Single Whatsapp Message Raising General Dispute Can't Become Foundation To Reject Petition U/S 9 Of IBC: NCLAT

Brief Facts:

The present appeal has been filed by the Appellant against an order passed by the Adjudicating Authority by which a petition under section 9 of the Insolvency and Bankruptcy Code, 2016 (“Code”) was dismissed.

A Petition under Section 9 of the Code, was filed for initiation of the Corporate Insolvency Resolution Process (“CIRP”) against the Respondent, on account of the Respondent's failure to pay the outstanding operational debt amounting to Rs. 1,36,06,646.70.

The Appellant submitted that no notice of dispute, either with regard to the quality of the products or the invoice amounts, was raised by the Respondent within the stipulated period as per the invoices or at any subsequent time. No valid or specific dispute has ever been raised by the Respondent concerning any particular product or invoice.

It was further submitted that the Respondent did not specify the particular invoices against which the said payments were made. In the absence of any such communication or intimation, the payments have been treated as ad hoc payments towards the total outstanding liability.

It was further submitted that the Adjudicating Authority erred in discrediting the invoices raised by the Appellant on the ground of claim of non-delivery of goods raised by the Respondent which is an unsubstantiated defence as the Respondent has already claimed Input Tax Credit for all invoices raised by the Appellant.

It was further submitted that the Adjudicating Authority has failed to appreciate that the Respondent did not raise any objection to the ledger of the Appellant in its reply to the Demand Notice issued under Section 8 of the Code, and therefore could not have belatedly raised such an issue at the stage of reply to the Insolvency Petition.

It was also argued that the Respondent has merely made a general and unsubstantiated assertion regarding the alleged unsatisfactory quality of goods, attempting to establish a frivolous dispute through a WhatsApp message that is vague and does not specify the exact invoice or product to which the purported dispute pertains.

Per contra, the Respondent submitted that the Appellant has failed to provide any proof of supply in support of its claims for payment in its Section 9 application. Additionally, in cases where goods were supplied, some consignments were found to be defective, as demonstrated by the Respondent's Quality Test Reports, and therefore, the Appellant is not entitled to payment for such defective goods.

It was further submitted that the corporate debtor sent a reply to the demand notice issued by the Appellant in which a dispute regarding supply of goods was raised for which an arbitration had already been initiated by the Appellant. Despite this, the Appellant proceeded to file the petition under section 9 of the Code that is against the settled principle that an insolvency petition cannot be filed when a genuine pre-existing dispute exists or is pending.

Lastly, it was submitted that the GSTR-1 that has to be filed is a statutory requirement which cannot be considered as an admission of liability or acknowledgement of a legal relationship between the parties.

Observations:

The Tribunal noted that the default amount that has been claimed in the petition is 1,36,06,646.70 excluding 24% interest. Furthermore, the demand notice that was issued under section 8 of the Code was supported by three documents such as ledger accounts up to 31.03.2023, a confirmation email sent by the corporate debtor on 23.06.2022 and pending tax invoices.

It further observed that all these documents clearly establish the operational debt and its default. In a reply given by the corporate debtor to the demand notice, no reference was made to the three disputed invoices. The reply that was given was very vague in nature and merely stated that since arbitration proceedings had been initiated by the Appellant, the petition should be dismissed on the ground of a being a pre-existing dispute between the parties.

The Tribunal relied on the Supreme Court judgment in Vidarbha Industries Power Limited vs. Axis Bank Limited where it was held that financial solvency of the company can be considered while deciding an insolvency application under the code and the application can be rejected if the solvency of the company is established. However, in the present case, the principles laid down by the Supreme Court were not properly applied to the facts of the case thereby rendering the impugned order non-speaking and unsustainable.

In light of the above discussion, the Tribunal held that the debt and default are clearly established in the present case and the debt has also been acknowledged in the ledger accounts. This is further fortified by the fact that both parties have accounted for GST benefits based on goods which were supplied by the Appellant to the Respondent.

The Supreme Court in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd. held that the Adjudicating Authority is not empowered to adjudicate the dispute raised by the Corporate Debtor under the code. However, the dispute raised must be a genuine one and must not be a mere moonshine defence. Based on the above, it held that the demand notice issued by the Appellant indicated a clear amount of default which the Respondent failed to deny or refer to any specific invoices.

The Tribunal further held that the Whatsapp Message which is presented a record of pre-existing dispute vaguely refers to dispute in 2018 and fails to refer to any specific invoice or the amount which have been questioned in the message.This Whatsapp message pertain to period 2018 which cannot create a foundation for treating whole series of transactions as pre-existing disputes.

Accordingly, the present appeal was allowed and the impugned order was set aside.

Case Title: Mrs. Leena Salot Versus Ridham Synthetics Private Limited

Case Number:Comp. App. (AT) (Ins) No. 375 of 2024 & I.A. No. 1278 of 2024

Judgment Date: 03/07/2025

For Appellants: Mr. Sandeep Bajaj, Mr. Mayank Biyani, Mr. Ashish O. Lalpuria, Mr. Gaurav Gdodia, Advocates.

For Respondents: Mr. Arnav Kumar & Ms. Gitanjali Vohra, Advocates.

Click Here To Read/Download The Order