Tribunal Initiates Corporate Insolvency Resolution Process for Default in Operational Debt Payment
The National Company Law Tribunal (NCLT), Ahmedabad Bench, in a significant ruling dated June 25, 2026, admitted the corporate insolvency resolution process (CIRP) against Mehsana Dairy and Food Products Limited. The petition was filed by Mehsana Food Tradelinkers Pvt. Ltd., an operational creditor, under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking relief for a default in payment of Rs. 2,02,52,460.40.
The tribunal, comprising Member (Judicial) Sh. Shammi Khan and Member (Technical) Sh. Sanjeev Sharma, found sufficient grounds to initiate the CIRP, given the absence of any pre-existing dispute and the acknowledgment of liability by the corporate debtor. The operational debt originated from a business relationship under a Master Super Stockist Agreement dated February 12, 2025, which was terminated on April 15, 2025. The tribunal noted that the corporate debtor failed to settle accounts or refund the security deposit, resulting in a default on May 15, 2025.
The corporate debtor, Mehsana Dairy and Food Products Ltd., contended that there were contractual disputes and alleged non-compliance with the agreement terms by the operational creditor. However, the tribunal observed that these defenses were not supported by contemporaneous material and were not raised prior to the issuance of the demand notice.
The tribunal emphasized that mere assertions of breach without evidence do not constitute a pre-existing dispute under the Code. It further stated that the communications and ledger accounts presented by the operational creditor demonstrated the acknowledgment of liability by the corporate debtor, thereby supporting the existence of the operational debt.
In its order, the tribunal declared a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, effectively prohibiting the initiation or continuation of suits, transferring of assets, recovery actions, or other proceedings against the corporate debtor during the CIRP period. NPV Insolvency Professionals Private Limited was appointed as the Interim Resolution Professional (IRP) to manage the debtor's assets and operations as a going concern.
The tribunal directed the IRP to make a public announcement of the CIRP initiation and called for submissions of claims, ensuring compliance with the regulations under the Code. The operational creditor was ordered to pay an initial sum to the IRP to cover the initial costs of the CIRP process.
The decision underscores the tribunal's role in ensuring the timely and effective resolution of insolvency cases, highlighting the importance of clear documentation and acknowledgment of debts in such proceedings. The ruling serves as a precedent for similar cases where the existence of operational debt and absence of genuine disputes are crucial factors in admitting insolvency petitions.
Bottom line:-
Insolvency and Bankruptcy Code, 2016 - Operational Creditor's petition under Section 9 for initiation of Corporate Insolvency Resolution Process (CIRP) against Corporate Debtor for default in payment of operational debt allowed - Acknowledgment of liability and absence of pre-existing dispute crucial factors.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 8, 9, 14
