General WhatsApp Message Cannot Constitute Pre-Existing Dispute to Defeat Section 9 IBC Petition: NCLAT
- REEDLAW
- Jul 8
- 4 min read
NCLAT held that a general WhatsApp message lacking specificity cannot constitute a pre-existing dispute sufficient to defeat a petition filed under Section 9 of the Insolvency and Bankruptcy Code.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Rakesh Kumar Jain (Judicial Member) and Technical Members Mr. Naresh Salecha and Mr. Indevar Pandey, while adjudicating a company appeal along with an interlocutory application, recently held that a Section 9 application under the IBC must be admitted where the operational debt and default are duly established through documentary evidence and acknowledgments. The Tribunal further clarified that an alleged pre-existing dispute, if vague, unsubstantiated, and failing to meet the threshold of a genuine dispute as laid down in Mobilox Innovations Private Limited v. Kirusa Software Private Limited, REEDLAW 2017 SC 09545, cannot be a valid ground for rejection. The financial solvency of the Corporate Debtor or a frivolous objection is also not a sufficient basis to deny admission if the undisputed debt exceeds the statutory threshold.
The Appellant, operating as a sole proprietorship, had filed an appeal under Section 61(1) of the Insolvency and Bankruptcy Code, 2016, challenging the order of the NCLT, Mumbai Bench, which had dismissed the Section 9 application filed against the Respondent. The Appellant had claimed an outstanding operational debt of ₹1.36 crore, arising from continued business dealings dating back to 2015 involving the supply of textile materials. The Appellant argued that the Respondent had acknowledged the debt by accepting the goods without raising timely objections, availing Input Tax Credit on the invoices, and making part payments over several years. Despite serving a demand notice under Section 8, the dues remained unpaid. The Respondent’s defence rested on a vague WhatsApp message dated 24.07.2018, allegedly highlighting quality concerns.
The Adjudicating Authority had rejected the Section 9 petition on the ground that there was a pre-existing dispute based on three specific invoices—two relating to non-delivery of goods (Invoices RT/207/17-18 and RT/228/17-18) and one involving alleged inferior quality (Invoice RT/044/18-19). It also observed procedural deficiencies in the authorisation document and questioned the maintainability of the application. Additionally, the Authority found that the Corporate Debtor was a solvent entity and relied on the Supreme Court’s decision in S.S. Engineers v. Hindustan Petroleum Corporation Limited and Others, REEDLAW 2022 NCLAT Del 07549, holding that the IBC cannot be used as a recovery tool for disputed dues from solvent companies. On these grounds, it concluded that the debt lacked crystallisation and dismissed the application.
The Appellate Tribunal, however, undertook a detailed scrutiny of the record and found the conclusions of the Adjudicating Authority to be erroneous. It held that the WhatsApp message relied upon by the Respondent lacked specificity and made no reference to the disputed invoices or goods. The Tribunal further observed that despite raising a vague quality concern in 2018, the Respondent continued to acknowledge liability in subsequent years through emails dated 21.11.2019 and 23.06.2022, confirming dues of ₹1.76 crore and ₹1.39 crore respectively, even excluding the disputed invoices. The Tribunal also took note of part payments made by the Respondent on multiple occasions, the last being ₹25 lakhs on 15.10.2022, thus undermining the argument of a continuing dispute.
The Tribunal found that the Adjudicating Authority’s reliance on the S.S. Engineers v. Hindustan Petroleum Corporation Limited and Others, REEDLAW 2022 NCLAT Del 07549 judgment was misplaced. Instead, the facts of the case aligned more closely with the ratio in HPCL Bio-Fuels Limited v. Shahaji Bhanudas Bhad, REEDLAW 2024 SC 11518, which differentiated between recovery actions and insolvency proceedings. It also invoked the principle laid down in Vidarbha Industries Power Limited v. Axis Bank Limited, REEDLAW 2022 SC 07529, cautioning that solvency must be tested against defined criteria before being used as a ground to reject CIRP. The Tribunal highlighted that these aspects were not discussed in the Impugned Order, rendering it non-speaking on material issues.
On the issue of pre-existing disputes, the Tribunal applied the test laid down by the Supreme Court in Mobilox Innovations Private Limited v. Kirusa Software Private Limited, REEDLAW 2017 SC 09545, reiterating that a mere assertion unsupported by evidence cannot constitute a genuine dispute. Since the Respondent’s reply to the demand notice did not reference the disputed invoices and was general in tone, the Tribunal concluded that the dispute was illusory. It emphasised that when the undisputed portion of the debt is significantly above the statutory threshold of ₹1 crore, and the dispute pertains to a minor portion, the application under Section 9 ought to be admitted.
Even after excluding the three disputed invoices amounting to ₹20.01 lakhs, the Tribunal found the balance default to be ₹1.16 crore, well above the statutory limit. It also noted that the Appellant had supported its claim with comprehensive documents, including ledger accounts, emails confirming outstanding dues, and pending invoices. Therefore, the Tribunal held that debt and default had been clearly established, and the burden to prove any genuine dispute had not been discharged by the Corporate Debtor.
Accordingly, the Appellate Tribunal allowed the appeal, set aside the Impugned Order dated 22.12.2023, and restored the original petition in C.P. (I.B) No. 534/MB/2023. It directed both parties to appear before the Adjudicating Authority on 14.07.2025 for further proceedings in accordance with law. No costs were awarded, and any pending interlocutory applications were declared closed.
Mr. Sandeep Bajaj, Mr. Mayank Biyani, Mr. Ashish O. Lalpuria, and Mr. Gaurav Gdodia, Advocates, represented the Appellant.
Mr. Arnav Kumar and Ms. Gitanjali Vohra, Advocates, appeared for the Respondents.
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