NCLT Delhi Dismisses Diwan Spirits Insolvency Plea Against Khao Gali Restaurants
Pranav B Prem
The National Company Law Tribunal (NCLT), New Delhi Bench, has refused to initiate corporate insolvency resolution proceedings against Khao Gali Restaurants Pvt. Ltd. on a plea filed by liquor wholesaler Diwan Spirits, holding that the dispute between the parties was not a clear case of non-payment but involved reconciliation of accounts arising out of the now-withdrawn Delhi Excise Policy 2021–22.
The Bench comprising Judicial Member Manni Sankariah Shanmuga Sundaram and Technical Member Atul Chaturvedi dismissed the application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, observing that the claims raised by the applicant involved mutual adjustments and required detailed examination, which is beyond the scope of summary insolvency proceedings. Diwan Spirits had supplied liquor to Khao Gali Restaurants, which operated retail liquor outlets under the brand name “Alcomart” during the subsistence of the Delhi Excise Policy. The operational creditor claimed that it had raised invoices amounting to approximately ₹1.38 crore, against which it had received only a little over ₹6,000, resulting in a substantial unpaid operational debt. Reliance was placed on a balance confirmation letter dated August 22, 2022, which allegedly acknowledged dues of ₹1.40 crore as on July 31, 2022.
On this basis, Diwan Spirits contended that the liability stood crystallised and unpaid, and sought initiation of the corporate insolvency resolution process against Khao Gali Restaurants. It was also asserted that the invoice terms provided for 18% interest on delayed payments.
Khao Gali Restaurants, however, disputed the quantum of debt. While admitting liability to the extent of ₹81.38 lakh, it contended that the remaining amount was subject to adjustment towards market schemes, expired stock and breakages. It was argued that after such adjustments, the outstanding dues would fall below the statutory threshold required to trigger insolvency proceedings under the Code.
The Tribunal noted that email correspondence placed on record showed that even after issuance of the statutory demand notice, both parties had contemplated reconciliation of accounts. It further recorded that Diwan Spirits itself had agreed, albeit “without prejudice”, to undertake reconciliation. In this context, the Bench observed that the very fact that reconciliation was being discussed indicated that the liability was not crystallised or undisputed at the time of issuance of the demand notice.
The Tribunal held that the dispute between the parties was not a simple case of non-payment but one involving reconciliation of accounts and determination of mutual claims and adjustments. It reiterated that once a genuine pre-existing dispute regarding the debt or its quantum is shown to exist, the Adjudicating Authority is barred from admitting an application under Section 9 of the Code, irrespective of the amount claimed.
The Bench also observed that the balance confirmation letter relied upon by the applicant merely reflected the position of accounts on a particular date and did not preclude the corporate debtor from raising bona fide disputes arising out of the same commercial relationship. Referring to the “peculiar backdrop” of the Delhi Excise Policy 2021–22 and the investigations surrounding its implementation, the Tribunal noted that disputes relating to market schemes, expiries and breakages assumed particular significance and reinforced the conclusion that the matter was not suitable for resolution under the IBC.
Holding that Diwan Spirits had failed to establish the existence of a clear and undisputed operational debt, the Tribunal concluded that the insolvency mechanism could not be invoked as a substitute for recovery proceedings. Accordingly, the insolvency application was dismissed.
Appearance
For Applicant: Advocates Shivam Goel, Ramya S. Goel, Sanya Sharma, and Parul Garg.
For Respondent: Advocates Aditya Ganju, Samanyu Sethi, and Vatsal Agarwal.
Cause Title: Diwan Spirits v. Khao Gali Restaurants Private Limited
Case No: CP (IB)-321 (ND)/2025
Coram: Judicial Member Manni Sankariah Shanmuga Sundaram , Technical Member Atul Chaturvedi
