Corporate Debtor Failed to Prove Pre-Existing Dispute over ₹8L Packaging Material Debt: NCLAT Upholds CIRP [Read Order]
It was noted that the Corporate Debtor did not issue any prior communication regarding the pre-existing dispute on the quality of the goods sent by the corporate debtor.
Corporate - debtor - NCLAT - Taxscan
Corporate - debtor - NCLAT - Taxscan
The Principal Bench of the National Company Law Appellate Tribunal (NCLAT) at New Delhi recently upheld the initiation of the Corporate Insolvency Resolution Process (CIRP) against a corporate debtor (CD), noting that the CD failed to prove any pre-existing dispute regarding an outstanding ₹8.48 lakh operational debt that was claimed by the operational creditor.
The present appeal was filed by Ramniwas B. Somany, suspended director of Indian Denim Ltd., challenging an order dated 22 September 2023 passed by the NCLT Ahmedabad Bench, admitting a Section 9 application filed by the operational creditor under the Insolvency and Bankruptcy Code, 2016 (IBC).
Operational creditor Anushri Paper Pack Pvt. Ltd. had supplied corrugated packaging materials of various sizes to Indian Denim Ltd. and raised multiple invoices between July 2013 and November 2013, resulting in a total of ₹8,48,127 - which included a principal sum of ₹3,65,616 and contractual interest at 24% till 31 March 2019. Due to non-payment by the debtor, the operational creditor issued a demand notice on 25 January 2019 which was delivered but remained unanswered.
The NCLT Ahmedabad Bench admitted the application and appointed Rahul Nareshbhai Shah as the Interim Resolution Professional (IRP).
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Before NCLAT, the suspended director of Indian Denim, represented by Hemant Phalpher contended that there existed a genuine dispute concerning the quality and fitment of the packaging materials supplied which should have barred the initiation of CIRP. He further argued that the NCLT failed to appreciate the grievances raised by the debtor and that the claim was not undisputed.
The Respondent No.1 Operational Creditor was proceeded against ex-parte due to non-appearance.
The appellate bench comprising Justice Rakesh Kumar Jain, Justice Mohammad Faiz Alam Khan and Naresh Salecha (Technical Member) rejected the contentions raised by the appellant, holding that the alleged dispute regarding the quality of the materials was raised for the first time in the reply before the NCLT without any letter or email or documentary proof in relation to their dissatisfaction.
The tribunal noted that the statutory demand notice issued under Section 8 of the IBC was never replied to, and no communication regarding defective goods was produced before either forum. The claim of inferior quality was, therefore, an afterthought raised merely to resist insolvency proceedings.
The NCLAT concluded that the corporate debtor failed to substantiate any genuine pre-existing dispute and that mere assertion of fact, unsupported by evidence cannot invalidate an insolvency application. Accordingly, the NCLAT dismissed the appeal and upheld the order of the NCLT, admitting the Section 9 application filed by Anushri Paper Pack Pvt. Ltd.
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