Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member), and Mr. Indevar Pandey (Technical Member), held that a single WhatsApp message, vague in content and unconnected to any specific invoice, cannot form the basis for rejecting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Tribunal emphasized that such a message cannot constitute a valid pre-existing dispute when the operational debt stands clearly established.

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Brief Facts

The appeal arose from an order dated 22.12.2023 passed by the Adjudicating Authority (NCLT Mumbai), which had dismissed a Section 9 application filed by the Appellant—Mrs. Leena Salot, Proprietor of Riddhim Textiles—against Ridham Synthetics Private Limited. The operational debt amounted to ₹1,36,06,646.70, excluding interest.

The Appellant contended that the goods were duly supplied against various purchase orders and that the Respondent accepted delivery without objection. It was asserted that the Respondent availed Input Tax Credit on the said invoices and had also confirmed the account via email, admitting an outstanding liability. Furthermore, the Appellant submitted that the Respondent never raised any dispute at the relevant time concerning specific invoices or quality of goods. The only vague objection came via a WhatsApp message dated 24.07.2018.

Contentions of the Parties

The Appellant argued that the Adjudicating Authority erroneously relied on three invoices, including two which were claimed to be unsupported by supply and one allegedly involving inferior goods. It was pointed out that the invoices in question constituted only a small fraction of the total claim, and even if excluded, the remaining debt was above the statutory threshold of ₹1 crore. The Appellant further submitted that no reference to the disputed invoices was made in the reply to the demand notice issued under Section 8, and the alleged WhatsApp message was vague, unrelated to any specific invoice, and not sent by an authorized person.

On the other hand, the Respondent asserted that defective and unsupplied goods were invoiced and that disputes existed over the quality and quantity of goods supplied. It also highlighted that arbitration had been initiated earlier by the Appellant, thereby establishing a pre-existing dispute. The Respondent further contended that ledger confirmations and GSTR-1 filings do not constitute admission of liability, as they were subject to verification and reconciliation.

Observations of the Appellate Tribunal

The Tribunal noted that the Adjudicating Authority dismissed the Section 9 petition citing a pre-existing dispute based on three invoices, including those allegedly issued without supply of goods and one involving inferior quality. It was observed, however, that the WhatsApp message dated 24.07.2018, which was used to support the claim of inferior quality, did not refer to any specific invoice or product. The Tribunal held that such a generic and isolated communication from 2018 could not serve as a legitimate ground for treating the entire series of transactions as disputed.

It was further noted that the reply to the Section 8 demand notice, dated 26.04.2023, did not dispute the specific invoices and failed to respond adequately to the details provided by the Appellant. The Tribunal reiterated that the debt was clearly established by the ledger entries and the Respondent’s own emails dated 21.11.2019 and 23.06.2022, acknowledging outstanding liabilities. Additionally, payments had been made from time to time, the last being on 15.10.2022, further affirming the operational relationship and liability.

Relying on the Supreme Court's ruling in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd [(2018) 1 SCC 353], the Tribunal emphasized that a dispute, to be considered genuine under the Code, must be “plausible” and supported by evidence. A vague WhatsApp message with no invoice reference does not meet this standard. It was held that the Adjudicating Authority erred in treating the company’s financial solvency and a vague defence as sufficient to dismiss the petition.

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Verdict

The NCLAT set aside the impugned order of the Adjudicating Authority, holding that the debt and default were clearly established and that the alleged pre-existing dispute was not genuine but merely a moonshine defence. It emphasized that when the undisputed portion of the debt remains significantly above the statutory threshold, and the dispute raised is unsubstantial, the petition under Section 9 of the IBC ought not to be rejected. Accordingly, the original petition in C.P. (I.B.) No. 534/MB/2023 was restored, with directions for both parties to appear before the Adjudicating Authority on 14.07.2025 for further proceedings.

Appearance

For Appellants: Mr. Sandeep Bajaj, Mr. Mayank Biyani, Mr. Ashish O. Lalpuria, Mr. Gaurav Gdodia, Advocates.

For Respondents: Mr. Arnav Kumar & Ms. Gitanjali Vohra, Advocates.

Cause Title: Mrs. Leena Salot V. Ridham Synthetics Private Limited

Case No: Comp. App. (AT) (Ins) No. 375 of 2024 & I.A. No. 1278 of 2024

Coram: Justice Rakesh Kumar Jain [Judicial Member], Mr. Naresh Salecha [Technical Member], Mr. Indevar Pandey [Technical Member]