NCLT admitted an insolvency application for ₹3.96 crore despite claims of a pre-existing dispute, holding that post-petition mediation cannot retroactively create a dispute under Section 8 of the IBC.
NCLT Upholds Admission of Operational Debt Petition Despite Alleged Dispute
The National Company Law Tribunal (NCLT) admitted an insolvency application filed by an operational creditor for ₹3.96 crore, rejecting the corporate debtor’s contention of a pre-existing dispute. The defence relied on mediation initiated after the insolvency petition was filed, which NCLT held could not qualify as a ‘dispute’ under Section 8 of the Insolvency and Bankruptcy Code (IBC).
The Tribunal emphasized that
"a dispute must exist at the time of service of the demand notice and cannot be manufactured post hoc through delayed mediation or arbitration references."The record showed no prior legal or factual challenge to the debt before the demand notice, and the subsequent mediation was deemed a dilatory tactic. This aligns with settled precedent, including K. Suresh Kumar v. MVIRCL, that procedural responses after notice do not constitute a valid dispute.
Practitioners must advise clients that raising a dispute under Section 8 requires contemporaneous communication of denial—whether by way of written correspondence, pending litigation, or filed arbitration. Delayed defences based on post-petition proceedings will likely fail, reinforcing the IBC’s objective of timely resolution and deterrence against tactical litigation.
Citations
- Insolvency and Bankruptcy Code, 2016, Section 8
- K. Suresh Kumar v. MVIRCL (2021)
