NCLT Ahmedabad Rejects Button Industries' Insolvency Plea Against Viaz Tyres Over ₹1.16 Crore Dues

The Ahmedabad Bench of the National Company Law Tribunal (NCLT) on 24 September rejected an insolvency petition filed by Button Industries Private Limited against Viaz Tyres Limited over alleged dues of Rs. 1.16 crore.

Judicial Member Chitra Hanakre and Technical Member Dr VG Venakata Chalapathy held that the transaction did not qualify as a financial debt under the Insolvency and Bankruptcy Code, 2016 (IBC), as it did not involve disbursal of funds with consideration for the time value of money. The Tribunal observed:

“This underlying transaction is a different nature of debt and not lent to qualify as a financial debt under Sec 5(8) of the IBC where there is a disbursal of funds with time value of money.”

Button Industries had advanced Rs. 1.16 crore to Viaz Tyres in March 2020 under five invoices for the supply of Basmati rice. The parties subsequently entered into a Memorandum of Understanding (MOU) dated 12 April 2022, under which Viaz Tyres acknowledged the liability and agreed to repay the amount by 12 April 2023. The MOU provided for interest at 18% per annum in case of default.

Viaz Tyres sought a further extension on 15 April 2023 and agreed to repay the amount by 30 April 2024, again with interest liability. After the default continued, the parties executed a revised MOU on 2 July 2024, which stipulated repayment by 2 January 2025. Viaz Tyres did not repay the amount.

Thereafter, Button Industries issued a recall notice claiming Rs. 2.94 crore as outstanding as on 29 October 2025, comprising Rs. 1.16 crore towards principal and Rs. 1.78 crore towards interest. It also filed a record of default with the National e-Governance Services Ltd. (NeSL).

It argued that the amount advanced constituted a financial debt under Section 5(8) of the IBC, as the transaction had the commercial effect of borrowing and involved consideration for the time value of money.

Viaz Tyres disputed the genuineness of the documents. It contended that the invoices were unsigned, the MOUs contained forged signatures and seals, and the revised MOU carried an outdated Corporate Identity Number.

It further alleged that the documents had been fabricated using PDF-editing tools and were never exchanged electronically. The corporate debtor also contended that the petition was mala fide and that no financial debt existed.

The Tribunal noted that the underlying transaction originated from invoices raised against Viaz Tubes Pvt. Ltd. It held that the subsequent MOUs merely converted the existing operational dues into repayment schedules.

It held that the debt retained its character as an operational debt. It found that the MOUs only postponed payment of the existing dues and did not involve a fresh disbursal of funds for consideration for the time value of money.

Accordingly, the NCLT rejected Button Industries' insolvency petition against Viaz Tyres.

For Petitioners: Advocate Ravi Pahwa