NCLT Ahmedabad Holds Mere Breach Claims Cannot Defeat CIRP, Admits ₹2.02 Cr. Plea Against Mehsana Dairy

The Ahmedabad Bench of the National Company Law Tribunal (NCLT) on 26 June held that a corporate debtor cannot defeat an insolvency petition by raising contractual disputes that are unsupported by contemporaneous evidence.

Judicial Member Shammi Khan and Technical Member Sanjeev Sharma admitted an insolvency petition filed by Mehsana Food Tradelinkers Pvt. Ltd. against Mehsana Dairy and Food Products Ltd. under the Insolvency and Bankruptcy Code, 2016 (IBC) for an operational debt of Rs. 2.02 crore. The Bench observed:

“The Corporate Debtor has also failed to demonstrate that any dispute was pending or had crystallized prior to issuance of the Demand Notice. Mere assertion of breach of contractual obligations unsupported by contemporaneous material cannot constitute a preexisting dispute within the meaning of Sections 8 and 9 of the Code.”

Mehsana Food Tradelinkers Pvt. Ltd., as an operational creditor, had entered into a Master Super Stockist Agreement with Mehsana Dairy and Food Products Ltd. on 12 February 2025 for marketing and distribution of dairy products.

Under the agreement, deposits were required to be made and accounts settled upon termination. The arrangement was terminated on 15 April 2025, with the outstanding amounts required to be settled within 30 days. The default date was recorded as 15 May 2025.

The operational creditor claimed that despite repeated assurances, issuance of cheques and communications acknowledging liability, Mehsana Dairy failed to clear dues of Rs. 2,02,52,460.40. A demand notice was issued on 18 January 2026, but the payment remained outstanding.

Mehsana Dairy opposed the petition, alleging that the operational creditor had breached the agreement by failing to deposit the initial Rs. 5 crore required under Clause 15. It contended that the ledger reflected non-compliance and that the transactions involved adjustments requiring reconciliation. The company argued that the debt was disputed and that the insolvency proceedings were not maintainable.

The operational creditor denied the allegations and submitted that Mehsana Dairy had acknowledged its liability through emails, ledger entries and issuance of cheques. It argued that the alleged breach regarding the deposit was never raised before issuance of the demand notice and was an afterthought. The creditor also relied on dishonoured cheques and repayment schedules proposed by the company as evidence of admitted liability.

The Tribunal examined the matter in light of the Supreme Court judgments in Mobilox Innovations v. Kirusa Software and Kay Bouvet Engineering v. Overseas Infrastructure Alliance. It reiterated that insolvency proceedings cannot be used as a recovery mechanism and that a petition under Section 9 of the IBC must fail where a genuine pre-existing dispute exists.

It found that the agreement and business relationship between the parties were undisputed. It noted that the ledger accounts, communications and cheques indicated acknowledgement of liability, while the defence regarding non-deposit of funds was raised only after initiation of proceedings and was not supported by material evidence.

Further, the Bench held that the dues constituted operational debt under Section 5(21) of the IBC (which defines operational debt as a claim arising from the provision of goods or services) and that Mehsana Dairy had failed to establish any genuine pre-existing dispute.

Accordingly, the NCLT admitted the petition, ordered commencement of CIRP, imposed a moratorium and appointed NPV Insolvency Professionals Pvt. Ltd. as the Interim Resolution Professional.