Tribunal holds that mere invoices and ledger entries without delivery proof or acknowledgment insufficient to establish operational debt; emphasizes need for cogent evidence and upholds principles from Supreme Court's Mobilox Innovations ruling.
In a significant ruling on October 9, 2026, the National Company Law Tribunal (NCLT), Bengaluru Bench, dismissed the Section 9 petition filed by APL Apollo Tubes Limited against Tanisha Scaffolding (India) Private Limited, rejecting the claim of an operational debt amounting to over Rs. 30 lakh. The petition sought initiation of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC) alleging non-payment for supplied steel tubes and pipes.
The crux of the dispute centered around three invoices dated June 1, 16, and 20 of 2017, which the Operational Creditor claimed remained unpaid despite repeated reminders and a formal demand notice under Section 8 of the IBC. The Corporate Debtor, however, denied any transactions post-March 2017, contending that the invoices were fabricated and unsupported by purchase orders, delivery challans, or any acknowledgment of receipt.
The NCLT bench, comprising Judicial Member Mr. Sunil Kumar Aggarwal and Technical Member Mr. Radhakrishna Sreepada, observed that under Section 9 proceedings, the adjudication is summary and not meant for detailed fact-finding. Nonetheless, the Operational Creditor bore the initial onus to establish the existence of an operational debt and default. The Tribunal noted that the petitioner failed to produce critical documentary evidence such as delivery challans, GST or trade tax returns, or any contemporaneous written communication corroborating the supply of goods. Furthermore, the petitioner's balance sheet disclosed nil trade receivables, with no specific entry identifying the Corporate Debtor as a debtor, undermining the claim of outstanding dues.
Significantly, the Tribunal relied on the Supreme Court's landmark decision in Mobilox Innovations Private Limited v. Kirusa Software Private Limited (2018), which mandates rejection of Section 9 applications where a bona fide pre-existing dispute exists. The Corporate Debtor's denial of supply and assertion of full payment for transactions up to March 2017 was held to be a plausible dispute going to the root of the claim rather than a frivolous or spurious defense.
The Tribunal further clarified that mere non-response to the demand notice by the Corporate Debtor cannot be construed as admission of debt, referencing Delhi High Court precedent in NDMC v. Amrit Mehta. Given the factual contradictions and lack of conclusive evidence by the Operational Creditor, the petition was dismissed with liberty granted to pursue other appropriate remedies.
The case underscores the importance of furnishing robust and corroborative evidence to establish operational debt in insolvency proceedings and cautions against using IBC as a substitute for recovery mechanisms. The decision reaffirms the jurisprudential safeguards ensuring that only undisputed debts with clear evidence qualify for CIRP initiation.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 Section 9 petition by Operational Creditor - Mere production of invoices and ledger entries, without delivery challans, acknowledgment of receipt, GST/trade tax returns or balance sheet support showing trade receivables, is insufficient to establish operational debt and default - Where Corporate Debtor specifically disputes the very supply of goods and raises a plausible pre-existing dispute, Section 9 petition is liable to be dismissed - Non-reply to demand notice does not automatically amount to admission.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Section 8, Section 9; Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 Rule 6
