Insolvency Proceedings Cannot Be Reopened After Settlement Without Proof Of Fresh Default: NCLT Ahmedabad

The National Company Law Tribunal (NCLT) at Ahmedabad has dismissed an insolvency plea against Shukla Dairy Private Limited, holding that once parties settle and the case is closed, an operational creditor cannot reopen insolvency proceedings without clear bank records showing a fresh default.

A coram of Judicial Member Shammi Khan and Technical Member Sanjeev Sharma said bare allegations of non-payment are not enough, especially when the corporate debtor places specific proof of payment on record.

The tribunal said, “Once the parties admittedly entered into a settlement and the petition was disposed of on that basis, it was incumbent upon the Applicant to place on record bank statements or other cogent material evidencing default or non-payment by the Respondent after the settlement.”

It added, “In the absence of any such contemporaneous evidence, the Applicant's allegation of continued default remains unsubstantiated.”

The dispute traces back to a 2020 insolvency petition filed by Dhyaneshwar Shankar Unde, proprietor of Swadarshan Dairy Products, claiming Rs 1.78 crore for milk supplies made to Shukla Dairy.

During the hearing, the two sides reached a settlement and signed a Memorandum of Understanding on November 6, 2020, fixing the outstanding amount at Rs 1.49 crore, to be paid in instalments.

On the strength of this settlement, the NCLT closed the insolvency case in February 2021, while allowing it to be revived if the payments were not made.

Swadarshan Dairy later returned to the tribunal, claiming that Shukla Dairy had paid only Rs 34.90 lakh against the agreed amount.

In September 2025, the National Company Law Appellate tribunal restored the petition and asked the NCLT to decide the limited question of payment.

Before the NCLT, Shukla Dairy maintained that it had cleared the entire settlement amount. It produced its ledger along with bank statements showing payments totalling Rs 1.49 crore made between 2020 and 2022. It argued that the insolvency process was being misused as a recovery tool despite full payment.

Swadarshan Dairy responded that these amounts were wrongly adjusted by Shukla Dairy against fresh milk supplies made after the settlement, while the old dues under the MoU remained unpaid. It claimed that separate ledgers existed for post-settlement transactions.

The tribunal was not persuaded. It noted that the creditor had not produced a single bank statement for the post-settlement period to back up the claim of non-payment or to show a separate outstanding debt. On the other hand, the corporate debtor's proof of payment remained largely unchallenged.

The tribunal also rejected the creditor's reliance on an alleged admission of liability in cheque bounce proceedings, calling it a “bald assertion” unsupported by any certified court order.

Holding that there was no proof of a subsisting debt or default, the tribunal dismissed the insolvency petition. It said that without solid material to counter the evidence of payment, the insolvency process could not be invoked.

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