Rama Traders vs Rocktet Engineering Corporation Pvt ...

[Arising out of the Impugned Order dated 30.05.2025 passed by the Adjudicating Authority, National Company Law Tribunal, Mumbai Bench - IV in CP (IB) No. 4175/MB/2018 (Now RCP(IB) No. 2/MB/2025)]

IN THE MATTER OF:

RAMA TRADERS Through its Proprietor - Mr. Raju Mansukhlal Ruparelia, Office No. 10 & 11, 1st Floor Sangam, Commercial Complex, Phase - I, Dr. Ambedkar Road, Near RTO, Pune - 411001 Email id:paresh.rasmimarketing@gmail.com. s ...Appellant(s)

Versus

ROCKET ENGINEERING CORPORATION PVT. LTD. Plot No. D-19, MIDC, Shiroli Kolhapur 416 122 Email Id:info@rocket-comet.com ...Respondent(s) Present: For Appellant : Mr. Akshay Petkar, Mr. Vishesh Kalra, Ms. Sonia Sharma, Advocates For Respondents : Mr. Kedar Wagle, Mr. Sagar Wagle, Advocates

JUDGMENT

(Hybrid Mode) Per: Barun Mitra, Member (Technical) The present appeal, filed under Section 61 of the Insolvency and

Bankruptcy Code, 2016 ('IBC' in short) by the Appellant arises out of the

Order dated 30.05.2025 (hereinafter referred to as the 'Impugned Order')

passed by the Adjudicating Authority (National Company Law Tribunal,

Mumbai Bench, Court - VI) in CP (IB) No. 4175/MB/2018 now RCP (IB) No.

2/MB/2025. By the said impugned order, the Adjudicating Authority has

rejected the Section 9 application filed by the Appellant - Operational Creditor. Aggrieved by the impugned order, the present appeal has been

preferred by the Appellant.

2. Put briefly, the relevant facts which are required to be noticed for

consideration of this case is that the Operational Creditor -Rama Traders was

a proprietorship concern which was engaged in business transaction with the

Corporate Debtor - Rocket Engineering Corporation Pvt. Ltd. Claiming that

payments were outstanding from the Corporate Debtor, the Operational

Creditor issued a legal notice to them on 19.01.2018 seeking payment of Rs.

3,45,55824/-. On not receiving any reply thereto or any payment from the

Corporate Debtor, the Appellant-Operational Creditor issued Section 8

demand notice in Form-3 on 22.06.2018 which was followed up by another

notice dated 26.06.2018 seeking repayment of outstanding dues. The

Corporate Debtor sent a consolidated reply on 05.07.2018 denying the debt

following which the Operational Creditor filed a Section 9 petition. The said

Section 9 application was dismissed by the Adjudicating Authority on the

grounds that the demand notice issued under Section 8 of the IBC was

defective and that it was hit by limitation. Aggrieved by the impugned order,

the Appellant has come in appeal.

3. Making submissions on behalf of the Appellant, Ld. Counsel for the

Appellant assailed the impugned order for dismissing the Section 9

application at a time when the Corporate Debtor had admitted the debt and

default of Rs. 3.45 Cr. vide their email dated 15.01.2016. The Appellant had

placed on record the email of 15.01.2016 which document clearly

demonstrated the existence of operational debt and admission of liability by

the Corporate Debtor, the requirements of Section 8 stood fully satisfied. It Page 2 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025 was contended that the Adjudicating Authority wrongfully did not treat this

email to be an acknowledgement of debt by Corporate Debtor on the

misconceived ground that the email was addressed to 'Rasmi Marketing' and

not to 'Rama Traders'. It was pointed out that there were numerous instances

which show that correspondence was exchanged between the Operational

Creditor and the Corporate Debtor on both the email ids-

rasmimarketingpunegmail.com/paresh.rasmimarketing@gmail.com. When

both parties had been corresponding through the same email IDs, it was

patently wrong on the part of the Adjudicating Authority to hold that the email

of 15.01.2016 cannot be viewed as an acknowledgment of liability by the

Corporate Debtor to the Operational Creditor. It was emphatically asserted

that even if the email was sent by the Corporate Debtor at the email address

of Rasmi Marketing and not to the Operational Creditor, the very fact that

said email contained an attachment with respect to account statement by way

of ledger account in respect of Rama Traders, this clearly indicated that the

Corporate Debtor acknowledged its liability to the Operational Creditor.

Moreover, when both Rasmi Marketing and Rama Traders were proprietary

concerns of Mr. Raju M Ruparelia which were operating through common

accounts with common PAN and VAT details, the distinction now sought to

be created by the Corporate Debtor between Rama Traders and Rasmi

Marketing was a contrived afterthought. Thus, the Corporate Debtor by taking

the plea that the email was addressed to another entity was only trying to

evade the acknowledgment of liability tendered by them. It was further added

that since the Corporate Debtor had clearly acknowledged their liability in the

email dated 15.01.2016, the period of limitation stood extended by another Page 3 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025 three years from 15.01.2016. Hence, the Section 9 application which had been

filed on 26.09.2018 fell within the three years limitation period. However, the

Adjudicating Authority erroneously held that since the claim of the

Operational Creditor arose in 2014, it was time-barred. It was pointed out

that when the acknowledgement of liability basis the email of 15.01.2016

found mention in both the Section 8 demand notice and in Part IV of the

Section 9 application, the Adjudicating Authority had erred in holding that in

the absence of any specific date of default, the Section 9 application was

barred by limitation. It was also contended by the Appellant that the finding

returned by the Adjudicating Authority that the Section 8 demand notice was

defective was erroneous. The Adjudicating Authority wrongly held the Section

8 demand notice in Form 3 to be invalid on the ground that invoices had not

been attached alongwith the demand notice. Submission was pressed that in

terms of the judgment of this Tribunal in Neeraj Jain Vs Cloudwalker

Streaming Technologies Pvt. Ltd. in CA(AT)(Ins) No. 1354 of 2019, an

Operational Creditor can issue a demand notice either in Form 3 or Form 4

and attachment of invoices is not mandatory where the demand notice is

issued in Form 3. Hence the finding returned by the Adjudicating Authority

was contrary to the settled legal position. The Adjudicating Authority could

not have held the Section 8 notice to be invalid as the same was filed in Form

3 which did not require invoices to be attached.

4. Rebutting the arguments raised by the Appellant, it was contended by

the Ld. Counsel for the Respondent that the reliance placed by the Appellant

on the email dated 15.01.2016 to contend that the said email amounted to

acknowledgement of liability was entirely misplaced. It was pressed that the Page 4 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025 Adjudicating Authority has correctly held that since the email was addressed

to Rasmi Marketing and not to Rama Traders, it could not have been

considered as an acknowledgment of debt qua Rama Traders. In any case, the

said email did not show any attachment or ledger while the purported

attachment being ledger was neither signed nor had any seal of the Corporate

Debtor. It was also canvassed that when the Appellant - Operational Creditor

in their rejoinder to the reply of the Corporate Debtor in the Section 9

application had themselves pleaded that the Respondent is unnecessarily

involving Rasmi Marketing in the present matter, it clearly showed that the

Appellant was aware that Rasmi Marketing enjoyed a legal entity independent

and separate from Rama Traders. In such circumstances, the Appellant's

insistence that the email sent to Rasmi Marketing be treated as an

acknowledgement of liability towards Rama Traders tantamount to

approbation and reprobation by the Appellant which is not acceptable. The

Adjudicating Authority had therefore rightly discarded the contention of the

Appellant that the email addressed to Rasmi Marketing can be held as an

acknowledgement of liability qua Rama Traders. It was also contended that

the Adjudicating Authority has rightly concluded that the Section 8 demand

notice of the Appellant was defective as it was not accompanied by invoices.

It was contended that when the outstanding debt was claimed on the basis of

unpaid invoices, the Appellant could not have chosen to file the demand notice

in Form 3 without the invoices. Moreover, the invoices which have been placed

on record by the Corporate Debtor are vague in that it is bereft of details such

as terms of delivery, buyers order number etc. Submission was pressed that

the alleged operational debt was non-existent as there was no contractual Page 5 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025 relationship between the Operational Creditor and the Corporate Debtor for

supply of goods for the Appellant- Operational Creditor was to only receive

commission as a commission agent. It was vehemently asserted that the pre-

existing disputes surrounding the operational debt had been articulated both

in their reply to the Section 8 Demand notice which had been rightly noticed

by the Adjudicating Authority also. It was further added that the Section 9

application was hit by limitation as it was filed on 26.09.2018, while in the

Section 8 demand notice, the date of default is shown to have occurred in

2014 which was clearly beyond the three years limitation period. Even the

Section 9 application filed on 26.09.2018 was clearly beyond the three years

limitation since the Operational Creditor had claimed the date of default to be

06.06.2015 being the last date of payment made by the Corporate Debtor. It

was therefore asserted that the Adjudicating Authority had rightly held the

Section 9 application to be time barred.

5. We have heard Ld. Counsel for both the parties and perused the records

carefully.

6. The first issue before us is the tenability of the finding returned by the

Adjudicating Authority that the Section 8 demand notice was not in

consonance with Rule 5 of the Insolvency and Bankruptcy Board of India

(Application to Adjudicating Authority) Rules, 2016("Rules" in short). For

reasons of clarity, it would be useful to notice the finding returned by the

Adjudicating Authority on this score which is as excerpted hereunder:

"5.3 ........ Further, the OC issued the Section 8 demand notice in Form-3, while its claims are actually based on the invoices issued during the period from January, 2015 to March, 2015. However, the OC failed to attach any of the invoices in the demand notice, Page 6 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025 which was given in Form 3. In fact, the veracity of the demand notice was challenged by the CD in its reply notice dated 05.07.2018. It is clear from the decision of the Hon'ble NCLAT, New Delhi, in Neeraj Jain (supra) that a party cannot arbitrarily issue the demand notice in any form it chooses but has to issue the same on the basis of its claim. The appropriate form to issue the demand notice against the CD under Section 8 of the IBC has already been specified in Form 3 or Form 4 along with attachment of invoices. Since the OC failed to attach the invoices with clear details regarding the details and actual period of default, Section 8 notice does not appear to be in order. When statute requires a particular form to be used for a particular purpose, it is only to be adhered to by the party to the litigation......"

7. When we look at the above extracts of the impugned order, we notice

that the Adjudicating Authority has noticed that the default amount claimed

by the Appellant is based on the purported failure on the part of the Corporate

Debtor to clear the outstanding invoices which had allegedly been issued by

the Appellant-Operational Creditor with regard to supply of pump set

accessories. The Adjudicating Authority has proceeded to observe that though

the claims of the Operational Creditor were based purportedly on the strength

of invoices, however, the invoices were not found attached with the Second 8

Demand Notice which was therefore in dissonance with the ratio laid down

this Tribunal in Neeraj Jain judgment supra.

8. It is however the case of the Appellant that in terms of the Neeraj Jain

judgment supra, a Section 8 demand notice can be issued either in Form 3

or Form 4 and that when Section 8 demand notice is issued in Form 3,

attachment of invoices is not mandatory. It was further contended that as

long as other documents substantiating the operational debt and the default

thereto is placed on record that would fully satisfy the requirement of Section

8 demand notice. Hence, in the present case though invoices were not Page 7 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025 attached, furnishing of the email of 05.01.2016 and legal notice of 19.01.2018

was sufficient for the purpose of issuing Section 8 demand notice in Form 3.

It was also asserted that only when the Section 8 demand notice is issued in

Form 4 that the copy of invoices are required to be attached.

9. Per contra, it is the contention of the Respondent that when the

outstanding debt and default thereof has been claimed on the basis of unpaid

invoices, it was incumbent upon the Appellant to submit the Section 8

Demand Notice in Form 4 alongwith details of the invoices. It was contended

that when the alleged debt was based on invoices, the Appellant could not

have issued the Section 8 demand notice sans the invoices.

10. To arrive at our findings, at this stage, it may be useful to have a look

at the manner in which the Appellant had submitted the Section 8 demand

notice which is found at page 156 of the Appeal Paper Book ('APB' in short)

which is as reproduced below:

FORM 3 FORM OF DEMAND NOTICE/INVOICE DEMANDING PAYMENT UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016 (Under rule 5 of the Insolvency and Bankruptcy Rules, 2016) Date: - 22.06.2018

1. .......

2. Please find particulars of the unpaid operational debt below:

Sr. No. PARTICULARS OF Amount OPERATIONAL DEBT

1. TOTAL AMOUNT OF DEBT An amount of Rs. 3,45,55,824/-

DETAILS OF TRANSACTIONS arising out of series of transaction ON ACCOUNT OF WHICH with respect to dealing in the Pump DEBTFELL DUE, AND THE accessories.

DATE FROM WHICH SUCH DEBTFELL DUE

Page 8 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025

2. AMOUNT CLAIMED TO BE IN 1. Total Amount claimed - Rs.

DEFAULT AND THE DATE ON 3,45,55,824/- WHICH THE DEFAUL 2. The default first occurred in OCCURRED 2014 & then continued thereafter. 3. The LIABILITY has been acknowledged as per the email dated 15/1/2016. 3. PARTICLARS OF SECURITY N.A HELD, IF ANY, THE DATE OF ITS CREATION, ITS ESTIMATED VALUE AS PER THE CREDITOR ATTACH A COPY OF A CERTIFICATE OF REGISTRATION OF CHARGE ISSUED BY THE REGISTRAR OF COMPANIES 4. DETAILS OF RETENTION OF N.A TITLE ARRANGEMENT [IF ANY] IN RESPECT OF GOODS TO WHICH THE OPPERATIONAL DEBT REFERS 5. RECORD OF DEFAULT WITH N.A THE INFORMATION UTILITY [IF ANY] 6. PROVISION OF LAW, Invoices CONTRACT OR OTHER DOCUMENT UNDER WHICH DEBT HAS BECOME DUE 7. LIST OF DOCUMENTS 1. Email dated 15/1/2016 ATTACHED TO THIS 2. Preceding Notice dated APPLICATION IN ORDER TO 19/1/2018 PROVE THE EXISTENCE OF OPERATIONAL DEBT AND THE AMOUNT IN DEFAULT

11. When we look at the above Section 8 demand notice submitted in Form

3, it is clear from the entries made at serial no. 6 that the Appellant has

Page 9 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025 claimed that the debt has become due on the basis of "Invoices" but does not

indicate details of the invoices. The only documents which have been relied

upon to prove the existence of operational debt which appears at serial no. 7

of Form 3 is the email dated 15.01.2016 and the preceding legal notice dated

19.01.2018 with no mention of the relevant invoices. It is further observed by

the impugned order that even these two documents mentioned at Serial no. 7

were not attached to the Demand Notice.

12. At this stage, it may be constructive to peruse the relevant paragraphs

of the Neeraj Jain judgment supra. In this judgement, we find that this

Tribunal had dealt with two questions, firstly, as to whether it is the discretion

of the Operational Creditor or the nature of the operational debt that

determines the issuance of notice in Form 3 or Form 4 under Section 8(1) of

the IBC. Secondly, it also considered the circumstances in which appending

copy of the invoices becomes a mandatory requirement for issue of demand

notice under Section 8(1) of the IBC. This Tribunal answered the above two

questions in following manner at paragraphs 43 to 46 which is as reproduced

below:

"43. However, it cannot be the discretion of the Operational Creditor to deliver the Demand Notice in Form 3 even if the operational debt involves transactions where corresponding invoices are generated but are not filed in court on the pretext that the Operational Creditor has chosen to send the Notice in Form 3.

44. The use of the phrase, "deliver a demand notice of unpaid operational debt or copy of an invoice demanding payment of the amount involved" in Section 8(1) does not provide the Operational Creditor, with the discretion to send the demand notice in Form 3 or Form 4 as per its convenience. Rather, it depends directly on the

Page 10 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025 nature of the operational debt and applicability of Form 3 or Form 4 as per the nature of the transaction.

45. It is important to mention that legislative provisions are made with a larger perspective to deal with all the eventualities that may arise in the implementation of the said provisions. Therefore, the use of the word "OR" in Section 8 cannot be interpreted as such, that the Insolvency and Bankruptcy Code has provided a choice or a discretion to an Operational Creditor, to provide an escape route from submission of the invoice, which can be treated as the most relevant document to prove the debt and amount in default.

46. On perusal of the language of Section 8, it is clear that an Operational Creditor on the occurrence of default has been provided with the option of delivering a demand notice of the unpaid operational debt or raising an invoice demanding payment of the amount involved. The two options available for initiation of Corporate Insolvency Process are provided to deal with all the eventualities that may occur. For example, if an operational debt is in the nature of salary dues, then in that situation, the question of submitting an invoice does not arise. To deal with such a situation, Section 8 contains the provision for issuance of demand notice of the unpaid operational debt. Form 3 of the Adjudicating Authority Rules has only laid down the condition that the applicant has to give the details of the amount of debt, details of the transaction on account of which such debt fell due and the date from which such debt fell due, and as per Column 7 of the said Form 3, applicant has to attach the documents to prove the existence of operational debt and the amount in default. Likewise, where the operational debt involves the generation of the invoice, then in that case, invoice raising the demand may be sent to the Corporate Debtor demanding the invoice amount. In such a situation, the Operational Creditor has to issue the demand notice in Form 4 along with the invoice."

(Emphasis placed)

13. When we apply the ratio of the above judgment, it is amply clear that

when the operational debt involves generation of invoices, then in that case,

the invoice raising the demand is required to be furnished to the Corporate

Debtor with the Section 8 demand notice while demanding the said amount.

Merely because Section 8 provides for an option to issue the Section 8 demand

Page 11 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025 notice in Form 3 or Form 4 cannot be seen to allow the Operational Creditor

to take refuge of Form 3 to escape from the requirement of submission of

invoices to prove the debt and amount in default. We therefore do not find any

infirmity in the finding returned by the Adjudicating Authority that the

demand notice served on the Corporate Debtor was not in order as the claim

of the Appellant was based on generation of invoices. When the relevant Rules

clearly outline that a particular Form is to be used for a particular purpose,

compliance to the same cannot be ignored or brushed aside or treated as

discretionary. Further what compound the situation further is that even the

two documents mentioned in Form 3 of the Section 8 demand notice including

the email dated 15.01.2016 were not attached to the said demand notice.

14. This brings us to the email dated 15.01.2016 which has been relied

upon by the Appellant to assert that the outstanding liability had been

acknowledged by the Corporate Debtor and on having committed default

thereto, this was a fit case for admission of Section 9 application. It was

vehemently contended that the Corporate Debtor has on hindsight denied that

this email was an acknowledgement from them to the Operational Creditor by

taking the clever plea that the email was addressed to an entity other than

the Operational Creditor. To buttress their argument that email address on

which the email of 15.01.2016 was sent was an address which was in regular

use by the Corporate Debtor in sending its communications to the Appellant.

It was pointed out that material on record shows that a clutch of emails was

sent by the Corporate Debtor at the email address of

rasmimarketingpune@gmail.com and paresh.rasmimarketing@gmail.com.

Page 12 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025 Elaborating further on this aspect, attention was adverted to email dated

16.07.2014 as placed at page 222 of the APB; email dated 16.08.2014 as

placed at page 47 of the APB; email dated 19.08.2014 as placed at page 51 of

the APB and email dated 06.01.2017 as placed at page 230 of APB wherein

both these email addresses had been used interchangeably by the Corporate

Debtor while addressing communications to the Operational Creditor.

Further, when these communications were dealing with the subject matter of

transaction in respect of Rama Traders, it was asserted that use of email

address of Rasmi Marketing for exchange of the communication cannot be a

ground to claim that the communication cannot be treated as admission of

liability of the Corporate Debtor towards Rama Traders.

15. Per contra it was contended by the Respondent that the

acknowledgment email of 15.01.2016 having been sent to Rasmi Marketing

could not have been treated as an acknowledgement of debt to the Appellant.

It is the contention of the Corporate Debtor that Rasmi Marketing was a

separate entity from that of the Operational Creditor which was Rama Traders

and hence any email sent to Rasmi Marketing cannot be construed as an

email sent to Rama Traders. Further when the purported attachment being

ledger was neither signed nor had any seal of the Corporate Debtor, it has

been rightly held by the Adjudicating Authority that the said email cannot be

viewed as an acknowledgement of liability. It was further asserted that they

had not only denied having acknowledged the liability, they had disputed

doing business with the Appellant in their reply to the Section 8 Demand

Notice. It was also submitted that when the Appellant in their rejoinder to the

reply of the Respondent to the Section 9 application had on their own vouched Page 13 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025 that Rasmi Marketing being a separate business entity cannot be dragged into

the transactions between the Appellant and the Corporate Debtor, it is

surprising that when it came to the email dated 15.01.2026, the Appellant

have been endeavouring to disregard the independent and separate status of

these two entities.

16. At this stage, we may have a look at to the reply to the Section 8 demand

notice as furnished by the Corporate Debtor to the Operational Creditor on

05.07.2018 which is placed at page 142 of the APB. The Corporate Debtor in

its reply has categorically disputed the operational debt and asserted that no

goods had been purchased from Rama Traders since 2012 and hence, there

was no question of payment of amount of Rs. 3.45 Cr. Even the nature of

transaction has been disputed by claiming that the Operational Creditor was

a commission agent and not a supplier of goods. The relevant extracts from

the notice of dispute are as reproduced below:-

REPLY NOTICE Dated: 5/7/2018

To M/S. Rama Traders, Prop: Raju Manasukhlal Rupareliya Sangam project, Office No. 3 & 4, 46, Dr. Ambedkar road, Near RTO office, Pune

Sir, .......

1.Your letter dated 22.06.2018; my client received on 26.06.2018 and whatever allegation, claim, demand and objection made in the said Notice are not agreed and accepted by my client. My client totally denied all the allegations made in the said Notice. Legal Notice sent by your advocate is illegal and erroneous. While sending the said illegal notice by you; you have not disclosed actual facts before your advocate. Hence, it seems that you are cunning and shrewd people. As mentioned in your notice; you are not doing business since Page 14 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025 the year 2012 and still and hence, there is no question arisen to purchase your goods since the year 2012. The contents as mentioned in your Notice; we have never purchased the goods from you. Therefore, there is no question arisen to pay an amount of RS.

3,45,55,824/- as mentioned in your Notice in illegal way. Therefore, it is not agreed and accepted by my client as per demand made in your notice. Accordingly, all the allegations and claims made in your notice in paragraph No. 1 to 7 are totally rejected by my client in clear cut manner.

2.In this regard actually fact is as under :-

1.....

2.As mentioned hereinabove, you are commission agent. My client's company's turn over is more than crores. Apart from this, my client's company is very famous and reputed company and getting information of my client's company entirely and you have shown your willingness to do the work of my client's company.

As a part of it; you have visited top most officers and directors of the company to get agency of my client's company for sale and supply of my client's diesel machinery within the State of Maharashtra. And you have expressed your willingness to do this job on commission basis. Hence, on my client's company name, you will have to get orders, to do correspondence, to submit the bills and also to collect bill amount on behalf of my client's company and also to pay the amounts on commission basis. After taking in consideration of your request sympathetically and my client have give consent to the same with an intention for convenience and beneficial sake; my clients have appointed you as commission agent and they have consent to the same.

3...... You have not given the details of materials supplied to my client's company as mentioned in your notice. Therefore, notice sent by you is illegal, null and void. Hence, there is no question of 24% interest per annum on the amount mentioned in the notice. The contents mentioned in your advocate's notice in paragraphs No.1 to 7 are totally false and fabricated and baseless allegations made by you. Therefore, my client never agrees and accepts the same and my client clearly rejects the said allegations and claim made in the illegal notice.

........

6.Therefore, my client should not pay you an amount of Rs.3,45,55,824/- and on this illegal and fake amount; you have sent bogus notice in the form No.3 as per rule 5. In the past, you have sent illegal notice on 19.01.2018 in accordance with rule-5 and my clients have given reply to this notice making clarification accordingly. Hence, there is no need to send reply to your notice again."

(Emphasis supplied)

Page 15 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025

17. We find that the Corporate Debtor in its reply on 05.07.2018 to the

Section 8 notice has denied the claim raised by the Operational Creditor on

the grounds that they are not legally due or payable besides disputing the

debt amount that has been claimed. The above reply by the Corporate Debtor

to the Section 8 demand notice is clearly a notice of dispute. Section 9(5)(ii) of

the IBC contemplates rejection of an application when a notice of dispute is

received by the Operational Creditor. In the present case, it is an undisputed

fact that the Section 8 demand notice issued by the Operational Creditor had

been replied to by the Corporate Debtor and this notice of dispute clearly

attracted Section 9(5)(ii)(d) of the IBC.

18. It is a well settled legal percept in terms of seminal judgment of Hon'ble

Supreme Court in Mobilox Innovations Pvt. Ltd. Vs Kirusa Software Pvt.

Ltd. (2018) 1 SCC 353 that as long as a dispute is raised which is not a

patently feeble argument or unsupported by evidence, the Adjudicating

Authority has to reject the application. The relevant extracts of the judgment

is as reproduced as below:

"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 Page 16 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025 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."

19. It is well settled that in a Section 9 proceeding, there is no need to enter

into final adjudication with regard to existence of dispute between the parties

regarding operational debt. What has to be looked into is whether the defence

raises a dispute which needs further adjudication by a competent court. If we

apply the above cited test laid down in Mobilox judgement to the facts of the

present case, it becomes clear that the nature of dispute raised is such that

it requires adjudication by the competent court. The present is not a case

where there is an undisputed debt for which insolvency can be initiated

against the Corporate Debtor.

20. With the aforesaid discussion, we are of the considered view that the

Adjudicating Authority did not commit any error in rejecting the Section 9

application filed by the Appellant. There being no merit in the appeal, the

same is dismissed. We however make it clear that it will remain open to the

Appellant to resort to other remedies in accordance with law. No order as to

costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical) Place: New Delhi Date : 04.05.2026 Sheetal

Page 17 of 17 Company Appeal (AT) (Ins) No. 1198 of 2025