NCLT admitted an operational debt insolvency petition of ₹3.96 crore, ruling that post-petition mediation cannot retroactively create a pre-existing dispute under Section 8(2) of IBC.
NCLT Upholds Admission of Insolvency Petition Despite Claimed Dispute
The National Company Law Tribunal (NCLT) admitted an insolvency petition involving an operational debt of ₹3.96 crore, rejecting the corporate debtor’s contention of a pre-existing dispute. The defence relied on post-petition mediation proceedings, which NCLT held cannot constitute a valid dispute under Section 8(2) of the Insolvency and Bankruptcy Code, 2016.
The tribunal observed that for a dispute to negate a demand notice, it must be demonstrably raised before the insolvency application. Mere initiation of mediation after the receipt of a Section 8 notice does not satisfy the legal threshold for a 'pre-existing dispute'.
Section 8(2) requires a dispute to exist prior to the insolvency application, supported by a notice and a pending legal proceeding.
This decision reaffirms the strict interpretation of pre-existing disputes in IBC jurisprudence. Practitioners must advise clients to formally contest debts before insolvency notices are issued—through legal notices, arbitration notices, or court filings—to avail of this defence effectively.
Citations
- Insolvency and Bankruptcy Code, 2016, Section 8(2)
