Factual snapshot. — Operational creditor (a registered partnership firm) served demand notice under Section 8 IBC (25.08.2021) for ₹1,79,93,691 (plus interest). The corporate debtor’s own ledger (communicated by CD on 04.08.2021) showed a closing debit balance of ₹2,49,93,690.80 and, after admitted payments, an outstanding ₹1,79,93,690.80. CD paid further ₹61 lakh after the demand notice. A separate CIRP against the CD was already pending (order dated 06.09.2021) when the Technical Director (suspended) addressed a reply on 20.11.2021 alleging short/faulty supply, two invoices not supplied and counterclaims; those allegations were not supported by contemporaneous documentary proof and the suspended director lacked authority. NCLT admitted the firm’s Section 9 petition (06.12.2023). NCLAT set aside the admission on the ground of a pre-existing dispute and delay; this Court restored the NCLT order.
Held (concise). — NCLAT’s order set aside. Where the corporate debtor’s own ledger and conduct (continued supplies/payments including ₹61 lakh after demand notice) demonstrate no bona fide pre-existing dispute, the adjudicating authority under Section 9 IBC is entitled to admit the petition; spurious or belated counter-assertions (especially by an unauthorized/suspended director) do not defeat the claim. Delay in filing Section 9 was not imputable to the operational creditor while an earlier CIRP against the CD was pending and an IRP was in place.
Legal principles applied.
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The NCLT must determine (i) existence of operational debt, (ii) that debt was due and payable and (iii) whether a pre-existing dispute or pending suit/arbitration existed on the date of receipt of the demand notice — per Mobilox and subsequent authorities.
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The adjudicating authority must separate “grain from chaff”: reject moonshine, spurious or tactical defences but not examine merits in depth; a defence must be bona fide and supported by credible material to displace admission.
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Ledger entries, admissions and subsequent payments by the corporate debtor are material indicia that negate a pre-existing dispute.
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Replies made by persons without authority (e.g., a suspended director) are of limited evidentiary value.
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Delay in filing Section 9 may be excused where an earlier CIRP was pending and the operational creditor reasonably awaited the outcome (or learned of withdrawal) before filing its own petition.
RATIO DECIDENDI
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Adjudicatory test under Section 9 (practical application).
At the admission stage under Section 9 IBC the adjudicating authority must satisfy itself that (a) an operational debt exists; (b) evidence shows the debt was due and unpaid; and (c) no real, bona fide pre-existing dispute or pending suit/arbitration existed on the date of receipt of the demand notice. In performing this function the authority must separate real disputes from spurious or tactical defences without conducting a full-blown trial of the merits. -
Ledger and post-notice conduct as decisive indicia.
Where the corporate debtor’s own ledger/account statements record the debt (including a certified closing debit balance) and the corporate debtor continues supplies and makes payments even after correspondence complaining of defects, those facts constitute powerful evidence negating the existence of a bona fide pre-existing dispute — such ledger entries and payments may justify admission of a Section 9 petition. -
Evidentiary weight of belated or unauthorized replies.
A belated reply asserting counterclaims or defects — especially when addressed by an officer who is, on record, suspended or otherwise unauthorised — is of limited probative value at the admission stage and cannot be allowed to defeat an operational creditor’s otherwise well-evidenced claim. -
Delay excuse where an earlier CIRP existed.
An operational creditor is not to be prejudiced for not filing its own Section 9 while a separate CIRP against the corporate debtor is subsisting and an IRP is in place; reasonable delay to monitor or react to developments (e.g., withdrawal of the earlier CIRP) is not a ground, by itself, to infer the existence of a pre-existing dispute. -
Rejection of moonshine defences.
The adjudicating authority must reject ‘moonshine’ defences — i.e., fictitious, speculative, unparticularised or inflated counterclaims — and admit an operational creditor’s petition where the defence lacks credible documentary foundation and appears designed only to delay or defeat recovery.
Operative consequence in the present case. — NCLAT erred in treating formulaic/alleged defects and an unauthorised, belated rebuttal as a bona fide dispute. The NCLT’s admission order (06.12.2023) is restored; the corporate debtor’s ledger, subsequent payments and absence of credible contemporaneous counter-evidence made the Section 9 admission appropriate.
