Pre-existing disputes and lack of operational debt under Insolvency and Bankruptcy Code, 2016 cited as reasons for dismissal
In a significant decision, the National Company Law Tribunal (NCLT), Ahmedabad Bench, dismissed the insolvency petition filed by Ricova International Inc. against Shree Narayan Kraft Paper Mill LLP, citing pre-existing disputes and the absence of an operational debt as defined under the Insolvency and Bankruptcy Code, 2016. The judgment, delivered on July 27, 2026, by Member (Judicial) Sh. Shammi Khan and Member (Technical) Sh. Sanjeev Sharma, underscores the tribunal's limited jurisdiction in adjudicating disputed contractual rights under Section 9 of the Code.
Ricova International, a Panama-based company, had sought the initiation of Corporate Insolvency Resolution Process (CIRP) against the Gujarat-based paper mill for an alleged operational debt of Rs. 3,81,87,186.24 (equivalent to USD 4,44,192.34). The debt was claimed to have arisen from the supply of waste paper (NDLKC) pursuant to indents placed by the paper mill.
However, Shree Narayan Kraft Paper Mill LLP contested the claim, asserting that no operational debt was due and payable. The company highlighted pre-existing disputes, such as changes in payment terms, refusal to accept consignments, and diversion of shipments, all prior to the issuance of the demand notice. The tribunal noted that these disputes were supported by contemporaneous evidence, which barred admission of the petition under Section 9 of the Code.
The NCLT referred to key judgments by the Hon'ble Supreme Court, including Mobilox Innovations Private Limited v. Kirusa Software Private Limited and Swiss Ribbons Pvt. Ltd. v. Union of India, to emphasize that the Code is not a recovery mechanism and disputes must be plausible and not spurious or illusory.
The tribunal concluded that the disputes raised required adjudication on factual and contractual issues beyond its jurisdiction under Section 9, leading to the dismissal of the petition without any costs.
Bottom Line :
Insolvency and Bankruptcy Code, 2016 - Pre-existing dispute prior to issuance of demand notice under Section 8 of the Code bars admission of a petition under Section 9 - Tribunal cannot adjudicate disputed questions of fact or determine contractual rights within the limited jurisdiction under Section 9 of the Code.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 8, 9, 9(5)(ii)(d), and 5(21)
