Searching Case Laws & Precedent on Legal Query.....!
Scanned Judgements…!
Searching Case Laws & Precedent on Legal Query.....!
Scanned Judgements…!
Pre-existing Dispute Recognition - Multiple sources confirm that approaching the MSME Facilitation Council before filing under Section 9 of the IBC generally indicates the existence of a pre-existing dispute. For example, ["iValue Advisors Pvt. Ltd. Vs Srinagar Banihal Expressway Ltd. - Supreme Court"] states that authorities, it showed pre-existing under the MSME Council are to be initiated and thus the Application under 9(3) of IBC, implying that prior proceedings or disputes with the MSME Facilitation Council are indicative of a pre-existing dispute.
Judicial Precedents on Dispute Status - Courts have consistently held that pendency of claims or proceedings before the MSME Facilitation Council constitutes a pre-existing dispute, which bars or influences the admissibility of Section 9 applications. ["ARPANA PACKAGING PRIVATE LIMITED VS REGMA CERAMICS PRIVATE LIMITED - National Company Law Appellate Tribunal"] notes that there was no pre-existing dispute when invoices and dues were based on contractual documents, whereas ["Kasha Sai. E VS M/s. Yarn Udyog - National Company Law Appellate Tribunal"] and ["INDNCLAT00000023520"] emphasize that if a dispute was already pending or initiated before the MSME Council, the Section 9 application should be rejected under Section 9(5)(ii)(d).
Dispute as a Bar to Section 9 Filing - Several sources clarify that if a bona fide dispute exists, especially one initiated or pending before the MSME Facilitation Council, the application under Section 9 of IBC must be rejected. ["North Agro Industries Pvt. Ltd. VS Mahindra and Mahindra Limited - National Company Law Tribunal"] states that if there is a pre-existing dispute the NCLT is required to reject the application, and ["North Agro Industries Pvt. Ltd. VS Mahindra and Mahindra Limited - National Company Law Tribunal"] confirms that Section 9(5)(ii)(d) of the IBC, 2016 bars an application if there exists a genuine pre-existing dispute.
Distinction Between MSME Proceedings and IBC - Courts have distinguished proceedings before MSME Facilitation Councils from IBC processes, noting that initiation before the MSME Council does not automatically preclude IBC action unless a dispute is established. ["PME INFRATECH PVT. LTD VS MELANGE SYSTEMS PRIVATE LIMITED - National Company Law Tribunal"] emphasizes that since the debt and default exist and no pre-existing dispute has been brought to notice, it is a fit case for admission u/9 of IBC, whereas ["DOTCOM PHARMA PRIVATE LIMITED VS MYLAN PHARMACEUTICALS PRIVATE LIMITED - National Company Law Tribunal"] highlights that a pre-existing dispute was identified when the respondent approached the MSME Council, which affected the IBC application.
Impact of Prior Proceedings and Dispute Validity - Initiating proceedings before MSME Facilitation Councils or raising disputes there does not necessarily mean a dispute is genuine or pre-existing in the context of IBC. ["ARPANA PACKAGING PRIVATE LIMITED VS REGMA CERAMICS PRIVATE LIMITED - National Company Law Appellate Tribunal"] clarifies that dispute raised before MSME was that it had dues to recover and that the Respondent has not paid, which does not automatically equate to a pre-existing dispute under IBC unless it is bona fide and pending. Conversely, ["M/s. Recap Ventures Pvt. Ltd. vs M/s. ITI Limited - National Company Law Tribunal"] notes that claim of Operational Creditor before the MSME facilitation council is in consonance with the provisions of IBC, 2016, but the existence of a pre-existing dispute can still bar the application.
Conclusion - Approaching the MSME Facilitation Council prior to filing a Section 9 IBC application generally indicates the existence of a pre-existing dispute, which is a key bar under Section 9(5)(ii)(d). Courts and tribunals have consistently held that if a bona fide dispute is pending or initiated before the MSME Council, the Section 9 application must be rejected, emphasizing the importance of the dispute's bona fide nature and timing ["ARPANA PACKAGING PRIVATE LIMITED VS REGMA CERAMICS PRIVATE LIMITED - National Company Law Appellate Tribunal"] ["North Agro Industries Pvt. Ltd. VS Mahindra and Mahindra Limited - National Company Law Tribunal"] ["North Agro Industries Pvt. Ltd. VS Mahindra and Mahindra Limited - National Company Law Tribunal"]. Proper analysis of whether a dispute is pre-existing hinges on whether proceedings before the MSME Council are initiated, pending, or bona fide, rather than mere formalities or prior claims.
In the complex interplay between the Micro, Small and Medium Enterprises Development (MSME) Act, 2006, and the Insolvency and Bankruptcy Code (IBC), 2016, operational creditors—often MSME suppliers—frequently face a strategic dilemma. Can they pursue insolvency under IBC Section 9 after invoking the MSME Facilitation Council? A critical question arises: Does approaching the MSME Facilitation Council before filing a Section 9 IBC application amount to a pre-existing dispute?
This post explores the legal landscape, drawing from judicial precedents and statutory provisions. While this analysis provides general insights, it is not legal advice—consult a qualified professional for your specific situation.
Generally, approaching the MSME Facilitation Council under Section 18 of the MSME Act before filing a Section 9 application under the IBC constitutes a pre-existing dispute. The reference under Section 18 presupposes a dispute regarding the amount due, and any such dispute existing prior to the Section 8 demand notice typically requires dismissal of the Section 9 application at the threshold. Silpi Industries VS Kerala State Road Transport Corporation - 2021 0 Supreme(SC) 299Rashmi Cement Limited VS Radha Bhattad - 2023 0 Supreme(Cal) 1162
This position stems from the statutory scheme where invoking MSME mechanisms acknowledges a payment dispute, aligning with IBC's threshold bar on admission where plausible contentions exist. Sabarmati Gas Limited VS Shah Alloys Limited - 2023 1 Supreme 10
The MSME Act offers a tailored recovery path for delayed payments to micro and small enterprises. Section 18(1) states: Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council. Silpi Industries VS Kerala State Road Transport Corporation - 2021 0 Supreme(SC) 299 This language ties the reference to an existing dispute over goods/services payments (Section 17). Rashmi Cement Limited VS Radha Bhattad - 2023 0 Supreme(Cal) 1162S. R. Technologies (Unit-II) VS Micro and Small Enterprises Facilitation Council - 2023 0 Supreme(Telangana) 22
The process initiates with conciliation under Section 18(2), escalating to arbitration if needed, applying Arbitration Act provisions. Silpi Industries VS Kerala State Road Transport Corporation - 2021 0 Supreme(SC) 299Harcharan Dass Gupta VS Union of India - 2025 0 Supreme(SC) 830Piya Bajwa vs Micro and Small Enterprises Facilition Centre - Delhi (2021)Piya Bajwa VS Micro And Small Enterprises Facilition Centre - 2021 0 Supreme(Del) 1917 Courts note this often follows failed payments or prior claims, as in cases where petitions led to arbitration years later. Electrosteel Steel Limited (Now M/s ESL Steel Limited) VS Ispat Carrier Private Limited - 2025 0 Supreme(SC) 670
Under IBC, operational creditors' Section 9 applications falter if a dispute predates the Section 8 notice. The Supreme Court clarifies: Existence of ‘pre-existing dispute’ should entail dismissal of application filed under Section 9 IBC at threshold – It is enough that a dispute exists between parties – What is to be seen is whether there was a plausible contention requiring investigation. Sabarmati Gas Limited VS Shah Alloys Limited - 2023 1 Supreme 10 Correctness is evidentiary, not for NCLT to decide initially. Sabarmati Gas Limited VS Shah Alloys Limited - 2023 1 Supreme 10
An MSME reference qualifies, signaling contention over debt via conciliation/arbitration. This adversarial step confirms the dispute's nature. Piya Bajwa vs Micro and Small Enterprises Facilition Centre - Delhi (2021)Piya Bajwa VS Micro And Small Enterprises Facilition Centre - 2021 0 Supreme(Del) 1917
MSME Section 24 overrides other laws, creating parallel tracks. Silpi Industries VS Kerala State Road Transport Corporation - 2021 0 Supreme(SC) 299Harcharan Dass Gupta VS Union of India - 2025 0 Supreme(SC) 830 In one case, MSME claims (2014) preceded IBC Section 7 (2017), establishing sequence-based disputes. Electrosteel Steel Limited (Now M/s ESL Steel Limited) VS Ispat Carrier Private Limited - 2025 0 Supreme(SC) 670
Other rulings nuance this: Pendency before the Council may not always preclude IBC if no pre-existing dispute exists, especially with unpaid debts. BALAJEE STRUCTURAL (INDIA) PRIVATE LIMITED vs TAMIL NADU GENERATION AND DISTRIBUTION CORPORATION LIMITED - 2025 Supreme(Online)(NCLT) 4770 However, mean that there is a pre-existing dispute... under the MSME Council are to be initiated and thus the Application under 9(3) of IBC. iValue Advisors Pvt. Ltd. Vs Srinagar Banihal Expressway Ltd. NCLT has disagreed with claims of no dispute where MSEFC references under Section 18 were filed, noting the Respondent has also disputed its liability and raised the disputes... Section 18 pertains to reference of a dispute to MSEFC. THILAGAVATHI VS SIVADHARSHINI PAPERS PRIVATE LIMITED - 2023 Supreme(Online)(NCLT) 1680THILAGAVATHI VS SIVADHARSHINI PAPERS PRIVATE LIMITED - 2023 Supreme(Online)(NCLT) 1681
Contrastingly, claims before the Council align with IBC rights and do not inherently affect them. Mayfair Biotech Private Limited VS Good Value Chemicals Private Limited - 2024 Supreme(Online)(NCLT) 157 Yet, where principal falls below thresholds or interest is unadjudicated, petitions fail due to disputes. BALAJEE STRUCTURAL (INDIA) PRIVATE LIMITED vs TAMIL NADU GENERATION AND DISTRIBUTION CORPORATION LIMITED - 2025 Supreme(Online)(NCLT) 4770
While the general rule holds, consider these caveats:
In arbitration contexts, Section 34 filings may signal disputes precluding IBC. Sirpur Paper Mills Limited VS I. K. Merchants Pvt. Ltd. - 2021 Supreme(Cal) 240
Approaching the MSME Facilitation Council typically establishes a pre-existing dispute, shielding debtors from Section 9 IBC at admission. This prioritizes MSME's specialized forum, ensuring disputes are addressed there first. Strategic sequencing is vital—rushing to IBC risks rejection.
Stay informed on evolving NCLT/Supreme Court views, as seen in threshold dismissals for unadjudicated claims. BALAJEE STRUCTURAL (INDIA) PRIVATE LIMITED vs TAMIL NADU GENERATION AND DISTRIBUTION CORPORATION LIMITED - 2025 Supreme(Online)(NCLT) 4770Sabarmati Gas Limited VS Shah Alloys Limited - 2023 1 Supreme 10
This post synthesizes general principles from cited precedents. Laws and interpretations may vary; seek tailored legal counsel.
mean that there is a pre-existing dispute. ... Authorities, it showed pre-existing under the MSME Council are to be initiated and thus the Application under 9(3) of IBC. ... Section 8 Notice, there was an existing dispute.
The Applicant relied on several judicial precedents to assert that pendency of a claim before the Facilitation Council does not preclude recourse to IBC, particularly where there is no pre-existing dispute and the debt remains unpaid. 6.5. ... Section 18 (3) of the MSMED Act is not a mandatory precondition for claiming operational debt in proceedings under Section 9 of the Code, especially when there is no pre-#HL....
In reply to the application filed by the Petitioner under Section 9 of IBC, the Respondent has also disputed its liability and raised the disputes. 16. We are not in agreement with the contention of the Petitioner that there is no pre-existing dispute. ... Facilitation Council (MSEFC) under Section 18 of MSMED Act, 2006. ... It is stated that Section 18 pertains to reference of a dispute to MSEFC ....
In reply to the application filed by the Petitioner under Section 9 of IBC, the Respondent has also disputed its liability and raised the disputes. 16. We are not in agreement with the contention of the Petitioner that there is no pre-existing dispute. ... Facilitation Council (MSEFC) under Section 18 of MSMED Act, 2006. ... It is stated that Section 18 pertains to reference of a dispute to MSEFC ....
referred to as ‘the Code’), observing as follows: As regards the contention that there are pre- existing disputes as to the debts claimed, admittedly, the Applicant prior to filing this application, had initiated proceedings before MSME Council seeking the same amount claimed as outstanding ... The next issue raised by the Learned Counsel is with respect to a ‘pre existing dispute’ between the Parties as there was a ‘Barter Transaction’ and when ....
Para 13: We do not find that there was any pre-existing dispute raised by Respondent and we hold that the Section 9 Application was wrongly rejected. ... Thus the context of the word “dispute” in Section 18 takes colour from Section 17 of MSME Act. It is different from context of Section 5(6) read with Section 8 of IBC. ... The Appellant had a relief open under the #HL_S....
Section 9 of the IBC 2016 proposing to commence CIRP against respondent Government Company does not find favour with us in view of the pre-existing dispute between the parties, and the Corporate Debtor undertaking Sovereign Functions and as such ... Facilitation Council (MSMEFC) dated 30.08.2022.
Moreover, claim of Operational Creditor before the MSME facilitation council is in consonance with the provisions of IBC, 2016 and in no way effect the special rights provided under IBC, 2016 to Operational Creditor. ... In this stage, we may refer to provisions of Sections 17 and 18(1) of the Micro, Small, and Medium Enterprises Development Act, 2006 (“MSME”), As per section 18 of MSME parties to the dispute may make a reference t....
3.6 The Corporate Debtor states that there is a pre-existing dispute pending for adjudication. I say that as envisaged in Section 9(5) (ii) (d) of the IBC in case if there is a pre-existing dispute the NCLT is required to reject the application. ... 5.8 In view of the above, we find that the present case is fit for dismissal under Section 9(5)(ii)(d) read with Section 8(2)(a) o....
3.6 The Corporate Debtor states that there is a pre-existing dispute pending for adjudication. I say that as envisaged in Section 9(5) (ii) (d) of the IBC in case if there is a pre-existing dispute the NCLT is required to reject the application. ... 5.8 In view of the above, we find that the present case is fit for dismissal under Section 9(5)(ii)(d) read with Section 8(2)(a) o....
00. Thus, the total disputed amount was Rs. 1,59,09,214. 33. Buyer (appellant) did not make any payment so the entire amount was claimed as outstanding and due. Initially conciliation proceedings were initiated by the Facilitation Council but the buyer unit was not present though it had filed written submissions stating that on the request of the supplier it had appointed an arbitrator whereafter arbitration proceedings had commenced. As an independent arbitration agreement existed between the parties, Facilitation Council should not proceed under Section 18(3) of the MSME Act. Alr....
[In short “NCLAT”] apparently on the ground that section 9 of IBC petition was not maintainable as there was a pre-existing dispute. The NCLAT while allowing the withdrawal of the appeal granted stay of formation of CoC.
Whether the Facilitation Council itself could take up the dispute for arbitration and act as an arbitrator, when the Facilitation Council had conducted the conciliation proceedings under sub-section (2) of Section 18 of the MSME Act in view of the bar contained in Section 80 of the 1996 Act? Act makes it abundantly clear that provisions of Sections 15 to 23 of the MSME 26. That apart, from a reading of Section 18 of the MSME Act, more particularly sub-sections (2) and (3) thereof, the Facilitation Council is mandated either to itself conduct conciliation and on it....
Counsel reiterates that the respondent Award-holder could not have lodged its claim before the NCLT by reason of the impugned Award being stayed upon filing of the Section 34 application. On the factual aspect, counsel submits that the petitioner continues to exist and is hence under an obligation to pay the dues of the respondent Award-holder. Counsel submits that with the filing of an application under Section 34 is filed, the dispute raised by the party amounts to a pre-existing dispute which takes the respondent/Award-holder outside the purview of the IBC; Mobilox Innovations P....
Section 18 of the MSME Act provides that any party to a dispute may make a reference to the Facilitation Council, on receipt of which the Council shall either itself or through an alternate dispute resolution institution or centre, carry out conciliation between the parties and the provisions of Sections 65 to 81 of the Arbitration Act will apply to the said conciliation. If plaintiff has any ground to restrain the proceedings before the Facilitation Council or the Arbitral Tribunal, the same would have to be raised only before the Facilitation Council or the Arbitral Tribu....
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