CIRP Order Based On GST Dept Letter Neither Addressed To, Nor Received By Corporate Debtor Is Invalid: NCLAT New Delhi

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Rakesh Kumar Jain (Member-Judicial), Justice Mohammad Faiz Alam Khan (Member-Judicial), and Mr. Naresh Salecha (Member-Technical), has invalidated a CIRP Order Passed by the Adjudicating Authority Based on a Letter Neither Addressed to Nor Received by the Corporate Debtor. The corporate debtor was engaged in the business of manufacturing the non-ferrous metals used in the batteries, and the operational creditor used to supply the lead used in the manufacturing process. It is the case of the operational creditor that the corporate debtor has not made payment of the 38 invoices, which amounts to Rs. 1,24,95,015, which is inclusive of interest. The operational creditor issued the demand notice, and in its reply the corporate debtor admitted the principal amount of Rs. 79,82,857. It also agreed to pay the amount after the NOC was issued by the GST department. Earlier, the GSST department had directed the corporate debtor to not pay the remaining dues to the operational creditor, as there was an investigation being carried out against the operational creditor in relation to its fake invoice and wrongful tax credit. Contention of the Parties The corporate debtor argued that the operational creditor cannot unilaterally claim the interest of Rs. 14,12,857/-, in the absence of any agreement between them. And, since the amount left is only Rs. 7,982,857/-, which is below the threshold limit of Rs. 1 Cr. prescribed under Section 4 of the IBC. It also contended that it has never acknowledged the interest in either the reply to demand notice or the affidavit of reply to section 9. Relying on the ruling of Rishabh Infra v. Sadbhav Engineering Ltd., CA (AT) (Ins) No. 1881 of 2024, the corporate debtor submitted that in the absence of an agreement between the parties, an interest based on unilaterally issued invoices cannot be valid. The adjudicating authority admitted the application, relying on the reply of the DG of the GST. In its reply, the DG directed the corporate debtor to pay the dues directly to the bank account of the operational creditor. However, the letter was neither addressed to nor received by the corporate debtor; instead, it was addressed to a different GST zonal office. Relying on the ruling of Feng Ji v. Giesecke & Devrient MS India Pvt. Ltd., CA (AT) (INS) No. 213 of 2023, the corporate debtor submitted that there was a pre-existing dispute between the parties for non-payment of service tax by the operational creditor. Per contra, the respondent, an operational creditor, submitted that the appellant has accepted the principal amount in the reply of the demand notice. And, since there was a clause in the invoice regarding interest, the appellant is liable to pay the interest. Thus, by adding the interest amount, the application reaches the threshold of Rs. 1 Cr. It also submitted that the May 2020 notice of the DG of GST directs the corporate debtor to deposit the pending amount, and hence, there are no pre-existing disputes. Relying on the ruling of the Hon'ble Delhi High Court in W.P. (C) No. 6208 of 2019, it also submitted that the communication of the GST department restraining the corporate debtor from making the payment to the operational creditor is unlawful. Observations of the NCLAT The NCLAT observed that the letter relied upon by the operational creditor was neither addressed to nor received by the corporate debtor, and the reliance of the NCLAT on the said letter for admission of the section 7 application is misplaced. It was also observed that the corporate debtor rightly withheld the payment of the operational creditor, as it was having the directions from the GST Department and the GST investigation was also going there. Further, it was observed that in the absence of any agreement, the interest based on the unilateral invoice was insufficient to admit the interest claimed. With this the tribunal allowed the appeal and set aside the impugned order admitting the CIRP of the corporate debtor. Case Name: Ajay Rana, Director of Erstwhile Company Sarika Industries Pvt. Ltd. v. Sanjay Kumar Goel & Ors. Case No.: Comp. App. (AT) (Ins) No. 1045 of 2023 & I.A. No. 3577, 3578 of 2023, 3403, 4010 of 2024 Bench: Justice Rakesh Kumar Jain (Member-Judicial), Justice Mohammad Faiz Alam Khan (Member-Judicial), and Mr. Naresh Salecha (Member-Technical), Judgment Date: 29.08.2025 Click Here To Read/Download The Order

CIRP Order Based On GST Dept Letter Neither Addressed To, Nor Received By Corporate Debtor Is Invalid: NCLAT New Delhi

Mohd.Rehan Ali

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