When Sufficient Material Showing Dispute Exists Under Section 9(5)(ii)(d) IBC, Adjudicating Authority Cannot Ignore The Same, Rules NCLAT
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi has held that where there is sufficient material on record to demonstrate the existence of a dispute under Section 9(5)(ii)(d) of the Insolvency and Bankruptcy Code (IBC), the Adjudicating Authority cannot proceed to admit an application under Section 9 ignoring such evidence. The Tribunal allowed the appeal filed by Bhawani Prasad Mishra, suspended director of B.S. Ispat Pvt. Ltd., setting aside the order passed by the NCLT Mumbai Bench which had admitted an insolvency petition filed by Armaco Infralinks Pvt. Ltd.
The Corporate Debtor, B.S. Ispat Pvt. Ltd., engaged in coal mining, had entered into transactions with Armaco Infralinks Pvt. Ltd., which had initially deposited Rs. 1 crore for coal supply. A revised delivery order dated 16.09.2022 was subsequently issued for the supply of 60,000 MT of coal worth Rs. 42 crores, with a one-year validity. Despite the expiry of the order’s validity on 15.09.2023, both parties continued dealing, and coal was supplied until 01.06.2024.
Disputes arose when Armaco sought a refund of Rs. 35.58 crores, citing a confirmation email dated 03.07.2024. The Corporate Debtor later withdrew this confirmation via an email on 26.08.2024, stating it had been sent by an unauthorized individual and was obtained fraudulently. Armaco issued a demand notice on 04.09.2024, to which the Corporate Debtor replied on 11.09.2024, disputing the claim and stating it was ready to continue supplying coal worth Rs. 16.68 crores, the amount it considered due after reconciling accounts.
The appellant contended that the reply to the demand notice and the entries in the National e-Governance Services Limited (NeSL) record—which showed the status as “disputed”—met the requirements of Section 9(5)(ii)(d) of the IBC. It was argued that the NCLT failed to consider this material and wrongly proceeded to admit the Section 9 application. Heavy reliance was placed on the Supreme Court judgment in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. [(2018) 1 SCC 353], which laid down that the existence of a genuine dispute is sufficient to reject a Section 9 application.
On the other hand, the respondent, Armaco, argued that the Corporate Debtor had admitted its liability through the email dated 03.07.2024, which could not be retracted. It was also argued that any dispute raised after the issuance of the demand notice was not valid under the scheme of the IBC, and that the Corporate Debtor was incapable of fulfilling the coal supply obligation due to mine closures resulting from unpaid statutory dues.
The NCLAT, after examining the sequence of events and the communications exchanged, found that a pre-existing dispute did exist. The Tribunal noted that the delivery order remained operational based on continued conduct even beyond its stated validity, and coal supplies were made up to 01.06.2024. The email dated 13.08.2024 from the Corporate Debtor indicated its willingness to resume supplies post-rainy season.
Crucially, the Tribunal emphasized that the Corporate Debtor had disputed the claimed amount within ten days of the demand notice, as required under Section 8(2)(a), and that it had also recorded the dispute in the NeSL system on the same day. This satisfied both limbs of Section 9(5)(ii)(d): receipt of a notice of dispute and the existence of a record of dispute in an Information Utility.
Referring again to Mobilox, the Tribunal reiterated that the requirement was not to conclusively prove the dispute but merely to demonstrate that a real dispute exists. The Adjudicating Authority, according to the Tribunal, erred in disregarding this and in relying on the judgment in Consolidated Construction Consortium Ltd. v. Hitro Energy Solutions Pvt. Ltd. [2022 SCC OnLine SC 142], where the facts were distinguishable as the contract in that case was terminated, unlike in the present matter.
In conclusion, the NCLAT found that the conditions under Section 9(5)(ii)(d) were clearly met and held that the Adjudicating Authority could not have proceeded to admit the Section 9 application in the face of such material. Accordingly, the Tribunal set aside the NCLT’s order dated 26.03.2025 and allowed the appeal.
Appearance
For Appellant: Mr. Abhijeet Sinha, Sr. Advocate, Mr. Arun Kathpalia, Sr. Advocate and Mr. Vaibhav Gaggar, Sr. Advocates with Mr. Ayush Puri, Mr. Vishesh Kalra, Ms. Heena Kocchar, Ms. Malavika Chandramouli, Ms. Kanishka Pandey, Mr. Aditya, Advocates.
For Respondents: Mr. Krishnendu Datta, Sr. Advocate with Ms. Prachi Johri, Mr. Devashish Chauhan, Ms. Jasleen Singh Sandha, Ms. Neha Agarwal, Advocates for R-1. Ms. Eshna Kumar, Mr. Harpreet Singh Malhotra, Advocates for R-2. Mr. Gopal Jain, Sr. Advocate with Mr. Paras Mithal, Mr. Prahar Mithal, Advocates for Intervener. Mr. Gaurav Mitra, Ms. Aishwarya Modi Seth, Advocates for Intervener.
Cause Title: Bhawani Prasad Mishra V. Armaco Infralinks Pvt. Ltd. & Anr.
Case No: Company Appeal (AT) (Insolvency) No. 557 of 2025
Coram: Justice Ashok Bhushan [Chairperson] , Mr. Arun Baroka [Member (Technical)], Mr. Barun Mitra [Member (Technical)]
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