Part Payment By Third Party Does Not Discharge Corporate Debtor's Liability Under IBC: NCLT Cuttack
Kirit Singhania
16 March 2026 9:15 AM IST
The National Company Law Tribunal (NCLT) at Cuttack recently observed that the acceptance of a part payment from a third party cannot be treated as a substitution of the corporate debtor for the entire outstanding liability, particularly when the corporate debtor itself continued to make substantial payments toward the same debt.
A coram of Acting President Deep Chandra Joshi and Technical Member Banwari Lal Meena made the observation while allowing an insolvency application filed by Patnaik Steel International Ltd against SSAB Energy and Minerals Ltd. (corporate debtor) for default in payment arising from the supply of iron ore fines.
“The acceptance of a solitary part-payment from a third party cannot be construed as an acceptance of that third party as a substitute for the primary debtor for the entire outstanding balance, especially when the CD itself remained the primary entity making substantial payments from its own accounts.”, the tribunal said.
The operational creditor submitted that pursuant to a purchase order dated December 31, 2021, it supplied iron ore fines to the corporate debtor through invoices dated January 17, 2022 for a total value of Rs. 2.86 crore. While the corporate debtor made partial payments of Rs 1.55 crore through bank transfers, a balance of Rs. 1.31 crore remained unpaid.
The corporate debtor disputed liability, contending that under a Memorandum of Understanding dated December 31, 2021, another entity, Gleancore Minerals, was responsible for procuring raw materials and settling supplier dues.
Rejecting the defence, the tribunal held that the documentary evidence clearly established a direct contractual relationship between the supplier and the corporate debtor through the purchase order, invoices, and payment records. The bench noted that the corporate debtor had itself made substantial part-payments toward the invoices, thereby acknowledging the debt.
It further held that any internal arrangement between the corporate debtor and a third party cannot absolve the debtor of its obligation to the operational creditor.
Finding that there was no genuine pre-existing dispute and that the operational debt and default were established, the tribunal admitted the insolvency petition and appointed Suresh Chandra Pattnayak as the interim resolution professional.
For Applicant: Advocates Saswat K. Acharya, Sushree Phoglu, Abhijeet Agarwal, Subham Agrawal, Jaish Joshi, Krutibash Mohapatra
For Respondent: Advocate Supriyo Gole