In the case of Somesh Choudhary v. Knight Riders Sports Private Limited & Ors, the National Company Law Appellate Tribunal (NCLAT) has held that claims arising from the grant of an exclusive right and license to use intellectual property rights falls within the ambit of the definition of “Operational Debt” under Section 5(21) of India’s Insolvency and Bankruptcy Code.

The bench observed that a claim based on the provision of goods and services under an IP license agreement can be construed as an operational debt.

This is an important ruling, especially because intellectual property and technology rights are routinely being used as security to raise debt by companies in different sectors.  Not honouring these commitments can result in a liquidation process being initiated by the lenders.