Civil Suit, Anticipatory Bail Application Filed After CIRP Plea Cannot Amount To Pre-Existing Dispute: NCLAT

The National Company Law Appellate Tribunal (NCLAT) at New Delhi recently held that civil proceedings or anticipatory bail applications filed after a Section 9 CIRP plea cannot be used to claim a pre-existing dispute or block the admission of a valid insolvency petition.

The tribunal affirmed the NCLT Indore's order admitting a Section 9-CIRP application against Steelexpert Industries (Indore) and dismissed an appeal filed by former director Yusuf Malubhaiwala.

A bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra agreed with the NCLT's findings that “the suit was filed after the Section 9 application and did not qualify as a pre-existing dispute… the anticipatory bail proceedings had been initiated post the Section 8 Demand Notice.

Therefore it said, "Thus, the Civil Suit or Anticipatory Bail application proceedings which have been filed after filing of Section 9 application cannot be used to defeat a validly filed Section 9 application on grounds of pre-existing dispute.”

It added that it was “not convinced that the disputes are genuine, real or pre-existing,” describing the defence as “contrived” and a “moonshine” attempt to avoid insolvency.

The case stemmed from a running business relationship in which Haji Shahadat and Sons, a sole proprietorship of Abdul Maaz, supplied iron and steel materials to Steelexpert Industries. The supplier claimed outstanding dues of Rs 2.32 crore, including Rs 1.56 crore towards goods supplied and Rs 76.54 lakh as interest. After its Section 8 demand notice of October 17, 2019 went unanswered, it filed two Section 9 CIRP pleas, one of which was admitted on June 12, 2025.

In appeal, the Steelexpert claimed that it had already discharged its liability through alleged cash payments of Rs 1.81 crore supported by three receipts. It also relied on police complaints lodged in August 2019, and later on a civil suit and anticipatory bail application, to argue that an existing dispute barred admission of the CIRP plea. 

The Operational Creditor denied receiving any cash payments, questioned the authenticity of the receipts, and highlighted inconsistencies in dates, missing signatures and the absence of any corresponding bank withdrawals. It also maintained that the police complaints concerned intimidation and did not relate to the operational debt.

The tribunal held that the Corporate Debtor's defence lacked credibility. The alleged cash receipts were never referred to in the statutory reply to the Section 8 demand notice, nor mentioned in any police complaint, civil proceeding or bail application, and were raised only after initiation of insolvency proceedings.

The tribunal also found that the police complaints contained contradictory monetary figures and did not relate to goods supplied, invoices or contractual terms. None of the material relied on by the Corporate Debtor, the tribunal held, satisfied the requirement of a genuine, bona fide dispute that existed prior to the statutory notice.

The tribunal concluded that the invoices, delivery challans and supporting records placed by the Creditor clearly established supply and default, and that there was no pre-existing dispute capable of defeating the CIRP application.

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