NCLT Indore Dismisses Oswal Woollen Mills Insolvency Plea Against EKI Energy Services

The Indore Bench of the National Company Law Tribunal (NCLT) has dismissed an insolvency petition filed by Oswal Woollen Mills Ltd against EKI Energy Services Ltd, ruling that a genuine pre-existing dispute over contractual terms barred the proceedings.

Pre-existing Dispute Blocks Insolvency Route

The dispute arose from an Emission Reduction Purchase Agreement (ERPA) dated 12 April 2022, under which Oswal agreed to supply Certified Emission Reductions (CERs) to EKI Energy. Oswal claimed it delivered 70,085 CERs on 13 January 2023, triggering a payment obligation within 15 days. When EKI failed to pay the principal sum of ₹1.28 crore plus interest, Oswal issued a demand notice under Section 8 of the Insolvency and Bankruptcy Code (IBC) on 22 April 2024.

Carbon Credit Controversy Not a Sham Defence

EKI opposed the petition, arguing that the parties had been locked in a contractual dispute well before the demand notice. The company had invoked Clause 2.14(m) of the ERPA on 29 March 2023, seeking to revise the CER purchase price from the agreed USD 1.0/2.5 per CER to USD 0.40/1.35 per CER, citing a collapse in the global carbon-credit market. Oswal rejected the proposal on 2 June 2023, and correspondence continued through December 2023, with Oswal even threatening "legal litigations."

The tribunal found that this correspondence demonstrated opposing positions on the contractual price, payment mechanism, and quantity of CERs—amounting to a genuine dispute that existed before the statutory notice. Referring to the Supreme Court's test in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. , the bench noted that a dispute need only be plausible and not spurious to defeat a Section 9 petition.

Invoicing and Quantity Issues Reinforce Dispute

EKI also pointed out that Oswal had not issued any invoice, as required under Clause 2.14(f) of the ERPA, and that the claimed quantity of 70,085 CERs exceeded the 68,544.14 CERs actually issued according to the CDM Registry. The tribunal observed that these disagreements were part of the broader contractual controversy and could not be resolved in summary proceedings.

Court Refuses to Adjudicate Contractual Merits

The bench clarified that it was not determining the validity of the price revision, the applicable rate, or the interest claim. "The fact that each party consistently maintained its own position does not make the dispute illusory ; rather, it demonstrates that the disagreement remained unresolved and was carried forward into the period preceding the statutory demand notice ," the tribunal stated.

Key Observations

"The defence raised by the Corporate Debtor cannot be characterised as a bare denial or a moonshine defence . It is founded upon Clause 2.14(m) of the very ERPA on which the Operational Creditor 's claim is based, and is supported by contemporaneous correspondence ."

"Whether the Corporate Debtor was ultimately entitled to invoke the said clause and whether the circumstances pleaded by it fell within the scope of the clause are matters which we are not required to finally determine at this stage. The relevant question is whether the contention is genuine and requires adjudication."

"This Tribunal, while exercising summary jurisdiction under Section 9 , cannot undertake a final adjudication of such contractual questions."

Final Decision and Implications

The NCLT dismissed Company Petition IB (IBC)/56(MP)2025 with no order as to costs, holding that the statutory bar under Section 9(5)(ii)(d) of the IBC was attracted due to the pre-existing dispute. The rejection is confined to the maintainability of the insolvency proceedings and does not preclude Oswal from pursuing contractual remedies through arbitration or civil suit.

The judgment reinforces the principle that the IBC is not a substitute for recovery forums and that a genuine contractual dispute, even if not yet adjudicated, can shield a corporate debtor from insolvency proceedings.