Case Note & Summary
The appeal was filed by Bhawani Prasad Mishra, a suspended director of B.S. Ispat Pvt. Ltd. (Corporate Debtor), challenging the order dated 26.03.2025 passed by the National Company Law Tribunal, Mumbai Bench, admitting a Section 9 application filed by Armaco Infralinks Pvt. Ltd. (Operational Creditor). The Corporate Debtor was engaged in mining and sale of coal. The Operational Creditor deposited an advance of Rs. 1 crore on 19.03.2021 for supply of coal, and subsequently made further payments. Between April 2021 and September 2022, the Operational Creditor purchased coal from the Corporate Debtor. On 15.09.2022, the Operational Creditor issued a delivery order for 3,00,000 MT of coal, but the Corporate Debtor failed to supply the coal. The Operational Creditor demanded a refund of the advance, which was not paid. The Operational Creditor issued a demand notice under Section 8 of the IBC on 29.05.2024, and filed a Section 9 application on 29.05.2024. The Corporate Debtor raised a dispute regarding the quality of coal, but the NCLT admitted the application. The NCLAT held that the dispute raised by the Corporate Debtor was not a pre-existing dispute as it was raised only after the demand notice. The NCLAT also held that the suspended director had limited locus to challenge the admission, but the appeal was dismissed on merits. The NCLAT found that the Operational Creditor had made out a case for admission, and the application was within limitation. The appeal was dismissed.
Headnote
A) Insolvency and Bankruptcy Code - Operational Debt - Pre-existing Dispute - Section 9, IBC - The Operational Creditor deposited an advance of Rs. 1 crore for supply of coal, and subsequently made further payments. The Corporate Debtor failed to supply coal and did not refund the advance. The Corporate Debtor raised a dispute regarding the quality of coal only after the demand notice was issued. Held that a dispute raised after the demand notice cannot be considered a pre-existing dispute, and the Adjudicating Authority correctly admitted the Section 9 application. (Paras 2-10) B) Insolvency and Bankruptcy Code - Locus Standi - Suspended Director - Section 9, IBC - The Appellant, a suspended director of the Corporate Debtor, challenged the admission order. The NCLAT held that a suspended director has limited locus to challenge the admission, but since the appeal was filed by the suspended director and the Corporate Debtor did not file an appeal, the appeal was maintainable only on limited grounds. (Paras 1, 11) C) Limitation - Section 9 Application - Date of Default - Section 9, IBC - The Operational Creditor filed the Section 9 application on 29.05.2024. The default occurred when the Corporate Debtor failed to refund the advance after the delivery order was not fulfilled. The application was filed within three years from the date of default, and thus was within limitation. (Paras 2-10)
Issue of Consideration
Whether the Adjudicating Authority was justified in admitting the Section 9 application filed by the Operational Creditor despite the alleged pre-existing dispute raised by the Corporate Debtor, and whether the Appellant, a suspended director, has the locus to challenge the admission order.
Final Decision
The appeal is dismissed. The order dated 26.03.2025 passed by the Adjudicating Authority admitting the Section 9 application is upheld.
Law Points
- Operational debt includes advance payment for supply of goods
- Pre-existing dispute must be raised before demand notice
- Section 9 IBC application maintainable if no pre-existing dispute
- Suspended director has limited locus to challenge admission
- Limitation for Section 9 application runs from date of default or acknowledgment
