NCLT Admits Paytm's Insolvency Plea Against Ludo Empire Maker Fabzen: How IBC Operational Debt Works

The Mumbai bench of the National Company Law Tribunal (NCLT) has admitted an insolvency petition filed by Paytm's parent company One97 Communications against gaming firm Fabzen Technologies, the operator of Ludo Empire, over unpaid digital advertising dues of more than Rs 3.41 crore. By an order dated June 18, 2026, the tribunal initiated the corporate insolvency resolution process (CIRP) against Fabzen under the Insolvency and Bankruptcy Code, 2016 (IBC), and appointed an interim resolution professional. The case is a useful illustration of how an unpaid commercial invoice can become the foundation for insolvency proceedings against a company.

What the Dispute Was About

According to the order, One97 raised invoices for in-app advertising campaigns run for Fabzen from October 2024 onwards, with a 60-day credit period. Fabzen, which also runs games such as Callbreak Empire and Skill Patti Empire, allegedly failed to clear the dues despite repeated follow-ups. The tribunal noted that emails on record showed Fabzen acknowledging the outstanding amount, proposing a 12-month payment schedule and seeking more time to pay. Fabzen, on the other hand, argued that there were genuine disputes over the quality and performance of the advertising campaigns.

Operational Debt and the Section 9 Route

Paytm approached the tribunal as an operational creditor. Under the IBC, an operational debt is a claim arising from the provision of goods or services, which includes advertising services of the kind invoiced here. An operational creditor can file a petition under Section 9 of the Code after issuing a statutory demand notice, provided the amount in default is at least Rs 1 crore. That monetary threshold was raised from Rs 1 lakh to Rs 1 crore by a government notification in March 2020, and the default here, exceeding Rs 3.41 crore, was comfortably above it. A petition can be admitted only where there is a clear debt, a default, and no pre-existing genuine dispute about the claim.

The tribunal found that the emails relied on by Fabzen reflected routine performance discussions and did not amount to a real dispute over the invoices. It noted that Fabzen had continued to place purchase orders and avail services without raising grievances, conduct the bench described as inconsistent with the claim that the services were fundamentally deficient. This question of what counts as a genuine pre-existing dispute is often the decisive issue in operational creditor petitions, a theme that also runs through our analysis of whether an IBC moratorium can halt a cheque bounce case.

Why the Frustration of Contract Defence Failed

Fabzen also relied on the Promotion and Regulation of Online Gaming Act, 2025, arguing that new restrictions on real-money gaming had destroyed the commercial basis of the deal and automatically ended the contract under Section 56 of the Indian Contract Act, 1872, which deals with frustration of contract. The tribunal rejected this defence on a simple ground of timing. Fabzen's default dated back to January 2025, whereas the gaming legislation was enacted only later in 2025 and operated prospectively. As the bench put it, the operational debt had already crystallised before the law came into force, so a later statute could not retrospectively excuse an existing liability. Readers can follow the wider gaming law context in our coverage of the Online Gaming Act 2025 and the ban on real-money gaming and the Supreme Court ruling upholding state bans on online money gaming.

What Happens After CIRP Begins

Once a petition is admitted, the company enters CIRP and a moratorium under Section 14 of the IBC comes into effect, which stays most suits and recovery actions against the corporate debtor. Control passes from the existing management to an interim resolution professional, who runs the company as a going concern and constitutes a committee of creditors. The committee then considers resolution plans, and if no viable plan is approved within the statutory timeline, the company can proceed to liquidation. The process is meant to be time-bound, although delays remain a concern, as seen when the Supreme Court recently flagged a two-year delay in NCLT insolvency approvals. The IBC route applies not only to companies but, in certain cases, to individuals, as the personal insolvency plea against a corporate guarantor illustrates.

Related Reading

For the latest structural changes to insolvency law, see our explainer on the IBC Amendment Act 2026 and project-wise insolvency reforms.

If you are setting up a company and want to understand its compliance footprint, read our guide on how to register a private limited company in India.

Key Takeaways

An unpaid commercial invoice above Rs 1 crore can expose a company to insolvency proceedings if there is no genuine pre-existing dispute. Businesses should respond to demand notices promptly and document any real service disputes contemporaneously, rather than raising them only after a petition is filed. The case also confirms that a later change in law will not, by itself, wipe out a liability that had already become due before the law took effect.