NCLAT Sets Aside NCLT Order; Reaffirms That Silence to Section 8 Notice Does Not Bar Proof of Pre-Existing Dispute Under IBC
- REEDLAW
- 1 day ago
- 3 min read
The NCLAT set aside the NCLT’s order and reaffirmed that failure to respond to a Section 8 notice does not bar the Corporate Debtor from proving the existence of a pre-existing dispute under the Insolvency and Bankruptcy Code.
On 26 May 2025, 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 reviewed an appeal along with a connected interlocutory application and held that the existence of a pre-existing dispute under Section 9 of the Insolvency and Bankruptcy Code must be assessed on the basis of all materials placed before the Adjudicating Authority. The Tribunal clarified that the failure to reply to a Section 8 demand notice does not, by itself, preclude the Corporate Debtor from establishing such a dispute through other documentary evidence.
The National Company Law Appellate Tribunal (NCLAT) heard an appeal filed by the suspended director of M/s Supercast Technologies Pvt. Ltd. challenging the order dated 14.05.2024 passed by the National Company Law Tribunal, Allahabad Bench, Prayagraj. The NCLT had admitted an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, filed by M/s Valplast Technologies Pvt. Ltd., initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for an alleged outstanding operational debt of ₹2,29,48,069.19, and had appointed an Interim Resolution Professional (IRP).
The appellant contended that there existed a pre-existing dispute between the parties, which had been substantiated through a series of emails and letters exchanged prior to the issuance of the demand notice under Section 8 of the Code on 08.05.2023. These communications, attached to the reply affidavit and also placed on record before the Appellate Tribunal, were, however, not considered by the NCLT. The Tribunal had disregarded them primarily on the ground that no reply was filed to the Section 8 demand notice and that the reply to the Section 9 petition was belatedly filed after payment of costs. The Appellant argued that the absence of a reply to the demand notice could not by itself disentitle the Corporate Debtor from establishing the existence of a pre-existing dispute, relying on judicial precedent, including the decision in Brand Realty Services Limited v. Sir John Bakeries India Private Limited, REEDLAW 2022 NCLAT Del 03603.
The NCLAT agreed with the appellant’s contention, observing that the issue of a pre-existing dispute went to the root of maintainability under Section 9 and that such a dispute, if established, would bar the admission of the application. The Tribunal held that the NCLT had erred in law by disregarding communications solely on procedural grounds without examining their content or relevance. It emphasised that even if the Corporate Debtor failed to respond to the demand notice within the prescribed time, the Adjudicating Authority was still required to examine any material placed on record to determine the existence of a dispute.
Accordingly, the NCLAT set aside the impugned order and remanded the matter back to the NCLT for fresh adjudication. It directed the Tribunal to take into account the communications exchanged between the parties prior to the issuance of the Section 8 notice and to decide the issue in accordance with law. The main insolvency petition was restored, and the parties were directed to appear before the NCLT on 02.07.2025. The Appellate Tribunal clarified that it had not made any observation on the merits of the alleged dispute, leaving the issue entirely open for the Tribunal to determine after a complete evaluation of the evidence. All pending interlocutory applications were closed, and the NCLT was requested to expedite the matter.
Mr. Krishnendu Dutta, Sr. Advocate, along with Mr. Milan Singh Negi, Mr. Lokesh Malik, Ms. Aakriti Gupta and Ms. Atika Chaturvedi, Advocates, represented the Appellant.
Mr. Mohd. Nazim Khan, Mr. Harshit Sikka, and Mr. Satyendra Sharma, Advocates, appeared for the IRP.
To access the full content related to this article, including the complete judgment text, detailed legal analysis, ratio decidendi, headnotes, cited case laws, and updates on relevant statutes and notifications, we invite you to subscribe to our premium service.
Click Subscribe to unlock these exclusive legal resources.
If you are already a subscriber, please explore these resources by clicking the following citation/link.
Comments