NCLT Chennai Reiterates Unauthorised Communications Cannot Trigger CIRP, Dismisses ₹1.24 Crore Plea

The Chennai Bench of the National Company Law Tribunal (NCLT) on 5 May dismissed an insolvency application filed by Daedong Shipping Company Limited, a South Korean shipping company, holding that communications from an unauthorised person cannot be used to establish an operational debt or initiate proceedings under the Insolvency and Bankruptcy Code, 2016.

Judicial Member Jyoti Kumar Tripathi and Technical Member Ravichandran Ramasamy reiterated that corporate liability must rest on valid authorisation and a crystallised debt, while rejecting the plea to initiate Corporate Insolvency Resolution Process (CIRP) against Srivi Exports and Imports Private Limited over an alleged operational debt of about Rs 1.24 crore. The Bench emphasised:

“…it is a fundamental principle of corporate jurisprudence that a company is a separate legal entity and the person representing should ascertain valid authorisation.”

Daedong Shipping Company claimed that it entered into a charterparty agreement in October 2023 with Srivi Exports for transporting 22,500 MT of coal from Indonesia to Bangladesh, later modified through an addendum. It alleged that it issued a notice of readiness and kept the vessel available, but the corporate debtor failed to load cargo within the stipulated time, resulting in demurrage and dead freight claims.

The company further relied on email exchanges from November 2023, asserting that Srivi Exports acknowledged its inability to perform the contract and agreed to compensate the vessel owner for losses arising from the aborted voyage. Based on these communications, it sought initiation of CIRP to recover the outstanding dues.

Srivi Exports and Imports Private Limited denied the claim and disputed the existence of any binding charterparty or addendum. It contended that one T.P.S. Ponkumaran executed the documents without any authority to act on behalf of the company, and therefore no contractual liability could arise against it.

On examination, the Tribunal found that the email addresses used in the charterparty documents did not belong to the corporate debtor. It further noted that the correspondence relied upon by the applicant originated from the personal email account of T.P.S. Ponkumaran.

The Bench also held that Ponkumaran was neither a promoter, shareholder, employee, nor key managerial personnel of the company, and had not received any board authorisation to enter into contracts on its behalf. It observed that communications from an unauthorised individual could not bind the company merely because of alleged familial connections with its directors and stated:

“That being the case we are of the considered view that the liability cannot be casted upon the corporate debtor, the debt has not been crystallised by the applicant against the respondent to initiate CIRP against the respondent, to initiate CIRP the debt should be crystallised and it should be without pre-existing dispute in this petition placed before us for adjudication the applicant has not crystallised the debt against the respondent.”

The Tribunal also referred to an affidavit filed by Ponkumaran, which indicated that the dispute arose essentially between private individuals involved in the transaction. Reiterating that insolvency proceedings cannot function as a debt recovery mechanism, it held:

“At this juncture we would make it abundantly clear that the trigger point of initiation of Corporate Insolvency Resolution Process (CIRP) against the Company is when a Corporate Debtor is no longer in a position pay the debt and the obligations to its creditors, and in its Financial distress.”

Accordingly, the NCLT dismissed the application.

For Petitioner: Bharadwajaramasubramaniam, S. Diwaagar

For Respondent: Advocate Ebenezar Inbaraj