NCLAT Sets Aside CIRP Admission, Citing Pre-Existing Dispute Evident in Email Exchanges [Read Order]

The National Company Law Appellate Tribunal (NCLAT) has set aside the admission of a Corporate Insolvency Resolution Process (CIRP) initiated against Ambassador Logistics Pvt. Ltd., holding that a pre-existing dispute was clearly evident from the email correspondence exchanged between the parties prior to the demand notice.

The appeal was filed by Rajendra Bisht, erstwhile promoter and director of Ambassador Logistics, challenging the NCLT’s order dated 11.02.2022 passed by the New Delhi Bench of the National Company Law Tribunal in a petition filed by M/s Satkar Logistics Pvt. Ltd. under Section 9 of the Insolvency and Bankruptcy Code, 2016.

The appellant contended that the Operational Creditor had raised a claim of Rs. 6,66,667 for logistics services provided, and sent a demand notice under Section 8 of the Code on 27.02.2019. The Corporate Debtor responded on 07.03.2019, disputing the claim and asserting that Satkar Logistics in fact owed Rs. 6,94,102 to Ambassador Logistics. The response detailed accounting discrepancies, referencing past payments, incorrect invoices, and unmatched rates.

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The appellant relied on a series of email exchanges between the parties from May 2018, particularly the email dated 25.05.2018, in which the Corporate Debtor categorically stated that no amount was payable. This email, which was not contested or responded to by the Operational Creditor, formed the basis for the appellant's claim of a pre-existing dispute.

In opposition, the Operational Creditor argued that the dispute was only raised after the demand notice was issued, and that the last payment was made on 19.10.2016, placing the claim within limitation. It was further argued that the Corporate Debtor had admitted to dues in the reply to the demand notice.

After hearing both sides, the Tribunal concluded that the email dated 25.05.2018 and the continuous correspondence regarding unsettled accounts demonstrated the existence of a genuine pre-existing dispute prior to the issuance of the demand notice. The Bench observed that the absence of a reply from the Operational Creditor to the email denying liability reinforced the inference of a live dispute.

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Justice Yogesh Khanna (Judicial Member) and Ajai Das Mehrotra (Technical Member), who presided over the matter, relied on key precedents including the Supreme Court's decisions in 2022 and 2023 which held that the existence of any plausible contention or disagreement on debt or dues prior to the demand notice disqualifies admission under Section 9 of the Code.

In Sabarmati Gas Ltd. v. Shah Alloys Ltd. (2023) Supreme Court held that the failure of reconciliation of accounts also qualifies as a pre-existing dispute between the parties in terms of Section 8 of the IBC Code (Insolvency and Bankruptcy Code). They further noted that the IBC is not meant to be used as a debt recovery tool in the face of unresolved disputes.

Accordingly, the NCLAT set aside the NCLT’s order admitting the CIRP and allowed the appeal on 11.03.2025. All pending applications were closed with no order as to costs.

To Read the full text of the Order CLICK HERE

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