NCLAT: Application Filed Under Section 9 of IBC Must Fulfil Certain Conditions

Must Read

US Court Orders Iran To Pay $1.4 BN in Damages To Missing Former FBI Agent’s Family

The United States District Court for the District of Columbia ordered Iran to pay in total $1.45 bn to...

Onus on Petitioner To Show Unassailable Facts: Delhi High Court

In the case of Rhythm Jain v National Testing Agency, the Delhi High Court mentioned that in such petitions the...

Under-Trial/Convicted Persons Do Not Have Absolute Right To Parole in Light of Coronavirus : Bombay High Court

An important judgment was given by the Division Bench of the Nagpur bench of Bombay High Court concerning the...

Madhya Pradesh High Court Asks State To File Reply To Examine Whether Privacy Rights of an Individual Can Be Violated by Issuing an Executive...

A Writ Petition was instituted by an individual for violation of his fundamental rights by the State before the...

Bombay High Court Allows Export of Pending Consignment of Onions in Respect of Which Shipping Bills Have Been Generated Before Notification of the Ban

A writ petition challenging the notification dated 14th September 2020 to ban the export of onions was filed by...

Delhi HC: Mens Rea Essential Before Passing an Order U/S 14b of EPF Act

  In the matter of M/s Durable Doors and Windows v APFC, Gurugram, the bench allowed the Petitioner's appeal holding...

Follow us

An appeal was filed by the shareholder of the corporate debtor in the National Company Law Appellate Tribunal (NCLAT). The appellant challenged the decision of the National Company Law Tribunal (NCLT) dated 26th February 2020 wherein the tribunal accepted the application under section 9 of IBC by operational creditor.

Facts of the Case

Corporate Debtor was a buyer of aluminium ingots and wire rods and maintained running accounts with the operational creditor. The appellant, however, claimed that the debt claimed by the operational creditor was for the purchase of wire and ingots for the period of 6th December 2017 to 16th April 2018.  

Observations of National Company Law Tribunal 

NCLT, however, observed that there were no averments made by corporate debtor about the notice dated 5th November 2018. Corporate debtor has paid partial payments of Rs 1,95,34,823 on 21st October 2017 and Rs 1,95,79,294 on 10th November 2017 to operational creditor.

The Tribunal stated, “Corporate debtor also failed to provide any documentation regarding the tri-party agreement between the corporate debtor, operational creditor and their sister concerns, authorizing the corporate debtor to make payments to other concerns”.

The Tribunal very clearly stated that the dispute raised by the corporate debtor was illusionary and was only raised to run away from the liability to pay the operational creditor.  

Appellant’s Arguments

The appellant argues that the Tribunal i.e. NCLT ignored all the documents regarding the pre-existing dispute because the respondent failed to disclose that before the demand notice dated 27.10.2018 there was one more demand notice issued by respondents on 17.08.2018 claiming the same amount of Rs 16,18,18,265 to which the appellants responded that due to mutual understanding adjustments of payments were made and there was no amount due. 

The respondent had acknowledged the reconciled accounts of the appellants for the period 1.04.2017 to 31.03.2018 and 1.04.2018 to 31.03.2019 which was duly signed by the directors of the respondents and its sister concerns. This showed that there was no amount due. 

Furthermore, M/s Oyster (a sister concern of respondent) and Iron Pvt. Ltd. (a sister concern of respondent) confirmed the ledgers of the appellants which showed no amount due. Hence, there was no amount due to respondents.

Respondent’s Arguments

The respondent denied that there was any confirmation by them of accounts and also alleged that the letters in which authorized adjustments/entries were forged and fabricated. The rubber stamps also had errors wherein even the name of the operational creditor was wrong.

Additionally, the earlier reply dated 28.08.2018 only claimed settlements of the accounts till 31.03.2018 to which also the respondent disputed.

Furthermore, the respondent stated the case of Mobilox Innovations Pvt. Ltd. vs Kirusa Software Ltd. wherein it was stated that existence must be pre – disputed i.e. the existence of dispute must be pre-existing. Also, it was stated by the apex court in this judgment that 3 conditions must be fulfilled before accepting any application under section 9 of IBC and those are that existence of dispute must be pre-existing, the operational debt must be more than 1 lakh and the debt has not been paid. If all these conditions are fulfilled then the tribunal cannot reject the application.

Court’s Analysis

The NCLAT observed that the journals, ledgers, and letters showed by the appellant had many discrepancies. The argument that sister concerns of the respondent approved the accounts of the appellant inspired no confidence.

There were no substantial reasons as to why only the ledger of the appellant showed the entries and not the respondents. However, both parties agreed to these accounts.

Furthermore, it stated that the defences raised by the appellant were not mutually exclusive and cannot co-exist as debt cannot be disputed and discharged at the same time. 

Court’s Decision

According to NCLAT, there existed no dispute and the principle discussed in Mobilox Innovations Pvt. Ltd. case would be applicable in this case also. They also said that they were of the view that there was no illegality in the order passed by NCLT and hence the appeal was dismissed. 


Libertatem.in is now on Telegram. Follow us for regular legal updates and judgments from courts. Follow us on Google News, InstagramLinkedInFacebook & Twitter. You can also subscribe to our Weekly Email Updates. You can also contribute stories like this and help us spread awareness for a better society. Submit Your Post Now.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Latest News

US Court Orders Iran To Pay $1.4 BN in Damages To Missing Former FBI Agent’s Family

The United States District Court for the District of Columbia ordered Iran to pay in total $1.45 bn to the Levinson family in punitive...

Onus on Petitioner To Show Unassailable Facts: Delhi High Court

In the case of Rhythm Jain v National Testing Agency, the Delhi High Court mentioned that in such petitions the onus to prove the facts...

Under-Trial/Convicted Persons Do Not Have Absolute Right To Parole in Light of Coronavirus : Bombay High Court

An important judgment was given by the Division Bench of the Nagpur bench of Bombay High Court concerning the constitutionality of Rule 19 of...

Madhya Pradesh High Court Asks State To File Reply To Examine Whether Privacy Rights of an Individual Can Be Violated by Issuing an Executive...

A Writ Petition was instituted by an individual for violation of his fundamental rights by the State before the Madhya Pradesh High Court. The...

Bombay High Court Allows Export of Pending Consignment of Onions in Respect of Which Shipping Bills Have Been Generated Before Notification of the Ban

A writ petition challenging the notification dated 14th September 2020 to ban the export of onions was filed by the Exporters Association before the...

Delhi HC: Mens Rea Essential Before Passing an Order U/S 14b of EPF Act

  In the matter of M/s Durable Doors and Windows v APFC, Gurugram, the bench allowed the Petitioner's appeal holding that mens rea is an...

Delhi HC: Language of Statement and Testimony of Complainant Need Not Be Identical

A single-judge bench of J. Vibhu Bakhru of the Delhi High Court upheld the accused's conviction in Kailash @ Balli v State. The bench...

COVID Results Shall Be Conveyed To the Person Within 24 Hours: Delhi High Court

The order has come in a writ petition moved by Rakesh Malhotra. The Petitioner herein seeks to ramp up testing facilities in Delhi.   Facts of...

Delhi High Court Sets Aside the Order of the Trial Court in the Chief Secretary Assault Case

In the case of Mr. Arvind Kejriwal & Anr. V. State NCT of Delhi, Mr.Justice Suresh Kumar Kait has set aside the 24.07.2019 Order...

Delhi High Court Temporarily Restrains Vintage Moments’ Alcohol Sale in Case of Trademark Infringement

The manufacturers of the Alcohol Brand Magic Moments had filed a suit. The Delhi High Court has passed an order restraining the manufacturing, marketing,...

More Articles Like This

- Advertisement -