Unsubstantiated claims of pre-existing disputes do not impede the admission of an application under Section 9 of the IBC.

JUDGMENT :

SANJAY KUMAR, J.

1. Initiation of corporate insolvency resolution process¹ [For short ‘CIRP’] by an operational creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016² [For short ‘the IBC’] is in issue. By order dated 06.12.2023, the National Company Law Tribunal, Mumbai Bench-IV³ [For short ‘the NCLT’] admitted C.P. (IB) No. 398/NCLT/MB/C-IV/2023 filed by a registered partnership firm, viz. M/s. Saraswati Wire and Cable Industries⁴ [For short ‘the firm’] under Section 9 of the IBC and initiated the CIRP against Dhanlaxmi Electricals Private Limited, the corporate debtor⁵ [For short ‘the CD’] by appointing an Interim Resolution Professional. Aggrieved thereby, Mohammad Moinuddin Khan, a suspended director of the CD, filed Company Appeal (AT) (Insolvency) No. 22 of 2024 before the National Company Law Appellate Tribunal, Principal Bench⁶ [For short ‘the NCLAT’] New Delhi, under Section 61 of the IBC. By judgment dated 13.03.2024, the NCLAT allowed the said appeal and set aside the order of admission passed by the NCLT on the ground that there was a pre-existing dispute between the parties as to the firm’s debt prior to institution of the application under Section 9 of the IBC. Hence, this appeal by the firm.

2. The CD is a licensed engineering company that carries out works on contract basis. It placed purchase orders on the firm for supply of pipes and cables for its projects. The CD maintained a running account and used to make payments to the firm on the strength of the invoices raised by it from time to time. While so, the firm communicated its ledger account to the CD under email dated 31.07.2021 and sought confirmation thereof. In response, the CD addressed email dated 04.08.2021, through its Accounts Manager, informing the firm of three points of difference in the account maintained by it when compared with the ledger account sent by the firm. The points of difference were in relation to two debit notes of Rs. 6,490/- and Rs. 15,340/- respectively and a voucher of Rs. 1,37,210/-. All three pertained to November, 2018. The ledger account of the firm maintained by the CD from 01.04.2017 to 01.04.2021 was communicated by the CD under its email dated 04.08.2021. A closing debit balance was shown therein of Rs. 2,49,93,690.80, i.e. the sum due and payable to the firm. The ledger account of the firm maintained by the CD from 01.04.2020 to 30.03.2022 is also placed on record and it reflects an opening balance of Rs. 2,49,93,690.80, i.e. the closing balance of the earlier account. Three payments of Rs. 20 lakh each were made to the firm on 18.06.2020, 25.06.2020 and 20.08.2020 respectively and, thereafter, payment of Rs. 10 lakh was made on 29.08.2020, resulting in a closing debit balance of Rs. 1,79,93,690.80.

3. On 25.08.2021, the firm issued a demand notice under Section 8 of the IBC claiming the aforestated principal amount of Rs. 1,79,93,691/- along with interest thereon, quantified at Rs. 85,27,110/-, aggregating to Rs. 2,65,20,800/-. Seven invoices, from 29.05.2019 to 06.10.2019, found mention therein and the amount payable thereunder added up to Rs. 2,07,69,341/-. After adjusting the amounts paid, the claimed amount tallied with the debit balance shown by the CD in its ledger account pertaining to the firm. However, in his reply dated 20.11.2021 to this demand notice, the Technical Director of the CD raised an issue with regard to two invoices that foun