Pre‑Existing Dispute Must Be Plausible, Not Significant; Section 9 CIRP Set Aside: NCLAT New Delhi

NCLAT New Delhi closed the insolvency of a pharmaceutical company, holding that the NCLT wrongly admitted an operational creditor’s claim by weighing the strength of a dispute raised in correspondence before the demand notice.

The National Company Law Appellate Tribunal (NCLAT), New Delhi, has set aside the admission of FTF Pharma Private Limited into the corporate insolvency resolution process (CIRP) on an operational creditor’s application under Section 9 of the Insolvency and Bankruptcy Code, 2016. It held that the Adjudicating Authority applied a test of “significance and conviction” instead of asking whether a plausible dispute existed before the demand notice, as Section 9(5)(ii)(d) requires [Abhay Sapre v. Immacule Lifesciences Private Limited & Ors., 2026-juristway.com-3331-NCLAT(New Delhi)-IBC].

The Bench of Justice Mohammad Faiz Alam Khan, Member (Judicial), and Naresh Salecha, Member (Technical), heard the appeal; the judgment was written by Mr. Salecha. NCLT Ahmedabad had admitted the application on 9 Sep 2026 on three invoices raised under a Technology Transfer Agreement. The corporate debtor had replied to the demand notice on 31 Oct 2024 disputing all three invoices, and relied on emails sent between 21 Jul 2023 and 9 Aug 2024.

The Tribunal referred to Sections 5(6), 8(2)(a) and 9(5)(ii)(d), and to Mobilox Innovations Private Limited v. Kirusa Software Private Limited (2018). It also relied on S.S. Engineers v. Hindustan Petroleum Corporation Limited & Ors. (Civil Appeal No. 4583 of 2022), where admission despite a noted pre-existing dispute was held a grave error, and Rajratan Babulal Agarwal v. Solartex India Pvt. Ltd. & Ors. (Civil Appeal No. 2199 of 2021).

The NCLT had itself recorded pre-existing disputes, yet held them not significant enough, found the debt proved and decided questions of merit. The Tribunal held that this approach cannot stand. The Adjudicating Authority is not meant to hold a trial at admission; it only checks whether a genuine dispute exists. It stressed: “The Code is a law for the resolution of insolvency. It is not a law for recovery of money.” A creditor with a contested claim must go to a civil court or, as here, arbitration.

The operational creditor also told the Tribunal that the disputes had been settled and it did not contest the appeal. The order was set aside and the CIRP closed. The moratorium ceased, the interim resolution professional, Sunil Kumar Kedia, was discharged, the board’s powers were restored, and he was directed to hand over the company’s assets and records.

2026-juristway.com-3331-NCLAT(New Delhi)-IBC