Case Note & Summary
The National Company Law Appellate Tribunal (NCLAT) was hearing an appeal against an order dated 24.03.2025 passed by the Adjudicating Authority (NCLT) admitting a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) filed by Kisaan Steels Pvt. Ltd. (Operational Creditor) against the Corporate Debtor. The appellant, Rakesh Dalpatram Panchal, a director of the Corporate Debtor, contended that the Adjudicating Authority had itself recorded findings in paragraphs 32, 35, and 37 of the impugned order that there were pre-existing disputes regarding the quality of goods and delays in delivery, which were supported by documentary evidence and could not be characterized as spurious, hypothetical, or illusory. Despite these findings, the Adjudicating Authority admitted the Section 9 application. The appellant further submitted that the demand notice was replied to on 14.07.2023 raising a dispute, which constituted a notice of dispute, and therefore the application under Section 9 could not have been admitted. The NCLAT, after hearing the submissions, issued notice to the respondents, directed the filing of reply within three weeks and rejoinder within two weeks, and listed the appeal for 09.05.2025. In the meantime, the NCLAT stayed all further steps in pursuance of the order dated 24.03.2025. The bench comprised Justice Ashok Bhushan (Chairperson), Barun Mitra (Member Technical), and Arun Baroka (Member Technical).
Headnote
A) Insolvency and Bankruptcy Code - Operational Debt - Pre-existing Dispute - Section 9, IBC, 2016 - The Adjudicating Authority, while finding that there were ongoing disputes regarding quality and delays supported by documentary evidence, admitted the Section 9 application. The NCLAT issued notice and stayed further steps, observing that the submission regarding the existence of a pre-existing dispute required scrutiny. (Paras 1-3)
Issue of Consideration
Whether the Adjudicating Authority could admit a Section 9 application under the Insolvency and Bankruptcy Code, 2016 despite its own findings that there existed a pre-existing genuine dispute regarding the quality of goods and delays in delivery.
Final Decision
NCLAT issued notice, directed filing of reply within three weeks and rejoinder within two weeks, listed appeal on 09.05.2025, and stayed all further steps in pursuance of the order dated 24.03.2025.
Law Points
- Pre-existing dispute
- operational debt
- Section 9 IBC
- notice of dispute
- admission of petition
- stay order
Case Details
2024 LawText (NCLAT) (01) 119
Company Appeal (AT) (Insolvency) No. 526 of 2025
Justice Ashok Bhushan, Barun Mitra, Arun Baroka
Mr. Gopal Jain, Sr. Advocate with Mr. Mahesh Agarwal, Mr. Shivam Shukla, Mr. Ankur Saigal, Mr. Kaustubh Singh for Appellant; Mr. Akash Singh for Respondents
Kisaan Steels Pvt. Ltd. & Anr.
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Nature of Litigation
Appeal against admission of Section 9 petition under IBC
Remedy Sought
Stay of the impugned order and setting aside of admission of Section 9 application
Filing Reason
Adjudicating Authority admitted Section 9 application despite finding pre-existing genuine dispute
Previous Decisions
Adjudicating Authority (NCLT) passed order dated 24.03.2025 admitting Section 9 application
Issues
Whether the Adjudicating Authority could admit a Section 9 application despite its own findings of a pre-existing genuine dispute regarding quality and delays.
Submissions/Arguments
Appellant submitted that the Adjudicating Authority returned findings in Paras 32, 35, and 37 that there were ongoing disputes regarding quality and delays, supported by documentary evidence, yet admitted the Section 9 application.
Appellant submitted that the demand notice was replied on 14.07.2023 raising a dispute, which was a notice of dispute, hence Section 9 application could not be admitted.
Ratio Decidendi
Where the Adjudicating Authority itself records findings of a pre-existing genuine dispute regarding the quality of goods and delays in delivery, which are supported by documentary evidence, the admission of a Section 9 application under the IBC is prima facie unsustainable and requires scrutiny.
Judgment Excerpts
Following was observed in Paras 32, 35 and 37: '32. These communications clearly establish that there were ongoing disputes between the parties regarding the quality of goods and delays in delivery, which directly impact the quantum of the operational debt claimed by the Operational Creditor.'
It is submitted that the Demand Notice was also replied on 14.07.2023 raising dispute which was clearly notice of dispute, hence, the application under Section 9 could not have been admitted.
Procedural History
The Adjudicating Authority (NCLT) passed an order on 24.03.2025 admitting a Section 9 application filed by Kisaan Steels Pvt. Ltd. against the Corporate Debtor. The appellant, a director of the Corporate Debtor, filed an appeal before NCLAT on 28.03.2025 challenging the admission order. NCLAT issued notice and stayed further steps.
Acts & Sections
- Insolvency and Bankruptcy Code, 2016: Section 9
