NCLT Ahmedabad Rejects Conart Engineers' Insolvency Plea Against Senores Over Pre Existing Dispute

The Ahmedabad National Company Law Tribunal (NCLT) on 30 July held that an insolvency petition cannot be admitted when a pre existing dispute exists between parties over contractual claims, including certification of bills, recoveries and retention money.

A Bench of Judicial Member Shammi Khan and Technical Member Sanjeev Sharma dismissed Conart Engineers Limited's insolvency petition against Senores Pharmaceuticals Limited, holding that a dispute between the parties existed before the demand notice was issued. It also rejected an application alleging fraudulent initiation of insolvency proceedings. It held:

“Upon consideration of the pleadings and documents placed on record and discussed above, this Tribunal finds that the correspondence exchanged prior to the Demand Notice consistently refers to disputes relating to certification of bills, recoveries, quality of work, measurements, retention amount and contractual obligations. Such correspondence cannot be ignored while examining the maintainability of the present Petition.”

The dispute arose from construction services provided by Conart Engineers Limited, initially to Ratnagene Lifescience Pvt. Ltd., which later merged with Senores Pharmaceuticals Limited, and subsequently under a purchase order issued by Senores. Conart, an operational creditor, filed the petition on 22 March 2026 seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against Senores for an alleged operational debt of Rs. 1.32 crore.

Conart raised six invoices between April and October 2025. It claimed that after adjusting payments received, Rs. 1,10,99,105 remained outstanding from Senores Pharmaceuticals Limited. It further claimed Rs. 24,03,487 towards the liability of the merged entity, taking the total operational debt to Rs. 1,32,97,930. A demand notice dated 5 November 2025 was issued seeking payment of the outstanding amount. Senores Pharmaceuticals Limited replied on 21 November 2025 disputing the claim.

Senores Pharmaceuticals Limited opposed the petition, contending that disputes relating to execution of work, certification of bills, recoveries and contractual obligations had arisen before the demand notice. It relied on contractual documents, tender terms and email correspondence exchanged between August and October 2025. It also filed an application under Sections 65 and 76 of the IBC alleging that Conart Engineers Limited had concealed material facts and initiated insolvency proceedings fraudulently.

Conart Engineers Limited argued that the dispute and allegations of fraud were raised only after issuance of the demand notice. It submitted that Senores Pharmaceuticals Limited had acknowledged the debt by making part payments and certifying Running Account Bills. It further contended that the entry of dispute in the Information Utility, objections regarding financial soundness and challenges to the demand notice did not affect the existence of operational debt and default. Conart also argued that Senores could not rely on Section 76 of the IBC as the provision had been omitted from the Code in May 2026.

The Tribunal examined the pleadings, contractual documents and correspondence exchanged between the parties. It noted that communications sent before the demand notice referred to disputes regarding certification of bills, recoveries, retention money, quality of work and contractual obligations. It held that part payments and settlement discussions between the parties did not by themselves establish that no dispute existed. The Bench observed:

“Mere part payment or exchange of settlement proposals, however, does not by itself conclude that no dispute existed. Equally, every contractual disagreement cannot automatically defeat an application under Section 9.”

Relying on the Supreme Court's ruling in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., the Tribunal held that proceedings under Section 9 of the IBC are summary in nature and only require examination of whether a plausible dispute existed before issuance of the demand notice. Detailed adjudication of contractual claims falls outside the scope of insolvency proceedings.

On the allegations of fraudulent initiation, the Bench rejected Senores Pharmaceuticals Limited's application under Sections 65 and 76 of the IBC, holding that dismissal of a Section 9 petition due to a pre existing dispute does not automatically establish fraudulent or malicious intent. It found that Conart Engineers Limited had disclosed relevant documents and that allegations of concealment were not proved.

Accordingly, the NCLT dismissed the insolvency petition filed by Conart Engineers Limited and the application filed by Senores Pharmaceuticals Limited.

For Applicants: Advocate Nipun Singhvi