In Absence Of Crystallised Debt Due To Dispute Over Quality Of Product Supplied, Petition U/S 9 Can't Be Admitted: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan and Mr. Barun Mitra (Technical Member) has held that when debt is not crystallized due to repeated communication on Whatsapp between the parties over the quality of the product supplied by the Operational Creditor and the defects acknowledged by the Supplier, an application under section 9 of the IBC cannot be accepted. The present appeal has been filed under section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) against an order passed by the National Company Law Tribunal (NCLT) New Delhi by which it dismissed an application under section 9 of the IBC filed by the Operational Creditor. The Appellant submitted that the Adjudicating Authority has erroneously dismissed the Section 9 application by holding that there was a pre-existing dispute between the Appellant and the Respondent. It was also submitted that the outstanding amount was a legally enforceable operational debt as it was supported by invoices, delivery confirmations and ledger entries. It was further argued that the invoices which formed the basis of the Section 9 application were unrelated to the alleged pre-existing disputes and pertained to an entirely separate set of invoices and transactions relating to supplies made between April to August 2022 which had never been disputed. Per contra, the Respondent submitted that regular conversation was held on the WhatsApp Group between both parties regarding the defects in the batteries supplied, it was added that the Operational Creditor in their WhatsApp messages had admitted to the faults in the battery and assured to take corrective measures. The faulty goods were however either not replaced or even if replaced continued to remain faulty. The Tribunal noted that the Appellant through Whatsapp messages acknowledged the defects in the supplied batteries and promised the Respondent to remove the defects including fire related issues. Just before the issuance of the demand notice under section 8 of the IBC, the Respondent conveyed to the Appellant that the replaced batteries are also defective. All this shows that the debt had not crystallised and a pre-existing dispute existed between the parties. Furthermore, the parties were loggerheads over the applicability of the warranty which goes to the root of the matter. It further held that the claim of the Appellant that the indemnity bond signed between the parties was executed under duress and the sign was obtained through fraud is an issue that merits deeper investigation and beyond the remit of the summary proceedings under the IBC. Therefore, the Adjudicating Authority rightly concluded that there was a pre-existing dispute between the parties and rejected the petition under section 9 of the IBC. Accordingly, the present appeal was dismissed. Case Title: Ruchira Green Earth Private Limited Versus KLB Komaki Private Limited Case Number:Company Appeal (AT) (Insolvency) No. 1102 of 2025 Judgment Date: 07/08/2025 For Appellant: Mr. Anand Chhibbar, Sr. Advocate with Mr. Abhishek Anand, Mr. Karan Kohli, Mr. Vaibhav Sahni, Mr. Arjun Cbhibbar, Advocates. For Respondent : Dr. Swaroop George, Mr. Abhinandan Jain, Mr. Sunil Roy, Mr. Shivam Prajapati, Mr. Kartikey, Advocates. Click Here To Read Order

In Absence Of Crystallised Debt Due To Dispute Over Quality Of Product Supplied, Petition U/S 9 Can't Be Admitted: NCLAT

Mohd Malik Chauhan

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