NCLT admitted a CIRP application for ₹1.05 crore operational debt after finding the invoices undisputed and no pre-existing dispute demonstrated by the corporate debtor.
NCLT Admits CIRP Over ₹1.05 Crore Operational Debt: No Pre-Existing Dispute Found
The National Company Law Tribunal (NCLT) admitted a petition for initiation of the Corporate Insolvency Resolution Process (CIRP) over an operational debt of ₹1.05 crore, ruling that the corporate debtor failed to demonstrate a pre-existing dispute as required under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). The operational creditor had produced unpaid invoices and a demand notice, which went unchallenged within the statutory 10-day window.
The tribunal held that mere allegations of poor service quality, raised only after the demand notice, did not constitute a 'pre-existing dispute' under sub-section (3)(c) of Section 9. The burden lay on the corporate debtor to provide tangible evidence—such as emails, legal notices, or adjudication records—proving that the dispute existed prior to the notice. The absence of such material led to the conclusion that the debt was both operational and undisputed.
For practitioners, this reaffirms the narrow construction courts give to 'pre-existing dispute.' It is insufficient to raise issues for the first time in response to an IBC petition. Early documentation and timely communication of disputes are essential for corporate debtors to defend against CIRP initiation. Creditors, meanwhile, must ensure strict compliance with notice procedures to trigger time-bound responses.
Citations
- Insolvency and Bankruptcy Code, 2016, Section 9
