The National Company Law Appellate Tribunal, New Delhi has issued notice to Eros International Media Ltd. in an appeal filed by Phantom Studios India Pvt. Ltd. challenging the dismissal of its insolvency petition by the Mumbai Bench of the National Company Law Tribunal. The dispute, arising out of the co-production arrangement for the Hindi film NH-10, presents an important insolvency question concerning the character of money claims arising from a joint commercial venture: when parties jointly produce, finance, exploit and share the revenues of a film, can an unpaid amount between them be characterised as an “operational debt” so as to trigger the corporate insolvency resolution process under Section 9 of the Insolvency and Bankruptcy Code, 2016?
The NCLAT Bench comprising Judicial Member Justice Mohd. Faiz Alam Khan and Technical Member Naresh Salecha issued notice to Eros even though no one appeared on behalf of Phantom when the matter was taken up. The appellate proceedings arise from Company Appeal (AT) (Ins.) No. 1800 of 2026. The issuance of notice, however, should be understood in its proper procedural context: it does not amount to a finding that Phantom’s claim constitutes an operational debt, nor does it mean that insolvency proceedings against Eros have been admitted. The appellate tribunal has merely entertained the challenge sufficiently to call upon the respondent to answer it.
The controversy has its origins in a commercial relationship that was considerably more complex than an ordinary creditor-supplier transaction. A term sheet was executed on February 11, 2013 between Eclatant Films Pvt. Ltd., formerly associated with Phantom Films Production Pvt. Ltd., and Eros, under which the parties proposed to jointly produce four feature films. The arrangement subsequently resulted in a Film Co-Production Agreement dated December 17, 2013 concerning NH-10. Under the structure of the agreement, the production side was associated with Phantom’s predecessor while Eros was responsible for financing, distribution and exploitation of the film, with the parties sharing the economic returns in accordance with the agreed commercial arrangement.
The amount claimed in the insolvency proceedings is approximately ₹1.48 crore. Phantom relied, among other things, on a communication dated March 14, 2024 under which Eros was stated to have agreed to pay ₹1,25,66,866 by June 30, 2024. According to Phantom, that amount remained unpaid and constituted a debt in respect of which the insolvency jurisdiction could be invoked. The claim was connected with the parties’ arrangement concerning the remuneration of actor Anushka Sharma. Under the contractual structure, the approximately ₹1.25 crore fee was to be borne equally by the two parties, with each contributing ₹62.50 lakh, and the expenditure was to be recouped from revenues generated through exploitation of the film.
It was precisely this contractual architecture that became decisive before the NCLT. The Mumbai Bench comprising Judicial Member Lakshmi Gurung and Technical Member Hariharan Neelakanta Iyer did not treat the claim as a conventional invoice-based liability arising from the supply of goods or services. Instead, it examined the substance of the relationship between the parties. The Tribunal noted that the parties had a common commercial objective, exercised joint control over important aspects of production and had agreed to share both profits and intellectual-property rights equally. These characteristics, in the Tribunal’s assessment, pointed towards a joint venture rather than a vendor-and-purchaser relationship.
That finding became the foundation for the NCLT’s dismissal of the insolvency petition. Section 5(21) of the IBC defines “operational debt” as a claim in respect of the provision of goods or services, including employment, or a debt arising under certain statutory dues. The Tribunal reasoned that the claim put forward by Phantom was essentially linked to recoupment and revenue sharing under a co-production arrangement. It was not consideration payable by Eros to Phantom for an identifiable service supplied by Phantom to Eros in the conventional creditor-debtor sense. Consequently, the Tribunal concluded that the foundational requirement for a Section 9 application had not been established.
The reasoning carries significance beyond the particular film involved because the IBC does not treat every unpaid contractual amount as an operational debt. The statutory definition is deliberately connected to the provision of goods and services. The mere existence of an enforceable monetary claim, therefore, does not automatically confer the status of an operational creditor. The character of the underlying transaction must first be identified. This distinction prevents the insolvency process from being transformed into a general-purpose mechanism for recovering every disputed commercial payment.
The Supreme Court has repeatedly cautioned that insolvency jurisdiction is fundamentally different from ordinary debt-recovery proceedings. In Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., the Court emphasised the limited purpose of Section 9 proceedings and held that the Adjudicating Authority must examine whether there is a genuine pre-existing dispute rather than mechanically admitting an application merely because an amount is claimed. At the threshold, therefore, both the existence and legal character of the debt assume significance. The Phantom-Eros dispute adds another layer to that inquiry: even before examining whether a dispute exists, the appellate tribunal may have to determine whether the claimed amount falls within the statutory category of operational debt at all.
The NCLT had expressly stated that once it concluded that the amount did not constitute operational debt, it was unnecessary to examine the other objections raised in the matter, including issues concerning limitation and set-off. This is legally significant because the dismissal was not founded upon an exhaustive adjudication of every controversy surrounding the claimed amount. The Tribunal stopped at what it regarded as the threshold jurisdictional requirement under Section 5(21).
The appellate proceedings therefore provide Phantom an opportunity to challenge the Tribunal’s characterisation of the relationship. The central question before the NCLAT is likely to turn upon the precise contractual obligations created by the co-production agreement, rather than simply upon the fact that the parties described their arrangement as a co-production. In commercial law, the label attached to a transaction cannot necessarily determine its legal character. The substance of the rights and obligations, the flow of consideration, the nature of the services rendered, the allocation of risk, and the mechanism through which the claimed amount became payable may all become relevant.
There is a particularly important distinction here between joint commercial participation and operational supply. A joint venture participant may incur expenses on behalf of the venture and may become entitled to reimbursement or distribution of revenues. But that does not automatically mean that every such entitlement is an operational debt. If the claim arises from the venture’s internal accounting or profit-sharing structure, its character may be fundamentally different from a claim by a vendor who has supplied goods or services to the corporate debtor. The NCLT’s reasoning rests substantially upon this conceptual distinction.
At the same time, the appellate inquiry may have to confront the practical realities of the entertainment industry. Film production is frequently structured through multiple agreements involving producers, financiers, distributors, intellectual-property owners, artists and exploitation platforms. A single project may therefore involve obligations that do not fit comfortably into traditional categories of buyer and seller. If a contractual payment is expressly linked to a service undertaken by one party for another, it may potentially satisfy Section 5(21); if it is instead an adjustment of the parties’ respective contributions to a common venture, the analysis may be different.
The ₹1.25 crore actor-fee component illustrates this complexity. The amount was not simply a fee payable by Eros to Phantom for a completed service. According to the contractual arrangement examined by the NCLT, both sides were required to contribute equally towards the lead actor’s remuneration and the expenditure was subsequently capable of being recouped from film revenues. That mechanism supported the Tribunal’s conclusion that the parties were sharing the economics of a common undertaking rather than operating through a straightforward supply relationship.
The NCLT also took note of the parties’ agreement to share profits equally after recoupment of production costs and to share intellectual-property rights in the film. These features were not incidental contractual terms in the Tribunal’s view; they demonstrated that the parties had assumed a degree of mutual commercial participation. The resulting relationship, therefore, could not be reduced to the simple proposition that one company owed money to another and that the unpaid amount automatically became an operational debt.
This approach is consistent with a larger principle underlying the IBC: insolvency is a collective process for dealing with financial distress, not a substitute for ordinary contractual adjudication or recovery proceedings. Where a claimant approaches the NCLT under Section 9, the applicant must first establish that the statutory ingredients are satisfied. The Code does not permit a creditor to convert a contractual dispute into an insolvency proceeding merely by characterising the outstanding amount as a “debt”.
The principle is particularly relevant where the underlying transaction contains elements of profit participation, mutual obligations or contingent revenue sharing. Such arrangements may generate substantial financial claims, but their commercial magnitude does not determine their classification under the IBC. A claim of ₹1.48 crore and a claim of ₹1.48 lakh are subject to the same statutory question: what is the legal source and nature of the debt?
There is, however, another dimension to the appellate dispute. Phantom’s reliance on the March 2024 letter acknowledging or undertaking payment may be significant if the appellate tribunal finds that the later acknowledgment created an independent payment obligation. The legal effect of such a subsequent communication would depend upon the terms of the original agreement, the language of the communication, the purpose for which the amount was acknowledged and whether the acknowledgment merely recorded an amount arising from the joint venture’s accounts or created a fresh debtor-creditor obligation. The NCLAT’s notice stage does not resolve this question.
The case consequently demonstrates why the insolvency classification of a claim cannot always be decided by looking only at the final invoice, acknowledgment or demand notice. The tribunal may have to travel backwards into the contractual structure to determine why the money became payable in the first place. A payment document may establish quantum, but it does not necessarily establish the statutory nature of the underlying debt.
There is also a procedural lesson in the present NCLAT order. The fact that the appellate tribunal issued notice despite the appellant’s absence indicates that the matter was not disposed of summarily at the threshold. But notice is only the beginning of appellate adjudication. Eros will now have the opportunity to defend the NCLT’s conclusion, and the NCLAT will have to determine whether the Mumbai Bench correctly applied Section 5(21) to the contractual relationship. Until that exercise is complete, the NCLT’s finding remains the operative adjudication on the character of the claim.
The case also needs to be distinguished from situations in which a creditor provides identifiable services under a commercial arrangement that happens to contain profit-sharing or other ancillary mechanisms. The presence of a joint venture element cannot become an automatic formula for excluding every claim from the definition of operational debt. The decisive inquiry must remain anchored in the statutory language and the actual contractual obligations. Otherwise, sophisticated corporate structures could inadvertently place genuine service providers outside the insolvency framework merely because their contracts contain additional commercial arrangements.
Conversely, treating every payment arising under a collaborative commercial venture as operational debt would carry an equally serious risk. It could allow parties to use insolvency proceedings as leverage in disputes essentially concerning accounting, revenue distribution, contribution obligations or contractual interpretation. The IBC’s time-bound and coercive framework was not designed to become an alternative forum for such disputes.
The Phantom-Eros litigation thus sits at an interesting intersection between insolvency law and entertainment-industry contracting. Film production increasingly involves sophisticated structures in which financing, intellectual property, production services, distribution rights and revenue participation are contractually interwoven. The appellate tribunal’s eventual determination may provide useful guidance on how Section 5(21) should operate where a claimant’s monetary entitlement arises from a collaborative production model rather than an ordinary supply contract.
For now, the NCLAT has not opened insolvency proceedings against Eros, nor has it held that Phantom’s ₹1.48 crore claim is an operational debt. It has merely brought Eros into the appellate process by issuing notice on Phantom’s challenge to the NCLT’s threshold determination. The substantive question remains open.
The larger legal lesson, however, is already apparent. Under the IBC, the existence of a monetary liability and the existence of an operational debt are not synonymous propositions. The first is a question of commercial entitlement; the second is a question of statutory classification. In an insolvency regime designed to distinguish genuine operational creditors from ordinary contractual claimants, that distinction is not technical formalism it is the gateway to jurisdiction under Section 9.
As the matter proceeds before the NCLAT, the real issue will therefore not simply be whether Eros owes Phantom money. It will be whether the money, assuming it is payable, represents consideration for goods or services supplied to Eros, or whether it is an amount arising from the parties’ participation in a common film-production venture and their agreed sharing of costs, revenues and intellectual-property rights. The answer could determine whether the IBC remains unavailable as a recovery mechanism in this particular dispute or whether the claim can cross the statutory threshold into insolvency adjudication.
