NCLT Kolkata Rejects Insolvency Plea Against Burnpur Cement, Flags Disputed Debt

The Kolkata Bench of the National Company Law Tribunal (NCLT) has thrown out an insolvency plea against Burnpur Cement Ltd, finding that the claim itself was riddled with gaps and contradictions and could not be pushed through the insolvency route.

At the heart of the case was a claim by Mittal Polysacks Pvt. Ltd., which said it had supplied polypropylene cement bags worth about Rs.1.25 crore and had not been paid. But the tribunal found little on record to back that assertion in a manner fit for insolvency proceedings.

There was no written agreement. No purchase orders. No delivery records either. The file lacked transport receipts, challans, or even basic acknowledgment from the company showing that the goods were received. Even the invoices placed on record did not carry any acknowledgment from Burnpur Cement.

The Bench, comprising Judicial Member Bidisha Banerjee and Technical Member Siddharth Mishra, also took note of how the transactions were recorded. At the time, the two companies were linked through common management, and the dealings were reflected as related party transactions. That context became relevant once control of Burnpur Cement changed hands.

After the takeover, the new management flagged irregularities in past records. One such entry showing the alleged dues was later reversed in the company's books. This happened before the statutory demand notice was issued.

The tribunal treated that reversal, coupled with the absence of primary documents, as significant.

“The reversal of entries prior to the demand notice and the assertion that no primary supporting documents were found constitute a clear repudiation of liability preceding the Section 8 notice.”

The numbers did not quite line up either. In one instance, invoices were said to have been raised during a financial year where the company's balance sheet showed no outstanding dues. That mismatch, the bench noted, went to the root of the claim.

Equally telling was the silence. The supplies were said to have been made in 2016. The demand notice came only in 2021. There was nothing on record in between, no letters, no reminders, no follow-up for payment over those five years.

The tribunal was clear that insolvency proceedings are not meant to resolve such contested claims. Where the debt itself is under dispute and requires a closer look at facts and records, the matter has to be tested elsewhere.

It also pointed out that even the challenge to how the entries were reversed, including whether it complied with company law, was itself a dispute requiring proper adjudication.

“The contention regarding non-compliance with the Companies Act in reversing entries itself demonstrates that there exists a substantive dispute requiring detailed adjudication, which is beyond the limited summary jurisdiction under Section 9.”

With multiple fault lines in the claim, missing documents, inconsistent records, and a clear denial of liability before the demand notice, the Bench found that a genuine dispute existed between the parties.

That was enough to shut the door on the insolvency plea.