Tribunal Rules That Alleged Operational Debt Is Disputed Due to Prior Issues in Certification, Retention Money, and Contractual Obligations
In a significant ruling, the National Company Law Tribunal (NCLT) Ahmedabad Bench has dismissed the insolvency petition filed by Conart Engineers Limited against Senores Pharmaceuticals Limited. The petition, filed under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, was dismissed on grounds of pre-existing disputes regarding the alleged operational debt.
The case revolved around an operational debt of Rs. 1,32,97,930/- claimed by Conart Engineers Limited for construction services rendered. The Tribunal, comprising Sh. Shammi Khan, Member (Judicial), and Sh. Sanjeev Sharma, Member (Technical), observed that the disputes concerning the certification of bills, recoveries, and retention money were evident before the issuance of the statutory demand notice, rendering the petition non-maintainable.
During the proceedings, Senores Pharmaceuticals Limited, the corporate debtor, argued that the disputes arose from contractual obligations, certifications, and adjustments, which were communicated before the demand notice was served on November 5, 2025. The Tribunal acknowledged these disputes, noting that various email correspondences, meetings, and proposals for arbitration indicated ongoing negotiations and unresolved issues.
The Tribunal emphasized that the IBC is not intended to serve as a recovery mechanism but rather as a means to resolve insolvency. It referenced the Supreme Court's decision in Mobilox Innovations Private Limited v. Kirusa Software Private Limited, which established that a pre-existing dispute is sufficient to reject an application under Section 9 of the IBC.
Additionally, the NCLT dismissed the application filed by Senores Pharmaceuticals seeking penalties under Sections 65 and 76 of the IBC for alleged fraudulent and malicious initiation of proceedings. The Tribunal concluded that mere dismissal of the petition due to pre-existing disputes does not automatically imply fraudulent intent.
The ruling underscores the importance of demonstrating genuine disputes in insolvency proceedings and highlights the necessity for creditors to thoroughly evaluate the existence of any disputes before initiating insolvency actions.
Bottom Line :
Insolvency and Bankruptcy Code (IBC) - Pre-existing disputes concerning certification of bills, recoveries, and retention money prior to issuance of Demand Notice render Section 9 petition non-maintainable - Mere dismissal of Section 9 petition does not automatically attract penalties under Sections 65 and 76 for fraudulent or malicious intent.
Statutory provision(s): Sections 8, 9, 65, and 76 of the Insolvency and Bankruptcy Code, 2016
