Code, wherein under Section 9(5)(ii)(d) of
the Code that the rejection shall be communicated to the operational creditor when the notice
of the dispute has been received by them. As per Section 5(6) of the Code which provides the

14
Insolvency and Bankruptcy Code 2016, s 8(1).
15
[2017] 205 Com Cas 324 (SC).
16
Moot Proposition, para 15.
definition of ‘dispute’, it clearly includes disputes in relation to the existence or the amount of
debt as well as the quality of goods and services.

The Supreme Court had stated that a spurious defence which is mere bluster is to be rejected
and for such examination, the court is not required to be satisfied that the defence is likely to
succeed but only to see if dispute truly exists in fact and is not spurious, hypothetical or
illusory, the Adjudicating Authority has to reject the application. For the notice of dispute to
be effective it must be pre-existing, i.e., it must exist before the receipt of the demand
notice.17

It is submitted the appellant has merely raised hypothetical and illusory concerns regarding
the invoices, by terming it as a pre-existing dispute, as the manner for raising such invoices
was never disputed by Naboo in the past.18 The dispute regarding the invoices should have
been raised within three days as per the decided ‘general business terms’ in the MSA. Such
claims being frivolous in nature, is an attempt to misuse the procedure established under the
Code. It is submitted that the allegation raised by Naboo concerning the invoices, fails to
meet the threshold of a valid existing dispute between the parties, wherein the ground for
rejection of the petition aren’t met. Thus the NCLT and NCLAT had rightfully admitted the
Section 9 petition filed by R2D2 against Naboo.

----------------------------------------------------------------------------------------------------------------

Issue II: “Whether the License to use 5G Spectrum can be directly or indirectly
assigned/transferred to a Resolution Applicant / any other buyer under IBC unless the
entire dues owed by the Corporate Debtor to DoT, including the AGR and the
Spectrum dues, are cleared or until the assignee/transferee furnishes binding assurances
in the form of bank guarantees/ support letters/ comfort letters to the effect that it shall
honor and fulfil the relevant payment obligations to DoT?”

It is humbly contended before the Hon’ble Supreme Court that the License to use 5G
Spectrum can be directly or indirectly assigned/transferred to a Resolution Applicant / any
other buyer under IBC, wherein the binding assurances in the form of bank guarantees,
support letters or comfort letters that shall honor the payment obligations to DoT is valid. The
same shall be explained in a three-fold manner: [II.A.] The Assignment/transferring of 5G

17
Mobilox Innovations Private Ltd. v Kirusa Software Private Ltd. [2017] 205 Com Cas 324 (SC).
18
Moot Proposition, para 16.
Spectrum is valid under the Code. [II.B.] The dues owed to DoT are contractual in nature,
wherein the dues towards the licensing fees is classified as ‘operational debt’

[II.A.] THE ASSIGNMENT/TRANSFERRING OF 5G SPECTRUM IS VALID UNDER THE CODE.

It is humbly presented be before the Hon’ble Supreme Court of India that the dues are
contractual in nature, which shall be explained in a twofold manner: [II.A.i.] The Spectrum
being an Intangible Asset can be subjected under the Code [II.A.ii.] The Trading of Spectrum
is permissible under the Code.

[II.A.i.] The Spectrum being an Intangible Asset can be subjected under the Code

The ‘Right to use’ the Spectrum is considered to be an intangible asset, wherein it is clearly
submitted that as per Section 18 of the Code,19 the assets of a third party in possession of the
Corporate debtor, does not include such right of usage of the Spectrum. Intangible assets are
‘any non-physical asset or resource that can be amortized or converted to cash such as
patents, goodwill and computer programs or a right to something such as services paid for in
advance’.20 As per Section 25(2)(a) of the Code, it is known that the Resolution Professional
is under a duty to take immediate custody and control of all assets of the Corporate Debtor
and to protect and preserve the same. Section 36(4)(iv) of the Code provides that liquidation
estate assets do not include other contractual arrangements which do not stipulate transfer of
title but only use of the assets.

It is acknowledged that the Spectrum being a natural resource that belongs to the people,
however, by participating and emerging as one of the highest bidder in the auction and by
paying substantial consideration for the same, it is humbly submitted that the Corporate
Debtor has acquired exclusive right to use such spectrum. In B. Gangadhar v. B.
G.Rajalingam,21 the Hon’ble Apex Court laid down that “ownership is a collection of rights
to use and enjoy property including right to transmit it to others.”

Furthermore, as per the Indian Telegraph Act,22 the exclusive privilege to maintain and deal
with telegraphs is with the Government, however, the statute has enabled to provide licenses
for a specific period, in exchange for consideration, thus making the Licensee becomes the
owner of right to use of specific band of spectrum and unless there is breach of contractual
terms, the DoT cannot interfere in exercise of rights of the Corporate Debtors.

19
Insolvency and Bankruptcy Code 2016, s 18.
20
Black’s Law Dictionary, (9th edn, 2009).
21
[1995] SCC (5) 238.
22
Indian Telegraph Act 1885, s 4.
In the present case, the Licensing Agreements would provide the TelCos with the ‘right to
use’ the 5G Spectrum.23 Such right, instills the ownership rights towards the usage of 5G
Spectrum, which is also corroborated by the Indian Telegraph Act. Thus, the
assignment/transferring of the 5G Spectrum is permissible under the Code.

[II.A.ii.] The Trading of Spectrum is permissible under the Code.

As per the Spectrum Trading Guidelines, the transfer of right to use a Spectrum, with the
approval provided by the DoT has been allowed, subject to the payment of recovery of dues
for the period prior to the effective day of trade. 24 This clearly indicates that the various
conditions placed for transfer of such right to use the Spectrum has been provided under the
Guidelines, wherein the fulfilment of all the conditions would allow the company holding
such rights to freely trade. Furthermore, as per Regulation 37 of the IBBI Regulations, 25 the
sale of assets of a Corporate Debtor as part of the Resolution Plan is permitted.

Furthermore, it has been held that the assets of Corporate Debtor (grants, licences and
permits) should continue to be protected and be available to the Corporate Debtor during the
CIRP and Corporate Debtor should not be deprived of its primary assets until a Resolution
Applicant takes over.26

In the present case, M/s. Sith Technologies emerging as a successful RPA,27 would therefore
possess control over such usage of rights, wherein the trading of Spectrum is permissible
under the Code. The transfer of such rights to Sith, would also thus be transferred to the
successful RPA, as per the provisions established under the Code.

[II.B.] THE DUES OWED TO DOT ARE CONTRACTUAL IN NATURE, WHEREIN THE DUES
TOWARDS THE LICENSING FEES IS CLASSIFIED AS ‘OPERATIONAL DEBT’.

According to Section 3(11) of the Code, a debt may be financial or operational in nature,28
wherein as per Section 5(21) of the Code, an operational debt is defined as “a claim in
respect of the provision of goods or services including employment or a debt in respect of the
payment of dues arising under any law.” 29 Under Sale of Goods Act, 1930, the expression
‘goods’ has been defined to mean every kind of movable property. As per General Clauses
23
Moot Proposition, para 6.
24
Spectrum Trading Guidelines, guidelines 10, 11 and 12.
25
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons)
Regulations 2016, reg 37.
26
M/s Embassy Property Developments Pvt. Ltd. v State of Karnataka & Ors. [2019] SCC OnLine SC 1542.
27
Moot Proposition, para 23.
28
Insolvency and Bankruptcy Code 2016, s 3(11).
29
Insolvency and Bankruptcy Code 2016, s 5(21).
Act, 1897 ‘movable property’ is defined as property of every description except immovable
property.

As stated above, the right to use of Spectrum is treated as an intangible asset are therefore
goods under the Code, and a claim with respect such a provision of goods, ought to be
classified as ‘Operational debt’. Such AGR and Spectrum dues, thus arising out of the
operations of business, and a debt arising in respect of the payment of dues shall be classified
as Operational debt.

In the present case, as the right to use of Spectrum is being treated as ‘Intangible Asset’,
which is considered to be a “good” as per the Sale of Goods Act, and any claims that shall lie
towards the payment obligations of such goods shall be treated as an Operational debt. Thus,
any claim that lies towards the ‘right to use’ of the 5G Spectrum, shall be treated as
operational debt. Moreover, the DoT had filled its dues under ‘Form B’ under Regulation 7 of
the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016 (“CIRP Regulations”) and the same were verified and admitted
by Mr. Binks.30 Thus such dues owed to the DoT is to be classified as operational dues, and
the debt shall be repaid as per the proposed resolution plan.

Furthermore, as per the terms of the licensing agreement, “Any such assignment or trade was
subject to either clearance of all the past dues of the DoT by the selling Telco till the date of
assignment/transfer of the Spectrum; or the purchaser/assignee undertaking to pay all past
dues towards DoT and all future dues of the DoT under the License Agreement.”31 Therefore,
as per the Licensing agreement, a change in control being an indirect assignment, wherein the
purchaser/assignee issuing binding assurances for repayment of the dues shall stand valid,
which have been duly incorporated in the CIRP. Thus, the dues owed towards the DoT have
been duly dealt with in the present case.

30
Moot Proposition, para 26.
31
Moot Proposition, para 7.