Application u/s 9 of IBC must not be Entertained when Debt is not Unequivocally Admitted by Corporate Debtor: NCLAT [Read Order]
The application must be denied if the Operational Creditor receives a notice of dispute or if a dispute is noted in the Information Utility in accordance with section 9(5)(ii) of the code
![Application u/s 9 of IBC must not be Entertained when Debt is not Unequivocally Admitted by Corporate Debtor: NCLAT [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/03/NCLAT-NCLAT-New-Delhi-IBC-Corporate-debtor-taxscan.jpg "Application u/s 9 of IBC must not be Entertained when Debt is not Unequivocally Admitted by Corporate Debtor: NCLAT [Read Order]")
In a recent case, the New Delhi bench of the National Company Law Appellate Tribunal (NCLAT) has held that the application under section 9 of the Insolvency and Bankruptcy Code, 2016 (Code) cannot be entertained when the debt is not unequivocally admitted by the Corporate Debtor. In accordance with a Charter Party Agreement dated 15.03.2017, Navin Madhavji Mehta, the suspended...
In a recent case, the New Delhi bench of the National Company Law Appellate Tribunal (NCLAT) has held that the application under section 9 of the Insolvency and Bankruptcy Code, 2016 (Code) cannot be entertained when the debt is not unequivocally admitted by the Corporate Debtor.
In accordance with a Charter Party Agreement dated 15.03.2017, Navin Madhavji Mehta, the suspended director of RR Metalmakers India Ltd. (Corporate Debtor), had approached Jaldhi Overseas Pvt Ltd. (Operational Creditor) about chartering the vessel MV Aetolia to transport cargo from Port Redi to China for delivery to BST (HK) Ltd. (the "BST"). Bulk Chart was designated as the parties' broker.
When the Corporate Debtor did not pay the freight and demurrage, the Operational Creditor sent a demand notice under section 8 of the code. On January 1, 2023, the corporate debtor responded to the notice contesting the Operational Creditor's claim. On February 2, 2023, the Operational Creditor sent out a payment reminder and then filed an application under section 9 of the Code.
The Adjudicating Authority issued the contested order on April 22, 2024, allowing the Section 9 petition against the Corporate Debtor that started the Corporate Insolvency Resolution Process (or "CIRP"). The Appellant-Corporate Debtor has filed the current appeal because they are upset about the contested order.
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The appellant argued that no charter party agreement had been signed by the appellant-corporate debtor and the operational creditor. Because Samruddha negotiated the entire deal with the Corporate Debtor, BST, and Globe Chart, the appellant paid Samruddha/BST or any other company at Samruddha's direction.
In contrast, the Respondent argued that the Charter Party Agreement, which is on file, demonstrates that it was signed by Bulk Chart, the broker, and the authorized signatory of the Corporate Debtor and Operational Creditor.
Additionally, it was asserted that since the Charter Party Agreement was between the Corporate Debtor and Operational Creditor and did not involve any third parties, the purported involvement of Samruddha, BST, and Globe Chart in the transaction is immaterial.
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The two member bench of Justice Ashok Bhushan (Judicial Member), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that a demand notice under section 8 of the code must be issued by the Operational Creditor upon default which can be disputed by the Corporate Debtor within 10 days from the date of receipt of the notice. In the present case, the demand notice was issued on February 2, 2020 which was replied to on March 9, 2020 in which a dispute with regard to the debt was raised.
The Tribunal further decided that if the corporate debtor does not respond or pay within 10 days under section 8(2) of the code, the Operational Creditor may submit an application under section 9 of the code. According to the bench, the application must be denied if the Operational Creditor receives a notice of dispute or if a dispute is noted in the Information Utility in accordance with section 9(5)(ii) of the code.
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While allowing the appeal, the Tribunal concluded that “when Operational Creditor seeks to initiate insolvency process against a Corporate Debtor, it can only be done in clear cases where no real dispute exists between the two which is not so borne out given the facts of the present case. The conditions laid down in Section 9 having not been fulfilled, the application deserved to be rejected.”
To Read the full text of the Order CLICK HERE
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