NCLAT’s order set aside. Where the corporate debtor’s own ledger and conduct (continued supplies/payments including ₹61 lakh after demand notice) demonstrate no bona fide pre-existing dispute, the adjudicating authority under Section 9 IBC is entitled to admit the petition; spurious or belated counter-assertions (especially by an unauthorized/suspended director) do not defeat the claim. Delay in filing Section 9 was not imputable to the operational creditor while an earlier CIRP against the CD was pending and an IRP was in place.

advocatemmmohan

Factual snapshot. — Operational creditor (a registered partnership firm) served demand notice under Section 8 IBC (25.08.2021) for ₹1,79,93,691 (plus interest). The corporate debtor’s own ledger (communicated by CD on 04.08.2021) showed a closing debit balance of ₹2,49,93,690.80 and, after admitted payments, an outstanding ₹1,79,93,690.80. CD paid further ₹61 lakh after the demand notice. A separate CIRP against the CD was already pending (order dated 06.09.2021) when the Technical Director (suspended) addressed a reply on 20.11.2021 alleging short/faulty supply, two invoices not supplied and counterclaims; those allegations were not supported by contemporaneous documentary proof and the suspended director lacked authority. NCLT admitted the firm’s Section 9 petition (06.12.2023). NCLAT set aside the admission on the ground of a pre-existing dispute and delay; this Court restored the NCLT order.

Held (concise). — NCLAT’s order set aside. Where the corporate debtor’s own ledger and conduct (continued supplies/payments including ₹61 lakh after demand notice) demonstrate no bona fide pre-existing dispute, the adjudicating authority under Section 9 IBC is entitled to admit the petition; spurious or belated counter-assertions (especially by an unauthorized/suspended director) do not defeat the claim. Delay in filing Section 9 was not imputable to the operational creditor while an earlier CIRP against the CD was pending and an IRP was in place.

Legal principles applied.

• The NCLT must determine (i) existence of operational debt, (ii) that debt was due and payable and (iii) whether a pre-existing dispute or pending suit/arbitration existed on the date of receipt of the demand notice — per Mobilox and subsequent authorities.

• The adjudicating authority must separate “grain from chaff”: reject moonshine, spurious or tactical defences but not examine merits in depth; a defence must be bona fide and supported by credible material to displace admission.

• Ledger entries, admissions and subsequent payments by the corporate debtor are material indicia that negate a pre-existing dispute.

• Replies made by persons without authority (e.g., a suspended director) are of limited evidentiary value.

• Delay in filing Section 9 may be excused where an earlier CIRP was pending and the operational creditor reasonably awaited the outcome (or learned of withdrawal) before filing its own petition.

RATIO DECIDENDI

1. Adjudicatory test under Section 9 (practical application).
   At the admission stage under Section 9 IBC the adjudicating authority must satisfy itself that (a) an operational debt exists; (b) evidence shows the debt was due and unpaid; and (c) no real, bona fide pre-existing dispute or pending suit/arbitration existed on the date of receipt of the demand notice. In performing this function the authority must separate real disputes from spurious or tactical defences without conducting a full-blown trial of the merits.

2. Ledger and post-notice conduct as decisive indicia.
   Where the corporate debtor’s own ledger/account statements record the debt (including a certified closing debit balance) and the corporate debtor continues supplies and makes payments even after correspondence complaining of defects, those facts constitute powerful evidence negating the existence of a bona fide pre-existing dispute — such ledger entries and payments may justify admission of a Section 9 petition.

3. Evidentiary weight of belated or unauthorized replies.
   A belated reply asserting counterclaims or defects — especially when addressed by an officer who is, on record, suspended or otherwise unauthorised — is of limited probative value at the admission stage and cannot be allowed to defeat an operational creditor’s otherwise well-evidenced claim.

4. Delay excuse where an earlier CIRP existed.
   An operational creditor is not to be prejudiced for not filing its own Section 9 while a separate CIRP against the corporate debtor is subsisting and an IRP is in place; reasonable delay to monitor or react to developments (e.g., withdrawal of the earlier CIRP) is not a ground, by itself, to infer the existence of a pre-existing dispute.

5. Rejection of moonshine defences.
   The adjudicating authority must reject ‘moonshine’ defences — i.e., fictitious, speculative, unparticularised or inflated counterclaims — and admit an operational creditor’s petition where the defence lacks credible documentary foundation and appears designed only to delay or defeat recovery.

Operative consequence in the present case. — NCLAT erred in treating formulaic/alleged defects and an unauthorised, belated rebuttal as a bona fide dispute. The NCLT’s admission order (06.12.2023) is restored; the corporate debtor’s ledger, subsequent payments and absence of credible contemporaneous counter-evidence made the Section 9 admission appropriate.