Alleged Quality Issues Not a Pre-existing Dispute: NCLT Allows Section 9 Application, Admits Operational Debt of ₹1.44 Crore [Read Order]

The operational creditor, Indiacrete Ready Mix Pvt. Ltd., engaged in the manufacture and supply of ready-mix concrete (RMC), had supplied materials to the corporate debtor, Theme Developers Pvt. Ltd., a construction company, pursuant to a series of purchase orders issued between April 2022 and September 2022 for the “Star Living” project at Thane, Maharashtra.

The supplies were made between 7 March 2022 and 4 November 2022 under multiple purchase orders totalling ₹6.32 crore. The goods were duly received and acknowledged by the corporate debtor without demur. Against this, the corporate debtor made part payments amounting to ₹4.87 crore, leaving a balance of ₹1.44 crore unpaid.

The operational creditor raised various invoices during this period and maintained that, despite reminders, the outstanding amount remained unpaid. A demand letter dated 1 May 2023 was issued, claiming ₹1.44 crore along with interest at 24% per annum, which was acknowledged by the debtor.

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The corporate debtor subsequently made a partial payment of ₹8 lakh on 5 September 2023, and a credit note of ₹33,212 was issued by the creditor on 31 January 2024. The ledger confirmation provided by the debtor itself showed an outstanding balance of ₹1.52 crore as of 31 March 2023, which was also reflected in the creditor’s audited balance sheets for FY 2023 and FY 2024.

Following non-payment, Indiacrete Ready Mix issued a demand notice under Section 8 of the IBC on 28 May 2024, claiming a total of ₹2.03 crore (including principal and interest). The notice was duly served on 30 May 2024. Since the corporate debtor failed to clear the dues or raise any valid dispute in response, the operational creditor filed the present Section 9 application seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against Theme Developers Pvt. Ltd.

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The corporate debtor contended that there were quality discrepancies in the ready-mix concrete supplied, which had been raised contemporaneously through emails and site communications during April–July 2022.

The debtor alleged that despite complaints and requests, the creditor failed to rectify the defects or provide test certificates and weight slips as required under the purchase orders. Emails from the STG Group (site management consultants) highlighting delays and inconsistent quality were relied upon to show a long-standing dispute.

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The operational creditor denied the allegations, asserting that the corporate debtor’s emails pertained only to early supplies in 2022 and that subsequent supplies till November 2022 were accepted without protest.

Any minor quality issues were resolved through replacements, and the corporate debtor’s ledger confirmation dated 27 April 2023, admitting ₹1.52 crore outstanding, nullified the claim of dispute.

The creditor relied on Winntus Scaffolding Pvt. Ltd. v. Aishwarya Business Corporation Pvt. Ltd. (NCLT Kochi) and Indiabulls Commercial Credit Ltd. v. Koshika Bioscience Pvt. Ltd. (NCLT Mumbai) to contend that minor or unsubstantiated disputes do not bar admission.

The Tribunal found that alleged disputes based on emails dated April–July 2022 were irrelevant, as supplies continued till November 2022 without objection. The debtor’s own confirmation of balance in April 2023 further negated the existence of any genuine dispute.

The Tribunal termed the defence a “moonshine dispute”, citing Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2017) 10 SCC 1006. Since the principal debt exceeded the ₹1 crore threshold under Section 4 of the IBC, the interest component was immaterial to admission. The appropriate rate of interest could be verified by the IRP during claim collation.

The two-member bench of Nilesh Sharma (Judicial Member) and Shri Sameer Kakar (Technical Member) held that the operational creditor had established an operational debt of ₹1.44 crore and a default beyond the statutory threshold, and admitted the petition under Section 9 of the IBC.

The Tribunal initiated the Corporate Insolvency Resolution Process (CIRP) against Theme Developers Pvt. Ltd., appointed Mr Debi Prasanna Sarangi as the Interim Resolution Professional (IRP), and declared a moratorium under Section 14, prohibiting institution or continuation of suits and transfer of assets.

The operational creditor was directed to deposit ₹3 lakh towards initial CIRP expenses, and the IRP was instructed to make a public announcement and invite claims.

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