NCLT Mumbai Rejects ₹4.43 Cr Section 9 Plea, Holds Pre Existing Dispute Over Part Of Debt Sufficient

The Mumbai Bench of the National Company Law Tribunal (NCLT) on 30 June held that a pre existing dispute raised before issuance of a demand notice can defeat a Section 9 application under the Insolvency and Bankruptcy Code (IBC), even if the dispute relates only to a part of the operational debt, unless the disputed amount is wholly insignificant.

Judicial Member Nilesh Sharma and Technical Member Sameer Kakar rejected Lumens Technologies Pvt Ltd's Section 9 petition seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against Radhika Opto Electronics Ltd over an alleged default of Rs. 4.43 crore. The Bench held:

“Therefore we are of the view that if a notice of dispute which is pre-dating the date of demand notice has been received by the operational creditor within 10 days of receipt of demand Notice, even if the dispute relates to part of the dues claimed by the Applicant (unless the same is totally insignificant) the Operation Creditor is justified in withholding of the outstanding claimed and in such a situation the Application under section 9 of the IBC , 2016 will not be maintainable due to default in payment by the CD.”

Lumens filed the petition on 26 June 2025, claiming an operational debt of Rs. 4.43 crore arising from the supply of semiconductors between August 2024 and March 2025. The company relied on balance confirmations, part payments and WhatsApp communications to contend that the Corporate Debtor had acknowledged its liability.

The Corporate Debtor opposed the petition, claiming that the supplied semiconductors were defective, resulting in customer complaints, business losses and cancellation of orders. It relied on emails dated 24 April and 28 April 2025, along with a legal notice dated 12 May 2025, to contend that a dispute existed before issuance of the demand notice.

Lumens argued that the dispute related only to goods worth about Rs. 74.70 lakh and could not prevent initiation of insolvency proceedings for the remaining outstanding amount.

The Tribunal rejected this contention, holding that the email dated 28 April 2025 reinforced the earlier complaints by recording customer grievances, business losses and the Corporate Debtor's decision to stop using the applicant's products. It observed that this made it difficult to accept that the dispute arose only after issuance of the demand notice.

Further, it held that the parties disputed not only the quality of the goods but also the identity of the goods sought to be returned. It observed that such issues required appreciation of evidence and could not be decided in a summary proceeding under Section 9 of the IBC. The Bench observed:

“In our considered opinion, this explanation itself highlights the existence of a genuine factual controversy. The parties are at difference not only on the issue of quality but also on the identity and source of the goods sought to be returned. Such controversies necessarily require appreciation of evidence and cannot be conclusively determined in a summary proceeding under Section 9.”

It rejected Lumens' argument that the absence of a pending suit or arbitration proceeding made the dispute irrelevant. Instead, the Tribunal relied on the Supreme Court's judgment in Mobilox Innovations Pvt Ltd v. Kirusa Software Pvt Ltd to hold that the existence of a genuine dispute before issuance of the demand notice is sufficient. It noted:

“We also find no merit in the contention that the dispute should be disregarded because the CD did not initiate a suit or arbitration proceeding. The law on this aspect is no longer res integra. In Mobilox (supra), the Hon'ble Supreme Court categorically held that pendency of a suit or arbitration is not a condition precedent for establishing existence of a dispute. What is required is the existence of a dispute in fact prior to issuance of the demand notice.”

Accordingly, the NCLT held that a bona fide pre existing dispute existed before invocation of the IBC and dismissed the Section 9 application.

For Applicant: Adv. Chaitrika Patki a/w Adv. Aashka Vora i/b Vidhi Partners

For Respondent: Adv. Mr. Saiee Nirgude Adv. Ankit Pitti i/b S & T Legal.