No Genuine Pre-existing Dispute Shown Over ₹18.56 Crore Operational Debt: NCLT Orders Insolvency Proceedings u/s 9 of IBC [Read Order]

The National Company Law Tribunal, Cuttack Bench, admitted an operational creditor’s insolvency plea against Geosphere Industries Pvt. Ltd. after holding that there existed no genuine pre-existing dispute over an operational debt of ₹18.56 crore.

The Tribunal also observed that the debt was within limitation and supported by clear documentary evidence, including invoices, completion certificates, and ledger acknowledgements. With the default established and no dispute shown, CIRP was initiated under Section 9.

The petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, was filed by Sree UGCL Projects Ltd. (“operational creditor”) against Geosphere Industries Pvt. Ltd. (“corporate debtor”) for default in payment of ₹10.60 crore in principal and ₹7.96 crore in interest, totalling ₹18.56 crore.

The operational creditor relied on multiple work orders executed between 2017 and 2020, supported by invoices, GST returns, and work completion certificates. A Section 8 demand notice dated 27.02.2024 was duly served but remained uncomplied with.

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In response, the corporate debtor denied default and argued that long-standing disputes existed regarding the quality and quantity of material supplied, machine failures, and penalty deductions raised between 2019 and 2020.

Copies of correspondence, including letters dated 12.08.2019, 24.09.2019, and 03.03.2020, were cited as proof of dispute predating the Section 8 notice. The debtor also contended that a work completion certificate dated 20.03.2023 was issued only for income-tax compliance and not as an acknowledgement of debt.

The operational creditor submitted that the correspondence relied upon by the debtor did not relate to the same transactions or to the amounts claimed under the petition.

It argued that the letters merely reflected routine operational communication, not a bona fide dispute on liability. Further, the creditor highlighted that the corporate debtor had consistently acknowledged the debt in its ledger up to 03.03.2021, extending the limitation period.

The corporate debtor maintained that the petitioner had failed to perform its obligations under the work orders and that several invoices were inflated or unsupported. It relied on the Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. precedent, arguing that the existence of any plausible dispute, regardless of its merits, warranted rejection of the Section 9 petition.

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The Bench examined the correspondence and found that the letters pre-dating the demand notice contained no quantified claims or evidence of unsettled counter-claims.

The communications reflected post-supply complaints rather than contemporaneous disputes questioning liability. Applying the Mobilox standard, the Bench held that the alleged differences did not amount to a “genuine pre-existing dispute.”

The Tribunal also noted that the work completion certificates, GST filings, and ledger acknowledgements constituted credible documentary proof of debt and default. The Bench observed that the limitation stood extended by a written acknowledgement in 2021 and that no evidence of payment or settlement existed thereafter.

Accordingly, the Deep Chandra Josh (Judicial Member) and Banwari Lal Meena (Technical Member) held the petition maintainable and the corporate debtor was admitted into CIRP under Section 9. An Interim Resolution Professional (IRP) was appointed and a moratorium declared under Section 14.

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