1. Operational creditor initiates corporate insolvency resolution process under Section 9, IBC — Dispute over pre-existing debt and validity of admission order. (Para 1 , 2 )
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2025 Supreme(SC) 2026
SUPREME COURT OF INDIA
SANJAY KUMAR, ALOK ARADHE, JJ.
M/s. Saraswati Wire and Cable Industries – Appellant
Versus
Mohammad Moinuddin Khan and Others – Respondents
Civil Appeal No. 12261 of 2024
Decided On : 10-12-2025
Advocates appeared:
For the Appellant(s) : Mr. Nikhil Singhvi, Adv. Mr. Manan Sisodia, Adv. Ms. Shraddha Deshmukh, AOR Mr. Soham Krishan Luthra, Adv. Mr. Sanyam Kumar, Adv.
For the Respondent(s): Mr. Shaurya Sahay, Adv. Ms. Aarushi Malik, Adv. Mr. Aditya Kumar, Adv. Ms. Yoothica Pallavi, AOR
For the Appellant(s) : Mr. Nikhil Singhvi, Adv. Mr. Manan Sisodia, Adv. Ms. Shraddha Deshmukh, AOR Mr. Soham Krishan Luthra, Adv. Mr. Sanyam Kumar, Adv.
For the Respondent(s): Mr. Shaurya Sahay, Adv. Ms. Aarushi Malik, Adv. Mr. Aditya Kumar, Adv. Ms. Yoothica Pallavi, AOR
Unsubstantiated claims of pre-existing disputes do not impede the admission of an application under Section 9 of the IBC.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 9 - Corporate Insolvency Resolution Process (CIRP) - Admission of CIRP against corporate debtor was denied by NCLAT citing pre-existing disputes between parties - Supreme Court reinstates admission, finding that such disputes were non-credible and did not justify withholding payment - Ledger accounts indicated amounts due, and payments confirmed absence of legitimate disputes. (Paras 1-21)
(B) Pre-existing Dispute - Definition and implications under the IBC - A mere assertion of dispute without credible evidence does not impede the admission of an application under Section 9 of the IBC. (Paras 15-19)
Facts of the case:
The case involves a corporate insolvency process initiated by an operational creditor against a corporate debtor, which was halted on appeal due to alleged disputes over debt amounts. The Supreme Court examined the legitimacy of such disputes.
Findings of Court:
The court found that the supposed disputes were without merit and restored the NCLT's admission of the creditor's application, underscoring the substantive evidence of debt owed.
Issues: Whether credible pre-existing disputes existed as a barrier to admission of the CIRP application.
Ratio Decidendi: The court reiterated that unsubstantiated claims of disputes would not suffice to prevent admission under Section 9 of the IBC.
Result: Appeal allowed, decision of NCLAT set aside, and CIRP admission reinstated.
Legal Category Hierarchy
Table of Contents
2. Whether a pre-existing dispute regarding material quality and supply exists to preclude initiation of corporate insolvency resolution process under Section 9, IBC. (Para 3 , 7 )
3. Post-demand notice payments and certified ledger accounts negate claims of pre-existing disputes; allegations of sub-standard supply were unsubstantiated and constituted mere moonshine. (Para 4 , 5 , 6 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 20 )
4. A defence of pre-existing dispute must be substantial and not mere moonshine, spurious, or illusory to justify rejecting an application under Section 9, IBC. (Para 15 , 16 , 17 , 18 , 19 )
5. Appeal allowed — NCLAT judgment set aside and NCLT order admitting the corporate insolvency resolution process restored. (Para 21 )
6. What is the test for determining a pre-existing dispute under Section 9 of the IBC?
The adjudicating authority must determine if an operational debt exists, if it was due and unpaid, and if a non-spurious dispute existed before the demand notice. The court must separate genuine disputes from mere bluster or illusory defences. (Para 15 )
7. Does the payment of dues after the issuance of a Section 8 demand notice affect the claim of a pre-existing dispute?
Yes. Continued payments made by the corporate debtor after the issuance of a demand notice under Section 8 of the IBC clearly negate the existence of a pre-existing dispute that would justify withholding payment. (Para 6 , 9 )
8. What standard of evidence is required for a corporate debtor to successfully plead a pre-existing dispute?
The defence must be substantial and not mere moonshine. The adjudicating authority must examine the material provided to determine if the defence has substance or is merely a tactic to delay the insolvency process. (Para 16 , 17 , 18 , 19 )
9. Can a delay in filing a Section 9 application be used as evidence of a persisting dispute?
Not if the delay is justified by external legal constraints, such as a prior existing corporate insolvency resolution process against the same corporate debtor which prevents the initiation of a new process. (Para 8 )
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 found mention in the demand notice, i.e. Invoice No. 203 dated 29.09.2019 for a sum of Rs. 33,42,527/- and Invoice No. 205 dated 06.10.2019 for a sum of Rs. 23,81,417/-. According to him, no supplies were made as against these two invoices, but a sum of Rs. 50 lakh was stated to have been paid as advance against them. It was further stated that the material supplied by the firm was sub-standard and there was also an issue of short supply. He stated that the CD had incurred financial losses owing to the sub-standard material supplied by the firm and
