More Than a Collection Agency: NCLAT Blocks Insolvency Plea in Complex Freight Dispute

In a clear message to creditors, the National Company Law Appellate Tribunal (NCLAT) has reminded stakeholders that the Insolvency and Bankruptcy Code (IBC) is not a substitute for standard debt recovery mechanisms. In the matter of RKB Global Limited vs. Tulip Polychem Pvt Ltd , the tribunal dismissed an appeal seeking to initiate the Corporate Insolvency Resolution Process (CIRP), ruling that the underlying debt was marred by "serious disputed questions of fact."

A Voyage of Contention

The dispute stems from a 2019 iron ore shipment from Redi Port, India, to Rizhao Port, China, carried out on the vessel M.V. Sun Lucia . RKB Global, the appellant, had chartered the vessel and loaded its cargo, but was also responsible—as the charterer—for the freight invoice of the respondent, Tulip Polychem, which had occupied space on the same ship.

Following an insolvency proceeding initiated against the appellant by the vessel owner, Jaldhi Overseas Pte. Ltd., RKB Global settled its accounts and subsequently turned its sights on Tulip Polychem. Armed with a clause from its own settlement agreement with Jaldhi, RKB issued debit notes to Tulip for approximately Rs. 3.24 crore in freight and demurrage charges. When Tulip contested these claims, citing that payment had already been facilitated years prior through third-party entities BST (HK) Limited and Globechart, the appellant rushed to the National Company Law Tribunal (NCLT) under Section 9 of the IBC.

The Conflict of Arguments

Counsel for RKB Global leaned heavily on the argument that the debt was undisputed. They suggested that the respondent’s failure to produce definitive banking evidence of payment to Jaldhi, combined with the vessel owner’s own admission, created an "admitted" operational debt.

Tulip Polychem, however, countered that the claim was an opportunistic attempt by the appellant to shift its own contractual liabilities after a private settlement. The respondent presented contemporaneous 2019 emails and ledger confirmations to suggest the freight had already been discharged.

Legal Analysis: The Threshold for IBC

The NCLAT bench, comprising Chairperson Justice Ashok Bhushan and Member (Technical) Indevar Pandey, found that the controversy reached far beyond simple non-payment. The core issue required untangling complex email trails, disputed SWIFT remittances, and conflicting interpretations of accounting entries from half a decade ago.

The court reiterated the threshold established in landmark cases such as Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. and Kay Bouvet Engg. Ltd. v. Overseas Infrastructure Alliance . These precedents mandate that where a corporate debtor raises a plausible contention that is not merely "sham or illusory," the summary jurisdiction of the NCLT is not the appropriate arena for resolution.

Key Observations

The judgment highlighted that the complexity of the facts rendered the summary nature of Section 9 proceedings inadequate:

• "The controversy is not confined merely to computation of liability but extends to the very existence of liability itself."
• "The IBC is not intended to be used as a substitute for recovery proceedings in matters involving seriously disputed contractual claims."
• "Determination of liability would necessarily require detailed evidentiary examination and adjudication of disputed facts, which falls outside the limited and summary jurisdiction exercised under Section 9 of the IBC."

Final Ruling

Finding no infirmity in the NCLT Ahmedabad bench’s original dismissal, the NCLAT affirmed that the insolvency code cannot be weaponized to resolve fact-intensive commercial disputes. "The present matter involved serious disputed questions of fact," the tribunal concluded, effectively closing the door on the appellant's attempt to use the CIRP as a debt collection tool in this instance. The appeal was dismissed, with the tribunal noting that the parties must seek justice in a more competent forum where detailed evidence can be tested.