NCLT Ahmedabad Dismisses Jindal's Insolvency Plea Against Kunal Structure For Failing IBC Threshold

The Ahmedabad Bench of the National Company Law Tribunal (NCLT) on 17 July dismissed the insolvency application filed by Jindal (India) Limited against Kunal Structure (India) Private Limited, holding that disputes regarding short-weight and LC charges reduced the undisputed claim below the statutory threshold of 1 crore.

A Bench comprising Judicial Member Chithra Hankare and Technical Member Dr VG Venkata Chalapathy held:

“The matter of dispute being marginal, it falls below the threshold limit, and crosses Rs 1 crore only by the stated LC charges, which apparently seems to have not been claimed. There are marginal weight disputes of around Rs.3.82 lakhs and the LC debit note for Rs. 2,54,735/- is for the usance period after invoice is issued for which LC seems to have not been paid and the claim made before us.”

Jindal (India) Limited, a manufacturer of galvanised pipes, supplied 10,000 metres of Metal Beam Crash Barriers to Kunal Structure on 19 March 2021 at an agreed rate of Rs 1,960 per metre. The total contract value was Rs 2.31 crore. Kunal Structure made part payments, but invoices dated 16 June, 19 June and 24 June 2021 amounting to Rs 99.64 lakh remained unpaid. Jindal also raised a debit note of Rs 2.78 lakh towards interest on the LC, taking the total claim to Rs 1.02 crore.

Jindal issued a demand notice under Section 8 of the IBC (which requires an operational creditor to demand payment before initiating insolvency proceedings) on 20 July 2022. After receiving no payment or response, Jindal filed a Section 9 application under the IBC (which enables an operational creditor to initiate Corporate Insolvency Resolution Process) against Kunal Structure.

Kunal Structure opposed the application and alleged suppression of material facts. It contended that the supplied goods had short-weight and thickness variations and that it had sought deductions of Rs 5.24 lakh along with additional supply to compensate for the discrepancies. It submitted that Jindal had accepted the deductions, reducing the outstanding amount to Rs 93.55 lakh. Further, even after adding interest, the claim stood at Rs 96.63 lakh, below the Rs 1 crore threshold.

Moreover, the company argued that the Bill of Exchange relied upon by Jindal did not constitute an unconditional acknowledgement of debt. It also relied on the arbitration clause in the purchase order and submitted that disputes regarding quality and deductions had to be resolved through arbitration.

Jindal argued that no genuine dispute existed as Kunal Structure neither replied to the statutory demand notice nor raised objections before its issuance. It contended that the allegations regarding short-weight were raised belatedly and that Kunal Structure had received and utilised the goods.

The Bench examined the invoices, debit notes, emails and the Bill of Exchange relied upon by Jindal. It noted that the Bill of Exchange did not contain Kunal Structure's endorsement, raising doubts regarding its validity.

It further observed that correspondence between the parties showed disputes regarding short-weight and deductions. It also noted that Jindal had invoked arbitration under Clause 32 of the purchase order during the pendency of the insolvency proceedings, indicating the existence of disputes. It observed:

“Since there are marginal disputes on quantity supplied, while the respondent had paid the other bills in time, bills raised under LC issued is not paid due to dispute, threshold limit not satisfactory and the applicant has proceeded before arbitration after filing this application before adjudication.”

Accordingly, the NCLT rejected and disposed of the Section 9 application filed by Jindal (India) Limited.

For Applicants: Advocates Shyam Kumar and Iqra Khan

For Respondents: Senior Advocate Dhaval Vyas with Advocates Vishwas K. Shah and Masoom K. Shah,