₹2.92 Crore Insolvency Plea Against GLS Films Dismissed Over Pre‑Existing Dispute: Supreme Court Restores NCLT Order [Read Order]

In a recent ruling, the Supreme Court of India set aside a National Company Law Appellate Tribunal (NCLAT) order that had admitted an insolvency petition against GLS Films Industries Pvt. Ltd., holding that there existed a plausible pre‑existing dispute between the parties prior to the demand notice under the Insolvencyand Bankruptcy Code, 2016 (IBC).

Chemical Suppliers India had approached the NCLT under Section 9 of the IBC, claiming that GLS Films owed ₹2.92 crore for chemical supplies made between March and July 2021. A demand notice was issued on 11 November 2021, followed by an application for initiation of the corporate insolvency resolution process (CIRP).

The appellant, GLS Films, however, disputed the claim, asserting that several consignments supplied in April and June 2021 were defective and had caused substantial losses. The company said it had repeatedly sought reconciliation of accounts and even lodged a police complaint on 27 September 2021, alleging coercive tactics by the supplier. It also issued a debit note for ₹2.42 crore, claiming that after adjustments, the respondent actually owed it ₹70 lakh.

The NCLT found that these communications and the police complaint demonstrated a genuine dispute predating the demand notice, and dismissed the insolvency plea on 16 December 2022. The NCLAT later reversed that decision, holding that the dispute was not “pre‑existing” and directing admission of the application.

The appellant counsel argued that correspondence dating back to December 2020 showed continuous complaints about defective supplies and requests for reconciliation. The supplier’s delayed response and subsequent debit notes for interest were afterthoughts meant to fabricate a claim under the IBC. The appellant emphasized that the police complaint and civil suit filed later were consistent with its stand that disputes existed long before the demand notice.

The respondent counsel maintained that the issue over defective supplies had been settled through a credit note of ₹1.66 crore, and that the remaining dues were undisputed operational debts. It contended that the appellant’s objections were raised only after receipt of the demand notice and were therefore not “pre‑existing.”

After considering the matter the supreme court observed that discrepancies between the parties’ ledger accounts and pointed out that the respondent’s own email of 10 September 2021 demanded ₹4.60 crore, later “corrected” to ₹2.92 crore—revealing confusion over the actual amount due. The Court also referred to admissions made by the respondent’s director in cross‑examination, confirming that written correspondence began only after disputes arose.

Citing the landmark precedents Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2018) and S.S. Engineers v. Hindustan Petroleum Corp. Ltd. (2022 ), the bench of Justice Sanjay Kumar and Justice R Mahadevan reiterated that the adjudicating authority must reject a Section 9 application if a plausible contention requiring investigation exists and the dispute is not spurious or illusory.

Holding that the NCLAT had erred by examining the merits of the dispute rather than its existence, the Supreme Court concluded“There was clearly no consensus between the parties as to who was liable to pay to the other and the amount that was payable.”

Accordingly, the appeal was allowed. The Court set aside the NCLAT’s judgment dated 11 February 2025 and restored the NCLT’s order of 16 December 2022, dismissing the insolvency application.

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