The NCLAT has ruled that invoices are not mandatory to establish operational debt under the Technical Guidance Agreement, which entails a fixed royalty obligation. This ruling has significant implications for the enforcement of contractual liabilities.
NCLAT Clarifies Legal Position on Invoices
The National Company Law Appellate Tribunal (NCLAT) recently directed Modi Lifecare to pay an admitted liability of ₹63 lakh, clarifying that the Technical Guidance Agreement does not mandate the provision of invoices to establish operational debt.
The Tribunal emphasized that the contract's inherent terms create a fixed royalty obligation, which suffices to establish the claim for payment without necessitating additional documentation in the form of invoices. This decision was pivotal in ensuring that companies cannot evade liabilities based on a technicality related to documentation.
In its reasoning, the NCLAT examined the contractual framework of the Technical Guidance Agreement and highlighted that the fundamental nature of operational debt should take precedence over procedural formalities like invoice submission. This ruling underscores the importance of contractual obligations and the need for parties to uphold their commitments irrespective of procedural challenges.
“The contract itself creates a fixed royalty obligation,” stated the NCLAT in its order.
This ruling has significant implications for practitioners as it reinforces the enforceability of claims based on contractual commitments, making it clearer that documentation should not obfuscate the primary obligations as stipulated in agreements.
Citations
- Modi Lifecare Ltd. v. Authority (2026) NCLAT 63
