Naresh Chand Suspended Director Of ... vs Mani Mahesh Ispat Private Limited & Ors

Naresh Chand, Suspended Director of Ashiana ...Appellant(s) Ispat Pvt Ltd.

Versus

Mani Mahesh Ispat Pvt. Ltd. & Ors. ...Respondent(s) Present: For Appellant : Mr. Krishnendu Datta, Sr. Advocate with Mr. Ankur Sadan, Mr. Hemant Kothari, Mr. Aryan Pathak, Ms. Parneet Kaur, Mr. Rishi Kapoor, Mr. Yash Tandon, Ms. Vidhi Jain & Mr. Sachin Kaushik, Advocates. For Respondents : Mr. Gaurav Mitra, Sr. Advocate with, Mr. Anurag Bhatt, Mr. Lokesh Pathak, Mr. Vaibhav Vijayvargiya, Mr. Yash Shahi, Ms. Arpita Goyal Advocates for R-1.

ORDER

(Hybrid Mode) [Per: Justice Mohd. Faiz Alam Khan, Member (Judicial)]

The instant appeal has been filed by the Appellant who is a Suspended

Director of Corporate Debtor Ashiana Ispat Pvt. Ltd. (CD) against the

judgment dated 03.07.2026 (impugned judgment) passed by the National

Company Law Tribunal, Jaipur Bench (Adjudicating Authority) in CP IB No.

25/9/JPR/2025 whereby the application filed by the Operational Creditor

(Respondent No. 1) under Section 9 of the Insolvency and Bankruptcy Code,

2016 (Code) has been admitted.

2. Brief facts necessary for the disposal of this appeal are that the

Respondent No. 1 Mani Mahesh Ispat private Ltd. (operational creditor), filed

an application under Section 9 of the Code against Ashiana Ispat Limited (CD) CA (AT) (Ins) No. 1217 of 2026 2

with the contention that the operational creditor is engaged in the business

of sale of steel products and the corporate debtor used to regularly purchase

mild steel ingots and mild steel billets from the operational creditor and the

operational creditor used to raise invoices to the corporate debtor and the

corporate debtor had cleared the payment with respect to the invoices raised

prior to 29 April 2023, however, the corporate debtor has failed to make the

payment towards the last 27 invoices and two debit notes raised by the

Operational Creditor, the details of which has been given in the petition. It is

further contended that the CD has duly acknowledged the confirmation of the

ledger accounts from 1st April 2023 to 31st October 2023 as per which the CD

was liable to pay the outstanding amount of Rs. 5,73,65,819/- towards the

above stated 27 invoices and two debit notes.

3. It is further submitted that the operational creditor had duly delivered

the goods as stipulated in the invoices and the corporate debtor has never

disputed the quality or quantity of the goods sold. The operational creditor

has also deposited the GST on the said invoices during the relevant period

and is therefore entitled to recover the same from the corporate debtor. The

corporate debtor has also deducted the TDS amount on the unpaid invoices

and the same is duly reflected in Form 26 AS.

4. It is further stated that on account of non-payment of the invoices an

FIR was filed by the operational creditor against the CD under Section 420

and 406 of the IPC on 13th December 2023 and thereafter the corporate debtor

has issued cheques against the outstanding amount of Rs. 5,73,65,819/- on

21-10-2024, 22-10-2024 and on 23-10-2024 of ₹2,00,00,000/- bearing no.

CA (AT) (Ins) No. 1217 of 2026 3

635252, of Rs. 2,00,00,000/- bearing no 635253 and of Rs. 1,73,65,819/-

bearing no 635254, respectively. The above stated cheques on being presented

to the Bank were dishonoured on 10th January 2025.

5. It is further contended that a demand notice under section 8

(1) of the IBC was sent to the corporate debtor on 10th January 2025 at their

registered address and other address through speed post, however, the notice

sent on the registered address was returned with the remark of item delivered.

The notices were also sent through email which were delivered, but the

corporate debtor has not given any reply nor has disputed the goods supplied

by the Operational Creditor and there after the petition under Section 9 of the

Court was filed before Ld. Adjudicating Authority.

6. As per part IV of the petition filed by the Respondent Operational

Curator, the default in payment of Rs. 5,73,65,819/- has been shown with

respect to invoices from 29th April 2023 to 12th September 2023 and two debit

notes dated 23rd September 2023 which were raised by the Operational

Creditor.

7. The details of these 27 invoices and 2 debit notes have been given in

Part IV of the petition. The date of default has been shown as from

29/04/2023 to 12/09/ 2023. It is stated that on 30th September 2023 the

corporate debtor has made a lump sum payment of Rs. 45 lakhs towards its

outstanding liability which was accordingly adjusted by the operational

creditor and as on 30.09.2023 total amount of Rs. 5,73,65,819/- was

outstanding and payable by the corporate debtor to the operational creditor.

CA (AT) (Ins) No. 1217 of 2026 4

8. The Appellant Corporate Debtor appeared before the Ld. Adjudicating

Authority and contended that the petition is not maintainable because of the

existence of prior dispute as Mr. Navnitya Prakash Goyal, who has instituted

the proceedings before the Ld. Adjudicating Authority on behalf of the

operational creditor in his capacity as the director and authorised

representative, has also instituted Civil Suit (OS) No. 320 of 2025 before the

Hon'ble High Court of Delhi in his individual capacity and in the same civil

suit he has averred that he had entered into an agreement to sell dated 14

February 2024 with Smt. Swati Jain, who has been arrayed as defendant, in

respect of certain immovable property described in the said Agreement for a

total sale consideration of Rs. 8 crores.

9. It is further contended that in the civil suit it is admitted that out of

total sales consideration of Rs. 8 crore Rs. 7,80,00,000/- stood paid by way

of adjustment of the outstanding dues pertaining to the business transactions

and a breakup of this amount has been given which includes Rs.

5,73,65,819/- being claimed by the operational creditor in this petition and it

is admitted to the operational creditor in that civil suit that the amount which

was due to the corporate debtor has been adjusted in the amount of sale

consideration which was paid under the agreement to sell dated 14.02.2024.

10. It is further contended by the corporate debtor that in view of the

original civil suit filed by the operational creditor, the operational creditor is

estopped from making any claim for any debt whatsoever when the said debt

is claimed to have been adjusted by the operational creditor against the part

of the sale consideration under the agreement filed dated 14/2/2024. It is

CA (AT) (Ins) No. 1217 of 2026 5

also contended that the pendency of the civil suit demonstrates that there is

existence of dispute between the parties in relation to the dues prior to the

institution of the petition.

11. Learned adjudicating authority by passing the impugned judgement

and order admitted the corporate debtor Ashiana Ispat Limited into the CIRP

and Mr. Prashant Agarwal was appointed as the IRP. The relevant part of the

impugned judgement is reproduced as under;

12. On the other hand, the Ld. Counsel for the Corporate Debtor has vehemently argued that an original Civil Suit (OS) No. 320/2025 is pending before the Hon'ble Delhi High Court filed by Mr. Navnitya Prakash Goyal which constitutes a pre-existing dispute between the parties.

13. The aforementioned suit bearing original Civil Suit (OS) No. 320/2025 was filed seeking specific performance of the agreement to sell dated 14.02.2024 for sale of certain properties described therein at a consideration of Rs. 8 Crore against the total outstanding amount of Rs. 7.80 Crore.

14. At this juncture, it is relevant to appreciate the terms of the agreement dated 14.02.2024. The said agreement was entered into between Shri Puneet Jain (Director of Ashiana Ispat Limited) and his wife Smt. Swati Jain, as first party and confirming party respectively; and Shri Navnitya Prakash Goyal (Director of Mani Mahesh Ispat Pvt. Ltd.), as second party. In the said agreement, it was stated that second party has supplied material to first party and amount of Rs. 5,73,65,819/- was outstanding against M/s Mani Mahesh Ispat Pvt. Ltd.; amount of Rs. 1,50,83,395/- was outstanding against M/s Shree Balaji Rolling Mills and other outstanding amount was Rs. 55,51,786/-. To settle the said liability, it was agreed upon in condition no. 3 of the said agreement that "the first party hereby confirm and accept that out of sale amount Rs. 8,00,00,000/-, at first second party will adjust his outstanding dues for Rs.

7,80,00,000/- and balance Rs. 20,00,000/- after deduction of TDS shall be payable after execution of registration of sale documents." It was further agreed that if the entire outstanding dues of Rs. 7.80 Crore were repaid by Ashiana Ispat Limited by 30.04.2024, the Agreement to Sell would stand terminated.

CA (AT) (Ins) No. 1217 of 2026 6

16. Upon careful perusal of the deed of agreement dated 14.02.2024, it transpires that terms of said agreement not only emphasize the outstanding debt but also adjusts the outstanding amount against consideration of sale of property.

18. At this stage, it is of paramount importance to note that Corporate Debtor never disputed the quality of goods/services, the quantum of debt or the liability itself. On the contrary, the very terms of the Agreement dated 14.02.2024 unambiguously acknowledge the existence of the debt and merely prescribe the mode (i.e., conditional sale of property against outstanding dues) and timeline for its discharge. If the operational debt stood finally adjusted/extinguished on 14.02.2024, then there should have been no need for the Corporate Debtor to issue three cheques dated 21.10.2024, 22.10.2024 and 23.10.2024 aggregating to Rs. 5,73,65,819/- being the precise amount claimed in the Petition. The subsequent issue of cheques also shows continuance of the debt and this is inconsistent with the plea taken by the Corporate Debtor that the liability had already been discharged. Further, Corporate Debtor had also not shown any journal entry, ledger reversal entry, settlement account or Board Resolution reflecting discharge of the operational debt. Hence, in the absence of contemporaneous accounting record, plea of the Corporate Debtor cannot be accepted".

12. Aggrieved by the impugned order, the corporate debtor has preferred

this Appeal.

13. Heard Shri Krishnendu Datta, Ld. Sr. Counsel appearing for the

Appellant and Shri Gaurav Mitra, Ld. Sr. Counsel appearing for the

Respondent No.1 as well as the IRP Mr. Prashant Agarwal in person.

14. We, at the outset, notice that the appellant as well as the respondent

have filed IA Nos. 5738 of 2026 and 5762 of 2026 requesting to keep on record

certain additional evidence/documents and we, by passing an order, had

taken the view that, if required for the purpose of just adjudication of the case,

this appellate tribunal may look into these documents. As we are now CA (AT) (Ins) No. 1217 of 2026 7

dictating judgment, we have taken a decision to look into the documents

which have been filed by the parties with the aforesaid applications.

15. Learned Senior Counsel appearing for the appellant submits that the

Learned Adjudicating Authority has committed manifest illegality in admitting

the application of the operational creditor under Section 9 of the Code, as it

was evident on the face of the record that no debt is due to the appellant,

which may be termed as operational debt and also that the nature of the debt

had changed by executing two agreements subsequently.

16. It is further submitted that earlier some dispute had arisen between the

appellant and the operational creditor, pertaining to which an FIR was lodged

by the operational creditor on 13th December 2023. In order to amicably

resolve the dispute between the parties, the director of the corporate debtor

Puneet Jain and his wife, namely Mrs. Swati Jain, and the director of the

respondent operational creditor, Nav Nitya Goel, had entered into a settlement

agreement dated 14th February 2024.

17. It is further submitted that in the settlement agreement, it was agreed

that the claim of the respondent No.2/operational creditor, aggregating to ₹7

crore 80 lakhs (including a sum of ₹5,73,65,819/- allegedly payable to the

respondent operational creditor by the CD), was adjusted towards the sale

consideration of an immovable property owned by Shrimati Swati Jain, which

is agreed to be purchased by the Respondent's director for a total

consideration of ₹8 crore and this settlement agreement further contemplated

execution of a separate agreement to sell in respect of the said property and

that it is expressly provided therein that, in the event the said amount was

CA (AT) (Ins) No. 1217 of 2026 8

paid by 30th April 2024, the agreement to sell would stand cancelled and in

case of non-payment of the outstanding dues within the time stipulated, the

agreement to sell would continue and may be executed by filing a suit for

specific performance.

18. It is further submitted that the two agreements (i.e., settlement

agreement and agreement to sell) both were executed on 14 February 2024,

therefore, it is evident that, by the execution of these documents, the

character and nature of the debt, which was allegedly due to the appellant,

has changed and instead of operational debt, it has now become an advance

sale consideration under the agreement to sell dated 14th February 2024, and

therefore no application under Section 9 of the Code was maintainable.

19. It is further submitted that the conversion of the operational debt into

the advance sale consideration is also admitted to the operational creditor, as

he, in pursuance of the agreement to sell, had filed an original suit before the

Hon'ble Delhi High Court for execution of specific performance of contract

wherein it is admitted that advance consideration of Rs. 7.8 crore has been

paid by the operational creditor to Mrs. Swati Jain.

20. It is further submitted that perusal of these two agreements would

reveal that these agreements have been signed by the parties in their capacity

as directors of their respective companies, and therefore the agreements were

binding on the companies, as well.

21. It is also submitted that the appellant had also issued three cheques

aggregating to ₹5,73,65,819/- in October 2024 to the operational creditors.

CA (AT) (Ins) No. 1217 of 2026 9

However, these cheques were presented by the operational creditor in the

bank on 10th January 2025, whereon these cheques were dishonoured.

22. It is further submitted that in the proceedings before the Delhi High

Court, the director of the operational creditor, Mr. Nav Nitya Prakash Goyal,

has specifically pleaded that out of the total sale consideration of Rs. 8 crores,

a sum of Rs. 7.8 crores already stood paid and adjusted in the advance

consideration paid pertaining to the agreement to sell.

23. It is vehemently submitted that when the operational creditor has

chosen to file the suit for specific performance of contract on the basis of the

agreement to sell executed on 14 February 2024, he was precluded from filing

any application under Section 9 of the Code.

24. It is further submitted that the respondent/operational creditor has not

disclosed the existence of the settlement agreement or the agreement to sell

executed between the parties on 14thFebruary 2024 to the learned

adjudicating authority and it was only the appellant which had brought these

facts to the notice of the learned adjudicating authority.

25. It is further submitted that the Learned Adjudicating Authority has

committed a mistake by not considering the fact that the dispute was existing

between the parties much prior to the issuance of the Section 8 notice (as the

civil suit has been filed by the operational creditor in the Delhi High Court,

wherein the two agreements stated above were admitted).

26. It is further submitted that the prior dispute in cases under Section 9

of the Code is not required to be proved, as in civil cases, by the standard of

preponderance of probabilities. It is sufficient that the CD may show that he

CA (AT) (Ins) No. 1217 of 2026 10

has a plausible defence, and the same is sufficient and for this purpose, the

Learned Adjudicating Authority is not required to appreciate the evidence and

material available on record like a civil court.

27. It is further submitted that by writing of the two agreements (i.e.,

settlement agreement and agreement to sell dated 14th February 2024), a new

contract has emerged, therefore, in view of Section 62 of the Indian Contract

Act, the old contract cannot be implemented or executed, and this aspect of

the matter has not been considered by the learned adjudicating authority.

28. It is also submitted that in the pleadings filed before the Hon'ble Delhi

High Court, the operational creditor has conspicuously admitted to have

received/set-off of the debt with the advance consideration of the agreement

to sell. Therefore, the Section 9 application moved by the operational creditor

was not maintainable, and the impugned order is liable to be Set Aside.

29. Ld. Sr. Counsel for the appellant has relied on Mobilox Innovations

Pvt. Ltd. vs. Kirusa Software Pvt. Ltd. (2018) Vol 1 SCC 353 and

Rajratan Babulal Agarwal vs. Solar Tex India Pvt. Ltd. & Ors., (2023) 1

SCC 115. in order to show that with regard to the issue of prior dispute the

court does not need to satisfy itself that the defence is likely to succeed and

the court also is not obliged at this stage to examine the merits of the dispute. Reliance is also placed on Talbot and Company vs. Austin Distributors Pvt.

Ltd., CA (AT) (Ins) No. 1470 of 2022 wherein the same principle has been

followed by the co-ordinate Bench of this Appellate Tribunal.

30. Reliance is also placed on Trafigura India Pvt. Ltd. vs. TDT Copper

Ltd., CA (AT) (Ins) No. 742 of 2020 wherein it is opined that the default of

CA (AT) (Ins) No. 1217 of 2026 11

instalment of a settlement agreement does not falls within the definition of

operational debt and also on Permali Wallac Pvt. LTd. vs. Narbada Forest

Industries Pvt. Ltd. in order to show that proceeding under the IBC is not a

recovery tool.

31. Learned Sr. Counsel appearing for the operational creditor, however,

submits that no illegality or, to say, any irregularity has been committed by

the learned Adjudicating Authority in accepting the application moved by the

respondent operational creditor, as the debt and default was clearly

established.

32. While referring to the settlement agreement dated 14th February 2024,

it is submitted that debt and default have been acknowledged by the appellant

in this document clearly. The application under Section 9 of the Code was

filed within limitation. Therefore, the Ld. Adjudicating Authority was obliged

to admit the same.

33. It is vehemently submitted that the nature of the debt could not be

changed by writing of settlement agreement or an agreement to sell. In the

settlement agreement, it has been clearly narrated that, in case the amount

in default is not paid by 30th April 2024, the agreement to sell would stand

cancelled. In this regard, there is no applicability of Section 62 of the Indian

Contract Act as well. To apply Section 62 of the Indian Contract Act, the new

contract must eclipse the old contract, and by the execution of the new

contract, the old contract must become inconsistent with the new contract.

34. It is further submitted that there were three modes adopted by the

corporate debtor for discharge of its debt i.e. By writing settlement agreement

CA (AT) (Ins) No. 1217 of 2026 12

dated 14th February 2024 wherein it was stated that the outstanding debt

would be paid by 30th April 2024 and when this was not paid, by a writing

addendum to the agreement to sell, the stipulated date for the execution of

the sale deed was extended from 12th August 2024 to 12th October 2024 and

when, within this extended period, the outstanding debt was not paid the

appellant issued three cheques in the month of October 2024, totalling

₹5,73,65,819/-.However, these cheques were also dishonoured. Therefore,

none of the modes adopted by the appellant satisfies the outstanding debt of

the operational creditor.

35. It is further submitted that the section 9 application was filed before

the Ld. Adjudicating Authority much before the institution of the Civil Suit

filed before Hon'ble Delhi High Court for specific performance and therefore

the defence of the appellant that pendency of the civil suit would bar the

proceedings of section 9 is a fallacy and could not be accepted.

36. It is also submitted that before this appellate tribunal and also before

the Ld. Adjudicating Authority, the defence has been taken by the appellant

that pendency of the original suit before the Hon'ble Delhi High Court for

specific performance would bar these proceedings. While before the

Honourable Delhi High Court, Swati Jain had taken the defence that she has

not received any consideration and also that an independent liability of the

CD could not be discharged by her property. Therefore, the intention of the

appellant is not to pay the outstanding debt to the appellant.

CA (AT) (Ins) No. 1217 of 2026 13

37. It is further submitted that Section 62 of the Indian Contract Act is not

applicable to the facts and circumstances of this case, as the old contract was

kept alive even by the execution of the subsequent contracts and agreements.

38. It is vehemently submitted that it is a case where the debt and default

are admitted by the appellant, and he cleverly had defrauded the operational

creditor by executing a settlement agreement and an agreement to sell.

However, neither the outstanding amount has been paid to the operational

creditor, nor has the property been transferred.

39. It is further submitted that, at the most, the settlement agreement

entered into between the parties may only be termed as a security for ensuring

the payment of the outstanding debt to the operational creditor, which is also

evident by the fact that in the addendum, it has been written that the

possession of the property has been given to the operational creditor, while

the same was never given and the efforts which gas been made by the

Operational; creditor by writing these agreements is only to secure/ ensure

payment of its outstanding debt. Therefore, there is no ground exists for

interference in the impugned judgment

40. Ld. Senior Counsel appearing for the operational creditor, has relied on

the law laid down by this Appellate Tribunal in Ahluwalia Contracts (India)

Ltd. vs Logix Infra Tech Pvt. Ltd. (2022) SCC Online, NCLAT 3797, Yusuf

Malubhaiwala vs. Mr. Anuj Maheshwari and Anr., CA (AT) (Ins) No. 916

of 2025, Ahluwalia Contracts (India) Ltd. vs. Raheja Developers Ltd.,

(2019) SCC Online NCLAT, 942 and submits that a moonshine defence

cannot be termed as prior dispute and the Ld. Adjudicating Authority is only

CA (AT) (Ins) No. 1217 of 2026 14

required to see the debt, default and limitation along with the fact that

application is complete in all respect.

41. IRP in person however, submits that he will abide by whatever decision

would be taken by this Appellate Tribunal.

42. Having heard Ld. Counsels for the parties and having perused the

record we at the outset submits that the debt and default has not been

disputed before us and the case of the appellant is that the parties had long-

standing commercial dealings, pursuant to which the respondent operational

creditor supplied iron ingots and billets to the CD in the ordinary course of

business and certain dispute arose between the parties regarding the alleged

outstanding payables by the CD to the OC. On 13 December 2023, an FIR

bearing number 331 of 2023 was filed by the OC under Section 420 and 406

of the IPC and on 14 February 2024, in order to resolve the dispute, the

director of the CD and his wife, Mrs. Swati Jain, entered into a deed of

agreement (settlement agreement) dated 14 February 2024 and the claim of

the OC, aggregating to ₹7,80,00,000/- including a sum of ₹5,73,65,819

allegedly payable to the respondent No. 1 by the CD, were adjusted towards

the sale consideration of an immovable property owned by Mrs. Swati Jain,

wife of the appellant. This settlement agreement further contemplated

execution of a separate agreement to sell in respect of the said property. It

was provided therein that, in the event the amount is paid by the appellant,

the agreement to sell would stand cancelled. If the amount is not paid by the

said date, the agreement to sell would continue until execution of the sale

deed and for this purpose, the OC has already filed a civil suit at the Hon'ble

CA (AT) (Ins) No. 1217 of 2026 15

Delhi High Court, and therefore these proceedings are not maintainable, as

the debt has been discharged in consideration of the agreement to sell. It is

also the case of the appellant that the nature of the debt, by writing of two

subsequent contracts/ agreements, has changed, and now it is no more

remained an operational debt.

43. Ld. Counsel for the appellant has also highlighted Section 62 of the

Contract Act in order to show that the new contract has substituted the old

contract. Lastly, the defence of the existence of a prior dispute has been

pleaded, and it is submitted that institution of a civil suit is itself sufficient to

show that there is prior dispute existing between the parties. In view of settled

law, only a plausible case is required to be shown to show that some dispute

is existing between the parties and therefore the impugned order is required

to be set aside.

44. The case of the defendant, on the other hand, is that there is a clear

admission of the debt and default in the settlement agreement dated 14

February 2024 and it is also admitted therein that the outstanding amount,

as shown in Part IV, is owed by the CD to the operational creditor. It is also

the case of the OC that the two agreements i.e., settlement agreement and

agreement to sell the property of Mrs. Swati Jain were only executed as a

security to pay the debt of the OC by the CD. However, the debt has not been

paid by the Appellant, nor has the property been transferred. It is also stated

that Section 62 of the Indian Contract Act is not applicable to the facts of this

case, as the original contract was kept alive and is not eclipsed by the new

contract. It is the further case of the OC that the CD also issued three cheques

CA (AT) (Ins) No. 1217 of 2026 16

in October 2024 aggregating to ₹5,73,65,819/-, however, these cheques were

dishonoured on presentation before the bank. Thus, neither mode of

discharge of debt has materialized. It is emphasized that there were three

modes which were adopted by the CD to pay the debt of the OC i.e. To pay the

debt up to 30th April 2024, as mentioned in settlement agreement which was

not paid, ii. The transfer of property in lieu of agreement to sell, which was

not transferred and iii. By issuance of three cheques in October 2024, which

were also dishonoured. Therefore, the intention of the CD is not to pay the

debt to the OC.

45. It is further highlighted by the OC that the sequence of events would

show that the agreement to sell was executed on 14 February 2024, along

with the settlement agreement wherein 12/8/2024 was set as the date by

which the sale deed was to be executed by the director of the CD. However,

by executing an addendum dated 12/9/2024, the date of execution of the sale

deed was extended till 12/10/2024, and thereafter, three cheques were issued

by the CD in October 2024. These events would clearly show that the

underlying object of all these efforts was to pay the debt of the OC by the CD,

and the two agreements were written only as security to pay the debt.

46. It is further the case of the OC that the application under Section 9 of

the Code was filed by the OC on 25/02/2025, and the suit for specific

performance was filed on 14/5/2025 before the Hon'ble Delhi High Court.

Therefore, the suit for specific performance cannot be a bar to the institution

of these proceedings. The conduct of the appellant is such that, in these

proceedings pending before the appellate tribunal, they are taking the defence

CA (AT) (Ins) No. 1217 of 2026 17

of the pendency of the suit for specific performance before the Hon'ble Delhi

High Court and in the suit for specific performance, they are taking the

defence of the pendency of the instant proceedings.

47. We notice that it would be the two agreements ie. the settlement

agreement and the agreement to sell, executed on 14 February 2024 which

are important for adjudication of dispute between the parties in order to

assess as to whether, by execution of these agreements, the debt has been

discharged? Ld. counsels for both the parties have relied on various clauses

of these two agreements executed on 14 February 2024. Thus, for the sake of

convenience, we are reproducing the relevant clauses of the two agreements

herein below;

CA (AT) (Ins) No. 1217 of 2026 18 CA (AT) (Ins) No. 1217 of 2026 19 CA (AT) (Ins) No. 1217 of 2026 20 CA (AT) (Ins) No. 1217 of 2026 21 CA (AT) (Ins) No. 1217 of 2026 22 CA (AT) (Ins) No. 1217 of 2026 23 CA (AT) (Ins) No. 1217 of 2026 24 CA (AT) (Ins) No. 1217 of 2026 25 CA (AT) (Ins) No. 1217 of 2026 26

48. Perusal of the settlement agreement dated 14 February 2024 would

reveal that it has been executed between Mr. Puneet Jain, director of the CD,

and Mrs. Swati Jain, his wife, and Mr. Navnitya Prakash Goel, director of the

OC. In the opening part of it, it is stated that whereas the second party (OC)

has supplied material to the first party (CD), the following amount is shown

outstanding, and bifurcation of the same is given as under:

M/s Mani mahesh Ispat Private Limited - Rs. 5,73,65,819/-

Shree Balaji Rolling Mills, -Rs. 1,50,83,395/-

Other outstanding amount: -Rs. 55,51,786/-

Total: ₹7,80,00,000 /-

CA (AT) (Ins) No. 1217 of 2026 27

49. It is also stated therein that the first party (Puneet Jain) is the absolute

owner of the entire first floor covered area of 204.60 sq. meters and has a 30%

share in the residential property E - 13/11, having a plot area of 407.50 sq.

yards, by way of document number 3867, book number 1, volume number

767, dated 02/08/2018, in favour of his wife, Mrs. Swati Jain (confirming

party) and Puneet Jain has full right to sell and dispose of the said property.

Thus, it reflects that the property was purchased by the director of the CD Sri

Puneet Jain in favour of his wife Swati Jain, who is the owner of the same?

50. The second opening clause of the settlement agreement dated 14

February 2024 would reveal that it is agreed that the First Party (CD/Puneet

Jain) has agreed to sell, convey, transfer, and assign to the Second Party (Nav

Nitya Prakash Goyal/OC) the entire property described therein for the total

consideration of ₹8 Crore in settlement of his outstanding dues payable to the

operational creditor.

51. In clause 2 of the settlement agreement, it has been clarified that the

property is registered in the name of Mrs. Swati Jain, and she has also agreed

to transfer the said property as settlement of her husband's debt.

52. Clause 3 of the settlement agreement provides that, out of the sale

amount of Rs. 8 crores, the OC will get his outstanding dues of Rs. 7.80 crore,

and the balance of 20 lakhs, after deduction of TDS, would be payable after

execution of the registration of the sale deed.

53. Clause 4 of the settlement agreement talks about the loan on the

property, which is stipulated to be cleared by the CD/ Puneet Jain within 6

CA (AT) (Ins) No. 1217 of 2026 28

months from the date of agreement, however, clause 5 fixes the date of

execution of the sale deed as 12th August 2024.

54. Clause 6 of the settlement agreement provides for execution of a

separate agreement to sell between the parties, and clause 7 provides that the

first party (CD) is expected to receive some funds till 30 April 2024 and would

clear the outstanding dues of 7.80 crore by paying the second party (OC) till

30/4/2024 and after repayment of outstanding dues till 30 April 2024, the

agreement to sell shall be treated as cancelled.

55. Clause 8 of the settlement agreement provides that if the first party

does not clear the outstanding dues of the second party (OC) by 30th April

2024, the agreement to sell shall be in force until execution of the sale deed.

56. Clause 10 shows that if the first party (CD) refuses to execute the sale

deed for whatever reason, the second party (OC) has a legal right to register

the said property in his name through the court of law by specific performance

of contract at the expense of the CD.

57. It is also reflected that an agreement to sell between Mrs. Swati Jain,

wife of Mr. Punish Jain, and Mr. Nav Nitya Prakash Goel, director of the OC,

was also executed on 14th February 2024 and by virtue of this agreement,

Mrs. Swati Jain agreed to sell the above property to Nav Nitya Prakash Goel.

In clauses 2 and 3 of the same, it is stated that she has received Advance

consideration of ₹7.80 crore in her husband's company (CD) and the

remaining ₹20 lakh is required to be paid at the time of registration of the sale

deed and the date of execution of the sale deed is fixed as 12th August 2024.

CA (AT) (Ins) No. 1217 of 2026 29

58. Clause 5 of the agreement to sell provides that if Mrs. Swati Jain fails

to execute the sale deed by the stipulated date, the Nav Nitya Prakash Goel

(OC) will have the right to get it executed through the court of law by specific

performance of contract. Other provisions of this agreement to sell are not

appearing relevant for our purpose, and therefore we refrain from discussing

the same.

59. An addendum to this agreement to sell was also executed between the

parties on 12 September 2024, whereby the date for execution of the sale deed

was extended from 12 August 2024 to 12 October 2024. Significantly, in this

addendum, it is also mentioned in clause 2 that Mrs. Swati Jain has handed

over the physical vacant possession of the said property to Mr. Navnitya

Prakash Goel on 11th September 2024. The keys of the main door have been

handed over and the remaining keys of the flat will be given within 2-3 days

and also that Mrs. Swati Jain will not claim possession of this property.

60. Basis on the aforesaid clauses of the agreements, it is claimed by the

appellant that the debt which was due to the appellant (Rs. 5,73,65,819/-)

has been discharged, as the same has been set off/adjusted in the

consideration of the agreement to sell and the only remedy available to the

OC was to get the contract executed through specific performance of contract,

for which he has already filed a suit for specific performance before the

Hon'ble High Court of Delhi.

61. We at the outset observe that the law with regard to the interpretation

of agreements/contracts is well settled i.e. the intention of the parties is to be

assessed at the time of entering into the contract.

CA (AT) (Ins) No. 1217 of 2026 30

62. It is evident that when the settlement agreement and agreement to sell

were executed on 14th February 2024, the debt to the tune of ₹5,73,65,819/-

was due on the CD, of the operational creditor and ₹1,50,83,395/- of Balaji

Iron Company Limited. Fifty lakhs were shown as other dues and the total

dues which have been shown in the settlement agreement are Rs. 7,80,00,000.

Thus, on 14th February 2024, it was admitted to the parties, including the

director of the CD, i.e. ₹7,80,00,000 was due on the CD and owed to the

operational creditor, including ₹5,73,65,819, for which the Section 9

proceedings have been initiated by the OC against the CD.

63. It is also reflected that, for the payment of this outstanding dues and

agreement was executed on 14th February 2024. The intention of the first

party, i.e, CD, is crystal clear in this settlement agreement i.e. to pay the debt

owed to the operational creditor. It is reflected from clauses 7, 8, and 10 of

the settlement agreement that CD was expected to receive some funds by 30th

April 2024 and after receiving the funds, CD would discharge the outstanding

dues of the OC till 30th April 2024 and In this scenario, the agreement to sell

would be treated as cancelled and If the money is not paid, the agreement to

sell shall be in force until execution of the sale deed, which, according to

clause 10, may be executed through specific performance of contract through

the instrumentality of the court of law.

64. Much emphasis has been given by learned counsel for the appellant on

the fact that, in case of non-payment of outstanding dues, the only remedy

available to the OC was to get the specific performance of the contract (for

which the suit for specific performance has already been filed by the OC before

CA (AT) (Ins) No. 1217 of 2026 31

the Hon'ble Delhi High Court) and that the OC cannot maintain the

proceedings under Section 9 of the Code, as the nature of the debt has now

changed from operational debt to advance consideration paid under an

agreement to sell.

65. We are not inclined to accept this submission, as perusal of the

agreement to sell would reveal that it is stated therein that Mrs. Swati Jain

has received Rs. 7.80 crore in the company of her husband. However, there is

no mention of adjustment of this outstanding debt in the agreement to sell

and it is admitted to the parties that no amount has been paid by the OC to

Swati Jain in lieu of the agreement to sell. Thus, we have to read all the

agreements i.e. agreement to sell, settlement agreement and addendum,

conjointly in order to deduce the real intention of the parties.

66. As stated earlier, the settlement agreement has a clause (clause

number 7), which clearly stipulates that if the outstanding dues are paid by

the CD to the OC, the agreement to sell would be treated as cancelled.

Therefore, it is not a case of a simpliciter agreement to sell. The settlement

agreement clearly stipulates that, in case of payment of outstanding dues, the

agreement to sell shall be treated as cancelled. Significantly, the addendum

to the agreement, which has been executed on 12 September 2024, whereby

the stipulated date for execution of the sale deed has been extended from 12

August 2024 to 12 October 2024, would further show the intention of the

parties as it is stated in clause 2 of the same that the first party has handed

over physical possession of the property to the second party (OC). It is

admitted during the course of submissions by the appellant that the

CA (AT) (Ins) No. 1217 of 2026 32

possession of the property is still with the first party (Mrs. Swati Jain).

Therefore, this clause of handing over possession of property also appears to

have been placed in the addendum to compel the CD to pay the outstanding

dues to the OC and the real intention of the parties by executing these three

agreements appears to be to pay the outstanding dues of the OC and not to

execute the sale of the property.

67. Subsequent events will further clarify the intention of the parties as

after the expiry of the time to pay the outstanding dues till 30 April 2024, no

action appears to have been taken by the OC. The date mentioned in the

agreement to sell, that is, 12 August 2024, expired and one month thereafter,

on 12 September 2024, the addendum to the agreement to sell was written,

whereby the date of execution of the sale deed was extended to 12 October

2024. Thus, this addendum has been executed after the expiry of the

stipulated date of execution of the sale deed, and possession is said to have

been given to the OC, which was not a correct recitation. Significantly, till the

last date provided in the addendum, neither the money was paid nor the sale

deed was executed by the CD, and therefore the CD issued three cheques on

21st October 2024, 22nd October 2024, and 23rd October 2024, of ₹2 Crore, ₹2

Crore, and Rs. 1,73,65,819/-, respectively, totalling ₹5,73,65,819/- and when

presented to the bank these cheques were dishonoured.

68. The question which stares at our face is that when, according to the

appellant, the debt has changed its nature and the only course available to

the OC was to institute suit for specific performance, why were these cheques

issued by the CD to the OC? That too of the same amount which has been

CA (AT) (Ins) No. 1217 of 2026 33

shown in the settlement agreement i.e. ₹5,73,65,819/-, and the same amount

has been shown in Part IV by the OC in his application moved under Section

9 of the Code. Thus, issuance of these cheques would further fortify that the

real intention of the parties, by executing these three agreements and also by

issuance of cheques, was payment of outstanding debt and not the sale of the

property and the agreement to sell appears to have been executed to provide

security for payment of outstanding debt to the CD to ensure payment.

69. Moving further, it is also reflected that a demand notice was given by

the OC on 10th January 2025, and the application under Section 9 of the Code

was moved by the OC on 25th February 2025. The suit for specific performance

has been filed by the OC on 14th May 2025. Thus, Section 9 application has

been filed by the OC before filing of the suit for specific performance, therefore,

the argument of simultaneous proceedings would not be available to the

appellant/CD with regard to the proceedings under Section 9 of the code, as

no specific performance suit was pending at the time, when Section 9

application was filed and this argument may perhaps be available to the

Appellant in the suit for specific performance and it has actually been taken

by Mr Puneet Jain in that proceedings.

70. The pleadings filed before the Hon'ble High Court of Delhi have been

highlighted by the appellant to show that the adjustment of the operational

debt has been admitted by the operational creditor in the plaint filed before

the Hon'ble High Court of Delhi. We have already opined that the real

intention of the parties to execute the agreement was to pay the outstanding

debt and not to purchase the property, so we do not want to consider this

CA (AT) (Ins) No. 1217 of 2026 34

submission again, however, it is to be noted that in the written statement filed

by Mrs. Swati Jain before the Delhi High Court, it is stated that the agreement

to sell dated 14th February 2024 does not have a valid and lawful

consideration and is thus violative of Section 10 of the Contract Act as instead

of lawful consideration, an independent business liability, allegedly due on

CD, is shown as consideration of the agreement to sell. Highlighting this,

Learned Counsel for the Respondent No. 1/Operational Creditor submits that

Mrs. Swati Jain admits that the liability to pay outstanding dues is of the CD

and it is independent. Mrs. Swati Jain further stated that dues against the

CD cannot be set off by the property owned by her. She also admitted that

she is a third party so far as the transactions between OC and the CD are

concerned and that she did not receive any consideration. It is submitted that

when Swati Jain admits that she has not received any consideration and also

that the outstanding dues against the CD could not be adjusted with her

independent property, how the outstanding dues may be deemed to have been

set off against consideration of agreement to sell. We find force in this

submission of learned counsel for the respondent No. 1/operational creditor.

71. Significantly, the director of the appellant, Mr. Puneet Jain, who had

executed the settlement agreement on behalf of the CD, has also filed written

statement before the Hon'ble Delhi High Court and stated that he is not a

signatory to the agreement to sell and be deleted from the array of parties, as

he does not have any role therein. It is also stated that the operational creditor

has already invoked parallel proceedings. Learned counsel for the

OC/Respondent No. 1 has drawn our attention to para-No. 10 of the written

CA (AT) (Ins) No. 1217 of 2026 35

statement filed by Puneet Jain wherein he has stated that the non-payment

of outstanding dues to the operational creditor is a separate cause of action

for which the operational creditor has instituted proceedings under Section 9

of the Code. Mrs. Swati Jain and Mr. Punit Jain, thus, both stated that

possession of the property was not given to the OC. Thus, what is transpired

from the above sequence of events is that, in the proceedings with regard to

specific performance, defence of pendency of section 9 proceedings before us

has been taken by Swati Jain and in the proceedings pending before us (under

section 9 of the Code) defence of pendency of the suit for specific performance

is being taken by the CD. Thus, it is clear that, to satisfy the outstanding dues

of the operational creditor, the Director of the CD, Mr. Puneet Jain, initially,

by writing a settlement agreement dated 14th February 2024, agreed to pay

the dues till 31st April 2024, which were not paid, thereafter three cheques

were issued by the CD in October 2024 for ₹5,73,65,819/- which were

dishonoured. Defence before the Delhi High Court has been taken by Mrs.

Swati Jain that the outstanding debt of the corporate debtor could not be set

off with her property. Thus, the intent of the CD appears to be not to pay the

outstanding dues of the OC.

72. So far as the defence of existence of prior dispute is concerned, a fine

distinction is required to be made between the dispute with regard to the

quality of the goods supplied and the dispute with regard to the payment of

the admitted outstanding amount. In the case at hand, what is disputed is

only the property pertaining to which the specific performance suit has been

filed by the director of the operational creditor, while there is no dispute raised

CA (AT) (Ins) No. 1217 of 2026 36

with regard to the quality and quantity of the goods supplied by the OC to the

CD, ever. It is admitted by the director of the CD, namely Mr. Puneet Jain, in

the settlement agreement, in categorical terms, that the second party

(operational creditor) supplied material to the first party (CD), and ₹7.80 crore,

including ₹5,73,65,819/- of the operational creditor, is outstanding on the

corporate debtor. This agreement is not only admitted by the CD but has also

been made the basis of submissions before us. Thus, in view of this admission

and the absence of any proof with regard to any objections raised with regard

to the quality and quantity of material supplied by the OC to the CD, we are

of the considered view that there is no prior dispute existed between the

parties. The dispute highlighted by the Counsel for the appellant is

moonshine, which has not been substantiated by any documentary proof.

73. Ld. Counsel for the Appellant has also submitted that in view of the

novation of the contract by entering into the agreement to sell the old contract

cannot be executed by virtue of Section 62 of the Indian Contract Act. Section

62 of the Contract Act provides that if the parties to a contract agree to

substitute a new contract for it, or to resend or alter it, the original contract

need not be performed.

74. A plain reading of this section shows that in order to have a novation,

the parties to a contract must agree to the extinguishment or discharge of the

old debt or obligation. There can be no novation until this has been

accomplished. A novation may take place by the introduction of new parties

or new terms into the contract. The test; therefore, is what was the intention

CA (AT) (Ins) No. 1217 of 2026 37

of the parties, or, in other words, whether they intended to bring about a new

or altered contract between themselves.

75. When the requisite conditions of novation are not satisfied then it will

be considered as no novation. The essential features of a novation are the

replacement or relinquishment of a right under the original contract by a new

one and when these essential features are missing then, there will be no

novation. In our considered opinion the second or substituted contract should

rescind or extinguish the previous contract. The terms of the two contracts

should be so inconsistent that they cannot stand together. Novation under

Section 62 may be by introduction of new parties or also by alteration or

introduction of new terms between the same parties. Its essential feature is

that a right under the original contract is relinquished or replaced by a new

contract. Where these ingredients are missing there is no novation.

76. We recall that under the Settlement Agreement a clause has been put

by the parties which clearly stipulate that if the outstanding dues are paid by

the CD, in that case the Agreement to sell shall stand cancelled and if the

amount is not paid then the Agreement to sell would be revived. By these

clauses alone it will be evident that the Agreement to sell itself was dependent

on the happening or not happening of an event. Thus, it is clear that even

after execution of the new contract the earlier contract was kept alive by the

parties under which the CD may still discharge his debt by paying the

outstanding amount and therefore it was not a case where the two contracts

have become completely inconsistent.

CA (AT) (Ins) No. 1217 of 2026 38

77. Ld. Counsel for the OC has relied on Lata Construction and others vs

Dr Ramesh Chandra Ramniklal Shah and Another, (2000) 1 SCC 586, Para

No. 9,10 and 11 of the same are placed as under: -

"9. We may, at this stage, refer to the provisions of Section 62 of the Indian Contract Act which provides as under:

"62. If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed."

This provision contains the principle of "novation" of contract.

10. One of the essential requirements of "novation", as contemplated by Section 62, is that there should be complete substitution of a new contract in place of the old. It is in that situation that the original contract need not be performed. Substitution of a new contract in place of the old contract which would have the effect of rescinding or completely altering the terms of the original contract, has to be by agreement between the parties. A substituted contract should rescind or alter or extinguish the previous contract. But if the terms of the two contracts are inconsistent and they cannot stand together, the subsequent contract cannot be said to be in substitution of the earlier contract.

11. In the instant case, the rights under the original contract were not given up as it was specifically provided in the subsequent contract that the rights under the old contract shall stand extinguished only on payment of the entire amount of Rs 9,51,000. Since the amount was not paid by the appellants as stipulated by the subsequent contract, the rights under the original contract were still available to the respondents and they could legally claim enforcement of those rights. Obviously, under the original contract, the appellants were under an obligation to provide a flat to the respondents. This right would come to an end only when the appellants had, in pursuance of the subsequent contract, paid the entire amount of Rs 9,51,000 to the respondents. Since they had not done so, the respondents could legally invoke the provisions of the earlier contract and claim before the Commission that there was "deficiency in service" on the part of the appellants".

CA (AT) (Ins) No. 1217 of 2026 39

78. Keeping in view the aforesaid legal position we are not inclined to accept

the submission of Ld. Counsel for the Appellant with regard to novation of

contract.

79. Keeping in view all the facts and circumstances of the case and for the

reason given hereinbefore, we do not find any good ground to interfere in the

impugned judgment. In result, the appeal filed by the appellant is dismissed.

80. There is no order as to costs.

81. Pending I.A.'s are disposed of.

[Justice Mohammad Faiz Alam Khan] Member (Judicial)

[Naresh Salecha] Member (Technical) New Delhi 25.08.2026 sr

CA (AT) (Ins) No. 1217 of 2026