NCLT Ahmedabad Admits Insolvency Plea Against Montecarlo, Rejects 'Pre-Existing Dispute' Defence

The Ahmedabad Bench of the National Company Law Tribunal (NCLT) on 6 July admitted an insolvency petition against Montecarlo Limited, holding that disputes raised only after receipt of a demand notice cannot be treated as “pre-existing disputes” under the Insolvency and Bankruptcy Code, 2016 (IBC).

A Bench comprising Judicial Member Chitra Hankare and Technical Member Dr V.G. Venkata Chalapathy allowed the application filed by Vanshita Transport, noting:

“The CD is consistently saying that there is a preexisting dispute. However, it has itself admitted that before the issuance of the demand notice, no dispute was raised by the CD. The dispute was raised by the CD only in the reply sent to the demand notice issued by the Applicant. Therefore, it cannot be treated as a pre-existing dispute.”

Vanshita Transport, an operational creditor engaged in cement transportation, claimed unpaid dues of Rs 1.47 crore, including interest of Rs 6.87 lakh, for services provided between November 2022 and November 2024. It supported its claim with invoices issued between 8 November 2022 and 25 November 2024.

The operational creditor issued a demand notice on 19 December 2024 and also placed on record default details filed with the Information Utility along with work orders dated 11 July 2022 and 1 April 2024.

Montecarlo Limited opposed the insolvency proceedings, alleging fraud and collusion between Vanshita Transport and its former employee. It claimed that inflated transportation rates and incorrect distance calculations had caused losses of Rs 4.91 crore.

The company also stated that it had filed a police complaint against the employee in December 2024 and initiated disciplinary proceedings. It argued that the dispute was civil in nature and that the work orders contained arbitration clauses requiring disputes to be resolved through arbitration.

In an additional affidavit, Montecarlo claimed that a joint verification of transportation distances conducted in February 2025 revealed discrepancies, which were supported by GPS data. It also informed the Tribunal that it had approached the Gujarat High Court under Section 11 of the Arbitration and Conciliation Act, 1996 (which empowers courts to appoint arbitrators) for appointment of an arbitrator.

Vanshita Transport contended that Montecarlo had raised no objections during the subsistence of the work orders or at the time of billing. It argued that the disputes were raised only in the reply to the demand notice dated 1 January 2025 and therefore could not qualify as pre-existing disputes under the IBC. The operational creditor termed the counterclaims belated and malicious, and submitted that the debt had been acknowledged and was not time-barred.

The Tribunal rejected Montecarlo's objections, holding that there was no genuine dispute existing before the demand notice. It noted that the police complaint was filed against the company's employee and not against Vanshita Transport, and therefore could not be relied upon as a defence to the insolvency petition.

Further, the Bench held that the pending arbitration proceedings could not prevent initiation of CIRP. It also observed that Vanshita Transport, being a Micro, Small and Medium Enterprise (MSME), was entitled to claim interest and that the debt exceeded the statutory threshold for initiating insolvency proceedings.

Accordingly, the NCLT admitted the petition, declared a moratorium and appointed Sanjay Jitendralal Shah as the Interim Resolution Professional (IRP).

For Applicants: Advocates Nipun Singhvi and Pragati Tiwari