NCLT Ahmedabad Rejects Insolvency Plea Against Manpasand Beverages Over Time-Barred ₹34.40 Cr Claim

The Ahmedabad National Company Law Tribunal (NCLT) on 14 July dismissed the insolvency application filed by Do Well Moulds against Manpasand Beverages Ltd., holding that the claim was time-barred and involved pre-existing disputes regarding the genuineness of the transactions.

A Bench comprising Judicial Member Chitra Hankare and Technical Member Dr. VG Venkata Chalapathy noted that an insolvency application cannot be admitted where the claim is barred by limitation, disputed prior to the demand notice, and arises from transactions allegedly linked to fraudulent circular trading. It observed:

“Even if the subsequent invoices are within the limitation, the fact that the applicant has not enclosed the Delivery Challans, investigations are being conducted for circular and paper trading (not genuine transactions) by GST authorities, this matter appears to be a fraudulent receivable and payable transaction/s between both the parties, that both have for the purpose of availing input credits, a purported attempt to defraud the system..”

Do Well Moulds, a partnership firm engaged in manufacturing moulds, machines and plastic components, supplied goods to Manpasand Beverages between 2014 and 2018. The operational creditor claimed outstanding dues of Rs. 34.40 crore, relying on invoices, ledger accounts and a balance confirmation letter from Manpasand Beverages' auditors showing Rs. 41.27 crore payable as of March 2019.

The Firm issued a demand notice on 5 July 2019 and filed the insolvency application in October 2019. It contended that the invoices forming the basis of the claim were raised from November 2017 onwards, with the last invoice dated 25 August 2018, and therefore the application was within the limitation period. It further argued that Manpasand Beverages did not raise any dispute within the statutory period after receiving the demand notice and that the invoices were not part of circular trading.

Manpasand Beverages opposed the application, arguing that the default occurred in February 2015 and the claim was barred under Article 137 of the Limitation Act, 1963, which provides a three-year limitation period for applications where no specific limitation period is prescribed. It also alleged that the invoices were fabricated, cancelled or unsupported by delivery challans.

The company further submitted that, at the time of issuance of the demand notice, its senior officials were in judicial custody following search and seizure proceedings initiated by the Central Goods and Services Tax (CGST) Commissionerate.

The Tribunal observed that Do Well Moulds had admitted that the default began in 2015, making the insolvency application time-barred. It further observed that emails exchanged in April 2015 showed that payments were withheld due to disputes between the parties.

The Bench also noted that GST authorities were investigating both parties for alleged circular trading and that the absence of delivery challans and supporting documents raised doubts over the genuineness of the transactions.

Accordingly, the NCLT rejected the insolvency application and directed the Registry to forward a copy of the order to the Registrar of Companies (ROC) and GST authorities for further investigation.

For Applicants: Advocates Jawahar Prajapati and Dharmesh J Shah

For Respondents: Senior Advocate Manish Bhatt with Advocate Yash Dadich