GLS Films Industries Private Limited vs Chemical Suppliers India Private Limited

Non-reportable 2026 INSC 344 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Civil Appeal No. 4019 of 2025

GLS Films Industries Private Limited … Appellant

versus

] Chemical Suppliers India Private Limited … Respondent

JUDGMENT

SANJAY KUMAR, J

1. Initiation of corporate insolvency resolution process was denied by

the adjudicating authority but the appellate authority reversed that

decision. Aggrieved thereby, the corporate debtor is in appeal. On

28.03.2025, this Court stayed the operation of the judgment under appeal.

2. Company Petition (IB)-792(ND) of 2021 was filed before the

National Company Law Tribunal, New Delhi Bench (Court II) (hereinafter,

‘the NCLT’), by Chemical Suppliers India Private Limited, the respondent

herein, under Section 9 of the Insolvency and Bankruptcy Code, 20161, Signature Not Verified

against GLS Films Industries Private Limited, the appellant. Digitally signed by babita pandey Date: 2026.04.09 18:42:45 IST Reason:

1 For short, ‘the Code’

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3. The case of the respondent was that it had supplied chemicals to

the appellant over a period of time and a sum of ₹2,92,93,223/- was due

and payable to it as on 26.05.2021. Demand notice dated 11.11.2021 was

issued by it under Section 8 of the Code. In response, the appellant

addressed email dated 06.12.2021 disputing the claim. The respondent

thereupon filed the subject application under Section 9 of the Code. The

appellant contested the proceedings claiming that there was a pre-existing

dispute between the parties prior to issuance of the demand notice.

According to it, the respondent had supplied two consignments of solvent

on 10.04.2021 and 11.04.2021 respectively at its factory premises at

Gurugram but the same were found to be defective. This was brought to

the notice of the respondent, which promised that it would do better.

Basing on the said representation, the appellant claimed to have sourced

some more solvent supplies from the respondent on 20.04.2021 and

23.04.2021. However, these supplies were also found to be defective. The

respondent assured the appellant that it would compensate it for the

losses suffered and supplied another batch of solvent on 21.06.2021. Yet

again, upon checking, this batch was also found to be defective and was

returned forthwith.

4. According to the appellant the respondent was called upon time and

again to come and settle accounts and compensate the appellant for the

losses suffered by it. However, no steps were taken in that regard but the 2 authorised representative of the respondent started applying arm-twisting

tactics by threatening to commit suicide if payment was not made for the

defective supplies. The appellant filed a police complaint in relation

thereto. According to the appellant, in view of the losses suffered by it due

to such defective supplies, it issued a debit note on 31.12.2021 for

₹2,42,11,648/-. After adjusting the account, per the appellant, the

respondent was still due and liable to pay it a sum of ₹70,09,430/-.

5. The NCLT took note of the letter dated 10.12.2020 written by the

appellant to the respondent detailing the defective supplies made between

16.09.2020 and 24.10.2020, amounting to ₹1,66,89,770/-. The appellant

had stated therein that its customer had debited its account by ₹6.50 crore

but, owing to its long association with the respondent, the appellant was

not planning to debit the said amount from its account. However, the

appellant requested the respondent to take note of the debit note raised

by it for ₹1.66 crore and arrange a credit note for that sum.

6. The NCLT noted that the respondent replied to this letter dated

10.12.2020 by way of email dated 14.07.2021. Therein, it denied that its

supplies of solvent were defective and requested for payment to be made

against overdue bills. In turn, by email dated 16.10.2021, the appellant

reiterated that the material supplied to it was defective and called upon

the respondent to reconcile the accounts and appropriate the losses

caused to it due to defective supplies. The appellant asserted that it was 3 only after repeated efforts on its part that the respondent incorporated a

credit note for ₹1.66 crore but the original thereof and the tax paid note

were never delivered to it. On the other hand, by email dated 10.09.2021,

the respondent raised a demand for ₹4,60,05,397/-. The NCLT also noted

that the appellant had lodged a police complaint on 27.09.2021, long prior

to issuance of the demand notice, raising the issue of the defective quality

of the supplies made by the respondent and its pressure tactics in seeking

payment therefor under threat of suicide. Therein, the appellant had also

referred to the fact that it called upon the respondent to come for

reconciliation of accounts but to no avail.

7. On a conspectus of these facts, the NCLT opined that there was a

plausible dispute raised by the appellant, which was not disclosed by the

respondent upfront in its application. The NCLT also took note of the

counterclaim of the appellant that it was due and payable a sum of

₹70,09,430/-. The NCLT opined that the respondent had approached it to

recover its alleged dues and that was not the objective of the process

provided under the Code. The NCLT, accordingly, concluded that there

existed a dispute between the parties prior to issuance of the demand

notice which necessitated a detailed investigation of documents and

adducing of evidence by all concerned, which was beyond the scope of

its summary jurisdiction under the Code. The respondent’s application

was accordingly dismissed by the NCLT, vide order dated 16.12.2022. 4

8. Aggrieved thereby, the respondent filed Company Appeal (AT) (Ins)

No. 157 of 2023 before the National Company Law Appellate Tribunal,

Principal Bench, New Delhi (hereinafter, ‘the NCLAT’). This appeal was

allowed by the impugned judgment dated 11.02.2025. Therein, the NCLAT

noted that the respondent had raised eight invoices between the dates

27.03.2021 and 26.07.2021, amounting to ₹1,72,04,137/-, for the material

supplied by it to the appellant and as the appellant failed to make payment

therefor within time, the respondent charged interest @24% per annum,

as per the invoice terms, amounting to ₹1,20,89,086/-. As no payment was

made even thereafter, the respondent was stated to have issued demand

notice dated 11.11.2021 under Section 8 of the Code for ₹2,92,93,223/-,

being the principal and the interest due, and then filed the application

under Section 9 of the Code on 21.12.2021.

9. The NCLAT observed that the appellant had addressed letter dated

10.12.2020 to the respondent, complaining about the poor quality of the

material supplied by it in September, 2020 and October, 2020 and that this

letter found reference in the appellant’s email dated 16.10.2021. The

NCLAT, however, opined that the respondent had accepted its liability in

that regard and issued a credit note to the appellant for ₹1.66 crore. The

NCLAT also noted that the appellant had incorporated this credit note in

its ledger account on 31.03.2021. According to the NCLAT, this credit note

resolved the issue raised by the appellant in its letter dated 10.12.2020, 5 which was again raked up in the email dated 16.10.2021. On this basis,

the NCLAT concluded that it could not be treated as a pre-existing dispute.

The NCLAT then referred to the appellant’s email dated 06.12.2021 in

reply to the respondent’s demand notice dated 11.11.2021. Therein, the

appellant had referred to the credit note dated 31.03.2021 for

₹1,66,89,770/-, the original of which was still awaited by it. The NCLAT

opined that the amount covered by the demand notice did not take into

account this sum of ₹1.66 crore which was in relation to the defective

material supplied from September, 2020 to October, 2020. Further, the

NCLAT was of the opinion that the issues raised by the appellant in its

reply to the Section 9 application related to developments and events after

receipt of the demand notice dated 11.11.2021 and could not be taken into

consideration for the purpose of determining whether there was any

pre-existing dispute.

10. The NCLAT was also of the opinion that the failure of the appellant

to point out the defects in the supplies within seven days from the date of

delivery was sufficient to hold that its contentions in that regard were

nothing but a moonshine defence. The NCLAT rejected the contention

urged by the appellant that levy of interest on the alleged delayed payment

would be a disputed issue in itself. The NCLAT noted that the police

complaint lodged by the appellant referred to the respondent’s demand

for ₹4.60 crore as its outstanding dues but accepted the plea of the 6 respondent that it had made a mistake in its email dated 10.09.2021 while

making that demand and that it had clarified on 09.12.2021 that it had

failed to adjust the sum of ₹1.66 crore. The NCLAT further noted that the

respondent’s demand notice mentioned ₹2.92 crore as being due and

payable to it and not ₹4.60 crore, which showed that adjustment of ₹1.66

crore had been taken care of.

11. The NCLAT also rejected the plea of the appellant that its recovery

suit in Civil Suit No. 37 of 2022, filed in April, 2022, was an indication of

the existing dispute between the parties, as the said suit was filed after

the respondent’s Section 9 application. On that ground, the NCLAT

refused to consider the proceedings in that suit which, according to the

appellant, supported its plea that there was a pre-existing dispute. Holding

so, the NCLAT set aside the order dated 16.12.2022 passed by the NCLT

and directed admission of the respondent’s application under Section 9 of

the Code after one month. During that period, the NCLAT left it open to

the appellant to settle the issue with the respondent for discharge of the

debt and, in the event of the same fructifying, the NCLAT left it open to the

parties to bring it to the notice of the NCLT for passing appropriate orders.

12. At this stage, we deem it apposite to set out the sequence of events.

The appellant’s letter dated 10.12.2020, informing the respondent of the

defective supplies made in September, 2020, and October, 2020, resulting

in a loss of ₹6.50 crore and requesting a credit note for ₹1.66 crore was 7 followed up by the respondent’s supplies made on 09.04.2021 and

10.04.2021. Notably, the tax invoices in that regard were signed only by

the respondent’s authorised signatory. Further, it was only on 14.07.2021

that the respondent considered it appropriate to reply to the letter dated

10.12.2020, denying that the supplies made by it were of inferior quality.

It was only after this date that the respondent started raising debit notes

on account of interest @24% on the alleged delayed payments made from

April, 2016 onwards. Debit notes dated 25.08.2021, five in number, and

debit notes dated 15.09.2021, three in number, and the debit note dated

12.10.2021, bear out the fact that interest demands from April, 2016, to

October, 2021, were raised only after the respondent’s reply email dated

14.07.2021. As to whether such interest could have been claimed in

August, 2021, on the strength of unilaterally signed invoices quoting an

interest rate of 24% per annum, in relation to alleged delayed payments

dating back to 2016-17 and 2018 is itself a moot point.

13. Further, the respondent’s ledger account from 01.03.2021 to

13.11.2021, filed by the respondent with its counter, reflects that the credit

entry of ₹1,66,89,770/- was made therein only on 31.07.2021 as a ‘sale

discount’ without reference to the appellant’s letter dated 10.12.2020. The

credit entry of ₹35,59,982/- marked ‘sale return’ was made on 01.07.2021

in relation to the supplies rejected by the appellant on 21.06.2021. The

ledger account also discloses that debit notes were raised for interest on 8 delayed payments only from 25.08.2021. The ledger account of the

appellant for the FYs 2020-21 and 2021-22, which was also filed by the

respondent along with said counter, disclose that the debit entry for

₹1,66,89,770/- was made on 31.03.2021, with the endorsement that the

account had been debited due to ‘stringent smell and impurity in solvents’.

The ledger account also discloses that a debit was raised on 21.06.2021

for ₹35,59,982/-, in relation to the material that was rejected and returned

on that day. That apart, debit entries were made on 22.06.2020 and twice

on 31.03.2021 due to ‘short quantity received’. The discrepancies

between the ledger accounts are, therefore, quite patent. Further, the

respondent’s eight invoices that were relied upon by the NCLAT added up

to a sum of ₹1,72,13,065/- and not the sum of ₹1,72,04,137/-, which was

mentioned in the demand notice.

14. Significantly, had the respondent actually given effect to the credit

entry of ₹1,66,89,770/- on 31.07.2021, there is no explanation forthcoming

as to why it had sent the email dated 10.09.2021, raising a demand for

₹4,60,05,397/-, which admittedly included the sum of ₹1,66,89,770/- also.

The belated email dated 09.12.2021 issued by it, professing to correct the

mistake made in including ₹1,66,89,770/-, speaks for itself.

15. Further, the irrefutable fact also remains that the appellant lodged a

police complaint on 27.09.2021, long before the respondent’s demand

notice dated 11.11.2021. The appellant mentioned therein that it had 9 called upon the respondent to come for reconciliation of accounts, clearly

indicating that there were issues to be settled between them. Even in its

email dated 16.10.2021, issued prior to the respondent’s demand notice,

the appellant had called upon the respondent to reconcile the accounts

pursuant to the losses caused by supply of defective materials.

16. The respondent’s debit notes raising exorbitant demands for interest

on delayed payments dating back to periods, in defiance of limitation,

manifest that such claims are open to question. Further, though the

NCLAT was not inclined to consider the proceedings in the appellant’s civil

suit on the ground that the same were post-initiation of the corporate

insolvency resolution process (CIRP), the same assume importance as

what was stated therein by Ankur Aggarwal, the Director of the

respondent, has relevance. In his cross examination in the said suit,

speaking as PW1, he stated that he used to interact only telephonically

with the appellant’s personnel and that there were no written

correspondence or emails between them. He admitted that written/email

correspondence started only when disputes arose regarding payment. He

also admitted that there was no written protest of delayed payments by

him from 2016-17 till 2021. He conceded that supply of material was made

on 10.04.2021 and 11.04.2021 by the respondent from the stock at Delhi,

which was kept in drums, and was supplied as it was, in drums, and not

in tankers as it used to be in other transactions. He admitted that the 10 drums had been purchased from vendors, other than the vendors of

chemical products, locally from Delhi and there was no cleaning certificate

for them. These admissions of the Director did not relate to post-CIRP

events but had reference to pre-CIRP issues relevant to this case. The

NCLAT, therefore, ought not to have eschewed them from consideration.

17. Once the respondent admitted that written correspondence

commenced only after disputes arose, and the first such written

correspondence dated back to 10.12.2020, long prior to issuance of the

demand notice on 11.11.2021, this was sufficient in itself to show that

there were pre-existing disputes between the parties. When the appellant

sought reconciliation of accounts in that context and the respondent failed

to oblige, its demand for a sum of money in excess of ₹1 crore would not

be sufficient to meet the threshold for maintaining an application under

Section 9 of the Code. More so, when the respondent had raised a

demand for ₹4.60 crore just two months prior to issuance of the demand

notice and clarified the same only on 09.12.2021, that is almost a month

after issuance of the demand notice. This confusion and lack of clarity on

the part of the respondent in deciding as to what was the amount allegedly

due to it, clearly supports the case of the appellant that the accounts

required reconciliation.

18. Further, the delay on the part of the respondent in replying to the

letter dated 10.12.2020 is another factor which strengthens the premise 11 that the respondent’s belated reply followed by its multiple debit notes for

interest in quick succession were just afterthoughts to build up a case so

as to file an application under Section 9 of the Code.

19. In this regard, useful reference may be made to Mobilox

Innovations Private Limited vs. Kirusa Software Private Limited2,

wherein this Court had observed as under: -

‘51. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(i)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the “existence” of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the “dispute” is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application.’

Thereafter, in S.S. Engineers vs. Hindustan Petroleum

Corporation Limited and others3, this Court noted that when examining

an application under Section 9 of the Code, the adjudicating authority has

to examine (i) whether there was an operational debt exceeding ₹1 lakh

(after 24th March, 2020, ₹1 crore); (ii) whether the evidence furnished with

2 (2018) 1 SCC 353 3 (2022) 234 COMP CAS 95

12 the application showed that the debt was due and payable and had not till

then been paid; and (iii) whether there was in existence any dispute

between the parties or the record of pendency of a suit or arbitration

proceedings filed before the receipt of demand notice in relation to such

dispute and in the event, any of the aforestated conditions was not fulfilled,

the application of the operational creditor would have to be rejected.

20. In Sabarmati Gas Limited vs. Shah Alloys Limited4, this Court

considered the scope of the word ‘reconciliation’ and applying the

definition in Black’s Law Dictionary, 10th edition, this Court opined that the

apt meaning suitable to the situation in relation to accounting would mean

an adjustment of amounts so that they agree, especially by allowing for

outstanding items. This Court referred to the observations in Mobilox

(supra) that it is not necessary that the Court should be satisfied that the

defence of a pre-existing dispute is likely to succeed and it is enough if

such a dispute exists between the parties. Per this Court, what is to be

seen is whether there is a plausible contention requiring investigation for

the purpose of adjudication for it to satisfy the requirement of a

pre-existing dispute.

21. Given the obtaining facts and the aforestated settled legal position,

it was not for the NCLAT to delve into the appellant’s dispute to decide

4 (2023) 3 SCC 229

13 whether it had actual merit. All that is required is for the adjudicating

authority to satisfy itself as to the existence of a plausible pre-existing

dispute, which was not spurious, hypothetical or illusory. Whether the

party raising that dispute would succeed on the strength thereof is not

within the ken of such inquiry. That being so, we are of the opinion that the

NCLT was correct in concluding that the application filed by the

respondent under Section 9 of the Code did not merit consideration, owing

to pre-existing disputes. The NCLAT was not justified in reversing the said

decision. There was clearly no consensus between the parties as to who

was liable to pay to the other and the amount that was payable.

22. The appeal is accordingly allowed, setting aside the judgement

dated 11.02.2025 passed by the National Company Law Appellate

Tribunal, Principal Bench, New Delhi, in Company Appeal (AT) (Ins) No.

157 of 2023 and restoring the order dated 16.12.2022 passed by the

National Company Law Tribunal, New Delhi Bench (Court II), in Company

Petition (IB)-792(ND) of 2021.

Parties shall bear their respective costs.

..............................., J.

SANJAY KUMAR

..............................., J.

R. MAHADEVAN April 09, 2026 New Delhi.

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