2026 Supreme(Online)(NCLAT) 533

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Arun Baroka, Member (Technical)
Rakesh Dalpatram Panchal – Appellant
Versus
M/s. Kisaan Steels Pvt. Ltd. – Respondent
Company Appeal (AT) (Insolvency) No. 526 of 2025

A corporate debtor cannot claim a pre-existing dispute after itself preparing a consequences sheet that crystallizes the debt and imposes penalties, making the dispute spurious, not genuine. A conditional offer to pay does not negate this.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 8, 9 and Section 9(5)(ii)(d) - Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Rule 5 - Initiation of Corporate Insolvency Resolution Process (CIRP) by Operational Creditor - Requirement of undisputed debt and default - Pre-existing dispute as a bar to admission - Nature of proceedings under Section 9 is summary, not a debt recovery forum - Code is not a substitute for debt enforcement procedures; it deals with insolvency and bankruptcy and not to penalize solvent companies for disputed dues. (Paras 8, 9, 10)

(B) The moment there is existence of a genuine dispute, the operational creditor gets out of the clutches of the Code - The dispute must be pre-existing, i.e., it must exist before the receipt of the demand notice or invoice - The dispute cannot be spurious, hypothetical, illusory or misconceived - When clear documents raising disputes exist, it is not appropriate for the Adjudicating Authority to enter into a trial of a civil suit - Disputed questions of fact already raised before notice under Section 8 cannot be investigated. (Paras 7, 11, 46)

(C) Pre-existing dispute - Assessment - The Corporate Debtor itself prepared a 'consequences sheet' crystallizing the balance amount payable and imposing penalties for delay and quality defects - By agreeing to pay this crystallized amount, the Corporate Debtor cannot claim a pre-existing dispute regarding that amount - An email stating intention to pay the balance amount, with a precondition of accepting the consequences sheet, does not constitute an unequivocal admission of liability but is a conditional offer - The insistence on acceptance of the consequences sheet as a precondition for payment is coercive and does not create a genuine dispute. (Paras 73, 75, 79)

(D) Acknowledgment of debt - Deduction of TDS and filing of GST returns are statutory compliances and do not, by themselves, constitute an admission of financial liability or an acknowledgment of debt. (Paras 25, 26, 27)

Facts of the case:
The Appellant, ex-director of the Corporate Debtor, appealed against the admission of a Section 9 petition filed by the Respondent No.1 (Operational Creditor). The parties had multiple purchase orders for supply of forgings. The Appellant claimed defective supplies and delays, raising a pre-existing dispute, and had prepared a 'consequences sheet' detailing penalties. The Respondent No.1 issued a demand notice for Rs.6.13 crores. The Corporate Debtor replied disputing liability and citing the pre-existing dispute. The Adjudicating Authority admitted the petition, relying on an email dated 01.11.2023 from the Corporate Debtor which it interpreted as an admission of liability, despite the email being conditional on acceptance of the consequences sheet.

Findings of Court:
The Appellate Tribunal held that the Corporate Debtor, by preparing and sharing a 'consequences sheet' that crystallized the undisputed amount and incorporated penalties for delays/defects, had effectively accepted the computation and could not later claim a pre-existing dispute over that amount. The email dated 01.11.2023, which offered payment subject to acceptance of the consequences sheet, did not create an unequivocal admission; rather, it was a coercive precondition. The Tribunal found no pre-existing dispute, concluding that the Appellant's claims were spurious, hypothetical, or illusory. The appeal was dismissed and the CIRP was allowed to restart.

Issues: The main issues were whether there existed a genuine pre-existing dispute between the parties regarding the operational debt so as to bar the admission of the Section 9 petition, and whether the email dated 01.11.2023 constituted an unequivocal admission of liability by the Corporate Debtor.

Ratio Decidendi: The court ruled that once a corporate debtor itself prepares a consequences sheet which crystallizes the amount payable and incorporates penalties for alleged breaches, it cannot later claim that there is a genuine pre-existing dispute regarding that amount. A conditional offer to pay, made contingent upon acceptance of such a consequences sheet, does not amount to an unequivocal admission of debt and does not negate the existence of a dispute; however, the insistence on such a precondition is coercive, and the dispute raised in this context is spurious and illusory. Therefore, the petition under Section 9 is maintainable. Result : Appeal dismissed. All related IAs disposed of. Insolvency proceedings to restart forthwith. No order as to costs.

Table of Content
1. appeal against section 9 admission based on pre-existing dispute. (Para 1)
2. appellant alleges delays and defective supplies by respondent. (Para 2 , 3 , 4)
3. pre-existing dispute precludes section 9 admission. (Para 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13)
4. nclt ignored evidence of pre-existing disputes and conditional admission. (Para 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28)
5. respondent argues debt admitted, no pre-existing dispute. (Para 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58)
6. appellate tribunal upholds admission due to undisputed debt and no genuine dispute. (Para 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66 , 67 , 68 , 69 , 70 , 71 , 72 , 73 , 74 , 75 , 76 , 77 , 78 , 79 , 80)
7. appeal dismissed, cirp to restart. (Para 81)

J U D G M E N T

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

1.This is an appeal filed by Rakesh Dalpatram Panchal who is the Ex-Director of M/s Gemini Engi. Fab. Private Limited – the Corporate Debtor against admission of Section 9 application, which was filed by Respondent No.1 – Kisaan Steels Pvt. Ltd. The Corporate Debtor – M/s Gemini Engi. Fab. Private Limited and Respondent No.1 – Kisaan Steels Pvt. Ltd. had entered into several purchase orders between December 2021 and June 2022 for the supply of forgings and other materials. It is claimed by the Appellant that R1 failed to adhere to the agreed delivery timelines and supplied defective goods, which led to multiple disputes between the parties. Numerous correspondences were exchanged between the parties which shows pre-existing dispute regarding quality, penalties and financial reconciliation. Appellant – Corporate Debtor had also imposed penalties on R1 for its breaches and reconciliation of accounts was going on. Respondent No.1 – Kisaan Steels Pvt. Ltd. had issued a demand notice under Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 claiming an outstanding amount of Rs.6,13,53,270/-. Appellant – Corporate Debtor in its rely on 14.07.2023, denied the liability and cited existence of pre-existing dispute and defective supplies. But despite this evidence of ongoing disputes NCLT admitted under Section 9 application relying on an email dated 01.11.2023, which was misinterpreted as an admission of liability, whereas it was conditional upon the acceptance of the consequences sheet.

Submissions of Appellant

2. Between June 2021 to December 2021, the Appellant – Corporate Debtor placed several Purchase Orders ("PO") for delivery of Tube sheets and Forgings to be delivered within the timeline stipulated in such POs. Notwithstanding the aforesaid, and more particularly the fact that time was of the essence under the POs, Respondent No.1 – Kisaan Steels Pvt. Ltd. failed and neglected to supply the goods within the stipulated timeline. Accordingly, supply by the Appellant – Corporate Debtor to the end-user/ customer suffered massive delays which affected completion of equipment and end-user's project and occasioned commercial loss and injury to the Corporate Debtor. Respondent No. 1 has also acknowledged delay in supply of goods as per contractual timeline vide letter dated 16th May 2017.

3. Such delays were not isolated incidents, but rather a recurring pattern across multiple purchase orders. Respondent No. 1 not only failed to respond to reminders addressed by the Corporate Debtor but miserably failed to meet the agreed timelines, demonstrating a persistent and negligent approach towards its contractual obligations. Due to Respondent No. 1's inaction, the Corporate Debtor was compelled to incur extra costs towards workforce, contractors, and bank interest. This was repeatedly informed to Respondent No. 1, however, Respondent No.1 failed to deliver the goods within the stipulated timeline. Respondent No. 1's failure to comply with the agreed delivery timeli

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