NCLT Dismisses APL Apollo Tubes' Insolvency Plea Against Tanisha Scaffolding For Lack Of Delivery Proof

The Bengaluru Bench of the National Company Law Tribunal (NCLT), on 9 October dismissed a Section 9 application filed by APL Apollo Tubes Ltd. seeking initiation of the corporate insolvency resolution process (CIRP) against Tanisha Scaffolding (India) Private Limited, holding that the operational creditor failed to establish the supply of goods underlying its claim.

A Bench comprising Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada dismissed the application after finding that the invoices did not establish the corporate debtor's receipt of the goods. They held:

“The contention that no transactions took place after March 2017 and that the invoices relied upon by the Operational Creditor are not backed by delivery documents to indicate the transaction having taken place, raises a plausible dispute that cannot be entertained by us while exercising summary jurisdiction under the Code. The parties although had dealt with each other earlier but their privity of contract qua the subject three invoices is not established.”

APL Apollo Tubes filed the Section 9 application claiming an operational debt of Rs. 30,43,360 under three invoices issued in June 2017 for the supply of steel tubes and pipes.

In 2019, the NCLT dismissed the application, holding that the operational creditor had failed to establish the existence of debt and default. In June 2024, the National Company Law Appellate Tribunal (NCLAT) set aside the order and remanded the matter to the NCLT for fresh consideration after hearing the corporate debtor's objections.

Before the NCLT, Tanisha Scaffolding denied receiving the goods and disputed the invoices. It also submitted that it had fully paid for its earlier purchases from APL Apollo Tubes.

APL Apollo Tubes relied on ledger statements and argued that the corporate debtor had failed to dispute the claim after receiving the demand notice.

The Tribunal observed that the invoices did not bear the corporate debtor's signatures, placing the initial burden of establishing the supply of goods on the operational creditor. However, APL Apollo Tubes failed to produce delivery challans, other documents evidencing receipt of the goods, or trade tax or GST returns to substantiate its claim.

Further, the Bench rejected the argument that the corporate debtor's failure to reply to the demand notice amounted to an admission of liability. Relying on the Delhi High Court's ruling in NDMC v. Amrit Mehta, RSA 101/2012, it observed that treating silence in response to a legal notice as an automatic admission would effectively shift the burden of proving the claim to the opposite party.

It also relied on the Supreme Court's ruling in Mobilox Innovations Private Limited v. Kirusa Software Private Limited, (2018) 1 SCC 353, to hold that the existence of a plausible dispute precluded the initiation of CIRP.

Accordingly, the NCLT dismissed APL Apollo Tubes' Section 9 application against Tanisha Scaffolding.