Shri Durga Scaffolding Noida Private ... vs Kanwar Enterprises Private Limited

[Arising out of the Impugned Order dated 12.08.2025 passed by the Adjudicating Authority, National Company Law Tribunal, New Delhi Bench in C.P. (IB) No. 655/ND/2024] In the matter of: SHRI DURGA SCAFFOLDING NOIDA PRIVATE LIMITED Through its Authorized Representative Mr. Himanshu Anand, Aged about 37 years S/o Sh. Ravinder Anand R/o 49 Deepali Enclave, Pitampura, New Delhi-110034

Having its Office at: 2/15, WHS, TIMBER MARKET, KIRTI NAGAR, MAIN ROAD DELHI- 110015 .... Appellant Versus

KANWAR ENTERPRISES PRIVATE LIMITED (CIN) U52341DL2005PTC138401 Having its registered office at: F.No. 642 G/F, Kondli Gharoli, Mayur Vihar PH-III, East Delhi, Delhi- 110096 .... Respondent

Present:

For Appellant : Mr. Gursad Singh, Mr. Aryan Ahuja and Mr. Shivanad, Advocates.

For Respondent : Mr. Gaurav Mitra, Mr. Sujoy Dutta, Mr. Abhinav Mishra, Ms. Aarushi Mishra and Mr. Surekh Kant Baxy, Advocates. JUDGMENT

(Hybrid Mode)

Per: Barun Mitra, Member (Technical)

The present appeal filed under Section 61(1) of Insolvency and Bankruptcy

Code 2016 ('IBC' in short) by the Appellant arises out of the Order dated

12.08.2025 (hereinafter referred to as 'Impugned Order') passed by the

Adjudicating Authority (National Company Law Tribunal, New Delhi Bench-IV)

in C.P. (IB) No. 655/ND/2024. By the impugned order, the Adjudicating

Authority has dismissed the Section 9 application filed by the Appellant-Shri

Durga Scaffolding Noida Pvt. Ltd. for initiation of CIRP against the Corporate

Debtor. Aggrieved by the impugned order, the present appeal has been preferred

by the Appellant-Operational Creditor.

2. Coming to the brief facts of the case, the Appellant-Operational Creditor

had been engaged by the Kanwar Enterprises Pvt. Ltd.-Corporate Debtor for

supply of shuttering and scaffolding materials on lease/hire basis. As per

business arrangement, the Appellant raised monthly invoices against the

shuttering and scaffolding material supplied to the Respondent from 01.03.2021

to 30.04.2024 on running account basis. Since the Respondent had stopped

making payments qua the invoices raised after 20.10.2023 the Appellant issued

reminder notices on 01.01.2024 and 10.04.2024 to clear the outstanding dues

and return of the rented scaffolding material. The Corporate Debtor sent a reply

to the above two notices on 10.06.2024 denying any liability to pay the

Operational Creditor. Thereafter, the Operational Creditor issued Section 8

Page 2 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025 Demand Notice on 18.06.2024 which was replied to by the Corporate Debtor on

29.06.2024. Failing to receive a satisfactory reply, the Appellant filed the Section

9 application on 24.07.2024 before the Adjudicating Authority for initiation of

CIRP against the Respondent for an outstanding amount of Rs 2,77,00,575.05/-

which included the principal amount, interest component and unreturned

shuttering and scaffolding materials of Rs 89,75,401.88/-, Rs 22,00,486/- and

Rs 1,65,24,737.70/- respectively. This Section 9 application was dismissed by

the Adjudicating Authority on 12.08.2025 on the ground of pre-existing disputes.

Aggrieved by the impugned order, the present appeal has been preferred by the

Appellant.

3. Making submissions on behalf of the Appellant, Shri Gursad Singh, Ld.

Counsel submitted that the Corporate Debtor had approached the Appellant and

issued two Hiring Orders dated 20.01.2021 and 12.04.2022 for supply of

shuttering and scaffolding materials (hereinafter referred to as "materials") for

two of its projects. Pursuant to the hiring orders, the Appellant supplied these

materials from March 2021 to April 2024 which were purportedly received by

the Respondent without any demur and protest with regard to quality or

quantity. The Respondent-Corporate Debtor had duly acknowledged and

stamped the invoices raised by the Appellant which invoices stipulated the

payment of interest @ 24% p.a. on delayed payments. The Corporate Debtor,

however, failed to discharge their payment obligations since 20.01.2023 leading

to reminder notices issued by the Appellant on 01.01.2024 and 10.04.2024.

4. It was also submitted that the claim of the Respondent that the debt did

not cross the threshold limit was also a baseless assertion as levy of interest was Page 3 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025 clearly spelt out in the invoices, hence, when the interest amount alongwith the

cost of materials retained by the Corporate Debtor is clubbed together with the

principal amount of outstanding hiring charges, the debt and default crossed

the threshold limit. It was contended that the Respondent in their reply dated

10.06.2024 to the two reminder notices had admitted that the materials were

still in their possession which admission clearly established acknowledgment of

their liability towards material hiring charges qua the Appellant.

5. Further the terms and conditions of the hiring order clearly cast the

obligation to return the damaged materials and its transportation on the

Respondent. Since the material had not been returned and was instead

wrongfully retained by the Corporate Debtor causing financial losses, the

Appellant had added the value of the unreturned material. Reliance has also

been placed on the judgment of this Tribunal in Prashat Agarwal Vs Vikas

Parasrampuria in CA(AT)(Ins) No. 690 of 2022 to contend that when interest

is stipulated in the invoices it can be clubbed with the outstanding principal

amount.

6. Submission was further pressed that since payments were still not

forthcoming, a Section 8 Demand Notice was issued. However, the Corporate

Debtor thereafter tried evading the discharge of their liability by raising spurious

disputes without any supporting documents in their reply dated 29.06.2024 to

the Demand Notice. It was asserted that the Corporate Debtor had raised

frivolous allegations regarding poor quality of material supplied and failure by

the Appellant to collect the damaged materials though no such disputes were

ever raised earlier during the course of their business dealings. It was contended Page 4 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025 that the Adjudicating Authority had failed to appreciate that these moonshine

disputes were raised as an afterthought with the sole intent to create a defence

of pre-existing dispute to escape the fallout of Section 9 application. Reliance

was placed on the judgment of this Tribunal in B.V. Gautam Vs Clarke Energy

India Pvt. Ltd. in CP(AT)(CH)(Ins) No. 148 of 2022 to contend that when a

dispute is raised post the issue of Section 8 Demand Notice after a prolonged

delay without prior supporting evidence, such a dispute is not a valid pre-

existing dispute. It was also emphatically asserted that the very fact that the

Corporate Debtor had approached the Appellant for settlement with a draft MoU

and remitted Rs 20,00,000/- and returned two trucks of material also shows

clear admission of liability. However, as the Section 9 application had been

erroneously dismissed by the Adjudicating Authority on 12.08.2025 by wrongly

applying the principles laid down in Mobilox Innovations Pvt. Ltd. Vs Kirusa

Software Pvt. Ltd. (2018) 1 SCC 353, the impugned order has been assailed

by the Appellant.

7. Refuting the contentions of the Appellant, Shri Gaurav Mitra, Ld. Counsel

for the Corporate Debtor submitted that the Section 9 application was not

maintainable as Part-IV of the Section 9 application filed by the Appellant depicts

the outstanding principal amount to be only Rs 89,75,401.88/- which sum was

less than the statutory threshold limit of Rs 1 Cr. prescribed under Section 4 of

IBC. It was further added that interest liability and cost of unreturned shuttering

material had been wrongfully claimed by the Appellant and that too for the first

time in the Section 8 Demand Notice dated 18.06.2024. It was contended that

the Corporate Debtor had disputed the outstanding principal amount as the Page 5 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025 goods supplied by the Appellant were damaged but the Appellant did not collect

the damaged materials from the project site inspite of multiple requests made to

them. Submission was also pressed that the Appellant was using the IBC

proceedings as a mechanism for recovery of debt which is contrary to settled

position of law. It was further contended that interest liability could not have

been added simply on the strength of invoices since interest was chargeable only

if there was a separate agreement for interest. Contending that in the absence

of any such agreement, the invoices could not be seen to operate contrary to the

principal agreement between the parties and support was drawn from the

precepts laid down in the judgment of this Tribunal in Rishabh Infra Vs

Sadbhav Engineering Ltd. 2024 SCC OnLine NCLAT 1262. Submission was

further pressed by the Respondent that the clear business understanding

between the parties was only for payment of the rental hiring charges of the

shuttering and scaffolding material supplied and there being no obligation on

them to pay for the value of these materials, the Appellant could not have added

the same in the computation of the outstanding debt. With the levy of interest

and the claim of cost of unreturned goods having been disputed, the Section 9

application deserved to be rejected.

8. Since the invoices raised by the Appellant had been disputed by the

Corporate Debtor even prior to the issuance of the Demand Notice on

18.06.2024, these complaints were in the nature of pre-existing disputes.

Support was also drawn from the judgment of the Hon'ble Supreme Court in

Mobilox judgment supra wherein it has been held that disputes raised by the

Corporate Debtor prior to the issuance of demand notice under Section 8 of the Page 6 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025 IBC squarely fall within the ambit of pre-existing dispute and if the disputes are

found to be prima facie plausible, rejection of the Section 9 application was in

order. It was vehemently contended that they had disputed the invoices on

10.06.2024 also because the materials supplied by the Operational Creditor had

been damaged due to rains and despite several reminders, the Operational

Creditor did not collect the damaged material from the site. This dispute of

reconciliation of accounts was clearly raised before the Section 8 Demand Notice

and hence constituted a pre-existing dispute. Elaborating on their arguments

further, reliance was placed on the judgment of the Hon'ble Supreme Court in

Sabarmati Gas Limited v. Shah Alloys Limited (2023) 3 SCC 229 wherein it

has been held that pending reconciliation to be a ground of pre-existing dispute

between the parties. Hence, it was contended that the Adjudicating Authority

had rightly rejected the present Section 9 application.

9. We have duly considered the arguments advanced by the Ld. Counsels for

the parties and perused the records carefully.

10. The short question to be answered is whether there were pre-existing

disputes between the parties both with regard to material supplied and

crystallisation of the debt amount which was due and payable.

11. We will commence our analysis by considering the facts of the present

case to find out whether the Operational Creditor has been able to successfully

establish that an operational debt exceeding an amount of Rs. 1 Cr had become

due and payable by the Corporate Debtor and that a default has been committed

thereto by the Corporate Debtor. In the present factual matrix this examination

would also require us to concurrently venture into realm whether the said Page 7 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025 operational debt was an undisputed debt or otherwise. Since both the Appellant

and Respondent have relied on the judgment of the Hon'ble Supreme Court in

Mobilox supra, we propose to advert our attention to the ground-rules laid down

therein which is as extracted below:

"25. Therefore, the adjudicating authority, when examining an application under Section 9 of the Act will have to determine:

(i) Whether there is an "operational debt" as defined exceeding Rs. 1 lakh? (See Section 4 of the Act)

(ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? and

(iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute?

If any of the aforesaid conditions is lacking, the application would have to be rejected."

12. At the very outset, it would be useful to have a look at the Part-IV details

in Form-5 as claimed by the Appellant which appears at page 70 of the Appeal

Paper Book ("APB" in short) under the Insolvency and Bankruptcy (Application

to Adjudicating Authority) Rules, 2016 with respect to the total debt amount

claimed. The Part-IV is as reproduced below:

PART-IV PARTICULARS OF OPERATIONAL DEBT

Page 8 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025

1. TOTAL AMOUNT OF DEBT, Total Amount of Debt: Rs.

DETAILS OF 2,77,00,575.5/-(Principal amount TRANSACTIONS ON of Rs.89,75,401.88/- + Interest of ACCOUNT OF WHICH DEBT Rs. 22,00,486/- and unreturned FELL DUE, AND THE DATE shuttering and scaffolding FROM WHICH SUCH DEBT material of Rs. 1,65,24,737.70/) FELL DUE towards shuttering and scaffolding material provided on hire-basis at the project site(s) of Corporate Debtor

Total amount of Debt: Rs. 2,77,00,575.5/- Debt fell due from-20th October, 2023

Having noted the Part-IV particulars above, we have no doubts that the

Appellant has listed out three components in the computation of debt and

default which includes principal amount, interest component and value of

unreturned shuttering and scaffolding materials. Basis Part-IV, it is the claim of

the Appellant that the entire outstanding liability stood at Rs 2,77,00,575.05/-

including the hiring/rental charges, interest component thereon and cost of

unreturned shuttering and scaffolding materials.

13. We will first look into the rival contentions made by both parties on the

aspect of interest computation. It is the case of the Appellant that it is an

undisputed fact that the Corporate Debtor had issued two Hiring Orders dated

20.01.2021 and 12.04.2022 to them for supply of shuttering and scaffolding

materials which had been honoured by them and invoices were raised

Page 9 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025 accordingly. It is further their case that they had initially received payments from

the Corporate Debtor but payments had stopped after 20.04.2023 resulting in

outstanding operational debt as hiring charges amounting to Rs 89.75 lakhs

which sum was also claimed to be reflecting in the ledger account maintained

by the Operational Creditor. It was further pressed that this outstanding due

attracted interest to the tune of another Rs 22 lakhs @ 24% p.a.. It was

canvassed that the Corporate Debtor cannot shy away from discharging the

interest liability as interest payment clause was clearly mentioned in the invoices

raised by the Operational Creditor and as these invoices were acknowledged by

the Corporate Debtor, it amounted to their acceptance of the interest clause. The

invoices raised by the Operational Creditor as placed at page 128 onwards in the

APB clearly mentions: "Interest to be charged @ 24% p.a. if the bill is not paid on

presentation." Furthermore, as the Corporate Debtor had acknowledged and

stamped these invoices raised by them which invoices contained a clause on the

payment of interest @ 24% p.a. on delayed payments, it shows that interest

liability was acknowledged by the Corporate Debtor.

14. Per contra, it is the case of the Corporate Debtor that the interest amount

reflected in the invoices was a unilateral claim which was neither backed by a

contractual agreement nor demonstrated by past conduct and practice between

the parties. It was asserted that Clause 17 of the hiring order entitled the

Appellant to charge 24% interest only on the difference of CGST, IGST, etc. which

read as follows: "Final tax invoice for GST, there should not be any difference with

respect to basic rate, HSN CODE, CGST/SGST/IGST rate. In case any difference

interest @2% Per Month will be charged extra on prorata from date of credit Page 10 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025 /cheque date." In such circumstances, the interest claimed by the Appellant was

unsustainable and cannot be justifiably added to the operational debt. It was

added that this clause for payment of 24% interest had been unilaterally inserted

in the invoices and therefore the same has no legal effect as it was contrary to

the principal agreement between the parties i.e. the hiring orders.

15. Coming to our findings, we notice that the Appellant has contended that

when interest is stipulated in the invoices, this liability can be clubbed with the

outstanding principal amount and in support of their contention, the Appellant

has relied on the judgment of this Tribunal in Prashat Agarwal judgement

supra. This contention of the Appellant is misplaced since in Prashat Agarwal

case, the interest amount was added to the principal amount as the Operational

Creditor and Corporate Debtor were at ad idem on the levy of interest as it was

reflected in the contractual agreement between them unlike in the present case

where the hiring order does not specify the levy of interest nor has the Appellant

been able to demonstrate that there was any practice in vogue of interest having

been earlier paid by the Corporate Debtor. In this backdrop, we find force in the

contention of the Corporate Debtor that mere mention of interest liability in the

invoices cannot be operated against the Corporate Debtor sans a separate

agreement for payment of interest as has been held by this Tribunal in Rishabh

Infra judgement supra. That the levy of interest was also disputed by the

Respondent is borne out from their reply to Demand Notice at paras 5(c) and 21

as placed at page 353 of APB which is as extracted below:

"5 .....

Page 11 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025

c) Further, there existed no stipulation of interest on delayed payment by our Client in the Hiring orders and the same was explicitly agreed between the parties.

......

21. Secondly, the interest component charged by you is wholly frivolous. As already mentioned above, (a) There was no stipulation for payment of interest on account of delay in payment of invoices in terms of the Hiring orders (the principal contract between the parties) or the agreed terms between the parties; and (b) In any case, since the invoices are itself disputed on multiple accounts as already elucidated above, the interest component also becomes wholly unsustainable."

16. We are therefore of the considered view that when the amount of interest

is not found to have been mutually agreed to between the parties, the levy of

interest amount by one party and denial to pay any such interest by the other

party becomes a veritable ground of dispute. Further since the Appellant has

failed to substantiate any practice of interest amount having been paid in the

past by the Respondent, we find substance in the contention of the Respondent

that though the hiring order issued by them did not contain any clause regarding

payment of interest, the alleged interest amount was unauthorisedly claimed for

the first time by the Appellant in their Demand Notice dated 18.06.2024 under

Section 8 of the IBC. Whether this interest component could be factored in by

the Appellant in computing the outstanding liability of the Corporate Debtor is

clearly a question which can only be adjudicated by a court of competent

jurisdiction. Dispute over interest amount claimed was therefore a clear ground

of dispute between the two parties and this dispute having also been raised in

the Notice of Dispute formed sufficient basis for rejection of the Section 9

application by the Adjudicating Authority.

Page 12 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025

17. We next come to the addition of an amount of Rs 1.65 Cr. as value of

unreturned shuttering and scaffolding material by the Operational Creditor

while computing the outstanding liability. It is the case of the Operational

Creditor that the Corporate Debtor had wrongfully retained the shuttering and

scaffolding materials in breach of the contractual terms. Submission was also

pressed by the Operational Creditor that in both their reminder notices sent on

01.01.2024 and 10.04.2024, Corporate Debtor had been requested to return the

said material. It was also pointed out that the Corporate Debtor had not denied

the fact that the said material was not in their possession. The only explanation

offered by the Corporate Debtor was that some of the scaffolding material was

damaged while majority of it was lying with them in good condition. Hence, the

non-return of the material caused the financial loss as they were deprived of the

opportunity to deploy the said material at other places for commercial use and

hence the Corporate Debtor was liable to pay the value of unreturned goods.

18. Per contra, it is the case of the Corporate Debtor that the shuttering and

scaffolding material supplied by the Operational Creditor was of poor quality

which had been rendered degraded and unusable by rainy weather conditions.

The Operational Creditor had been reminded orally and in the course of physical

meetings to take back the damaged material and replace it which never took

place resulting in delays in the execution of the project resulting in financial

losses. It was also pointed out that besides requesting the Operational Creditor

to collect the remaining material, the Operational Creditor was also requested to

conduct a valuation of the damaged goods as it was necessary to determine the

adjusted value to enable release of payments. However, when reconciliation was Page 13 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025 pending, no amount could have been claimed for payment. Hence the Corporate

Debtor has disputed the addition of Rs 1.65 Cr. towards value of unreturned

shuttering and scaffolding material in computing the outstanding liability of the

Corporate Debtor. Since no replacements were provided despite requests and

the Operational Creditor also failed to carry out a valuation of the damaged

goods, this constituted sufficient grounds to establish that the invoices stood

disputed and had never been admitted by them to be payable.

19. To arrive at our findings, at this juncture we may first look at the

communications exchanged between the two parties on 01.01.2024, 10.04.2024

and 10.06.2024. The relevant excerpts from the said communications are as

below:

01.01.2024 "Subject: - Notice for due payment and return of material.

As you very well know, we are Shri Durga Scaffolding Noida Pvt Ltd. We have supplied shuttering and scaffolding material for your site NTPC, Patratu & MW Panki Thermal Power Plant. The hiring invoices against the same have been delivered to you on monthly basis at your office and email. Refer to annexure A, the outstanding dues have now reached a critical stage. As on date 1-01-2024 the outstanding amount without interest is Rs 74,23,886/- app.

We have called upon your staff to immediately return our material but only feeble commitments had been made of which none realised. Refer to annexure B it is clear that not even a single lorry of material has been returned back to us. The material is legal property of Shri Durga Scaffolding Noida Pvt Ltd and as such ask you again to return it immediately without delay. Kindly see that failure to clear our payment and return back our material shall attract strict penalties.

For SHRI DURGA SCAFFOLDING NOIDA PVT LTD"

10.04.2024 "Subject: - Notice for due payment and return of material.

Page 14 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025 ........

The outstanding dues have now reached a critical stage As on date 1-04- 2024 the outstanding amount without interest is Rs 85,90,728.88/- app. We have called upon your staff to immediately return our material but only feeble commitments had been made of which none have realised. Refer to annexure B, it is clear that not even a single lorry of material has been returned back to us. The material is legal property of Shri Durga Scaffolding Noida Pvt Ltd and as such ask you again to return it immediately without delay.

Kindly see that failure to clear our payment and return back our material shall attract strict penalties."

For SHRI DURGA SCAFFOLDING NOIDA PVT LTD"

10.06.2024 "Sub: Reply to your letter/ notice Dated 10.04.2024 PRELIMINARY OBJECTIONS:

1. ....

2. ....

3. That in July, 2022, due to bad weather and heavy rain the shuttering material was drown in the said area wherein few materials were damaged and other maximum material supplied by you the addressee was in good and proper position.

4. That in this regard my client informed the official of you the addressee several times to collect your material from Panki site and also inform you the addressee to assess the value of damaged material so that my client may be able to release the payment accordingly but you the addressee each and every time were making excuses, even after the assurance that you the addressee shall collect the material from the site. Moreover, it is very much evident from the contents of para no.3 of the letter/notice that my client informed you the addressee to remove the material from the sites of my client but you the addressee manipulated the facts in the current para.

5. That you the addressee apart from the collecting the shuttering material from the site of my client were raising the monthly invoices and were sending the same to my client through email which doesn't means that issuance of invoices without any work may be booked as liability. My client has booked all the invoices which were relevant, legal as well as justified.

REPLY TO THE LETTER/NOTICE ON MERITS

2...It is specifically denied that the outstanding dues have now reached a critical stage as on date 01.04.2024 the outstanding amount without Page 15 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025 interest is Rs. 85,90,728.88/- app. It is submitted that the said balance is hypothetically mentioned. It is further submitted that you the addressee may at any time reconcile the account, if after reconciliation anything is payable to you the addressee my client will release the same.

3.That the contents of Para No.3 are wrong and denied. It is specifically denied that we called upon your staff to immediately return our material but only feeble commitments had been made of which none have realised. Refer to annexure B, it is clear that not even a single lorry of material has been returned back to us. It is further denied that the material is legal property of Shri Durga Scaffolding Noida Pvt Ltd and as such ask you again to return it immediately without delay. It is submitted that the official of my client several times intimated you the addressee to collect the material but you the addressee failed to collect the material from the site of my client.

Moreover, the contents of preliminary objection may be read as part and parcel to the reply of the current para and same has not been repeated herein for the sake of brevity."

(Emphasis supplied)

20. When we go through the above communications, we do agree with the

Operational Creditor that in their reply dated 10.06.2024, the Corporate Debtor

had admitted that most of the material was in good condition and that damage

had occurred while the material was in their possession. Nevertheless, we cannot

be unmindful of the fact that objections were also raised by the Corporate Debtor

regarding substandard and poor quality of shuttering and scaffolding material

supplied; that the Operational Creditor had failed to take back or replace the

damaged material and to conduct a proper assessment of the damaged material

besides failure to replace the damaged material. This communication dated

10.06.2024 addressed to the Appellant which was clearly prior to the issue of

the Section 8 Demand Notice. This clearly shows that disputes existed between

the two parties with regard to return of scaffolding and shuttering material well

before the issue of Section 8 Demand Notice.

Page 16 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025

21. Further when we peruse the two notices of 01.01.2024 and 10.04.2024

sent by the Appellant, we notice that payment had been sought by them for the

outstanding hiring/rental charges besides seeking return of the material. There

is no mention for payment of the cost of unreturned goods. Disputing the claim

raised by the Appellant with respect to cost of unreturned material, it was

contended that the business relationship between them contemplated payment

only for the hiring charges for supply of shuttering and scaffolding material on

rental basis. The Corporate Debtor was only required to pay the rent and there

was no obligation on them to pay for the value of goods. When we take a close

look at the reply of the Corporate Debtor dated 10.06.2024, we find that the

Corporate Debtor had categorically stated at para 4 of the said letter which has

already been reproduced at para 19 above that the Operational Creditor may

collect the damaged shuttering material from the project site and that they would

release the payment after the Operational Creditor had valued the damaged

material. We also notice that in the said letter, the Corporate Debtor has denied

the outstanding dues computed by the Operational Creditor and in particular

had stated that payment if any would be released only after accounts were

reconciled. This letter of 10.06.2024 clearly establishes the factum of dispute

with regard to the scaffolding and shuttering material including return of

damaged material which dispute clearly preceded the Section 8 Demand Notice.

22. When we come to the impugned order, we find that the Adjudicating

Authority at para 12 has also noticed that the Corporate Debtor in their reply

dated 10.06.2024 which preceded the statutory demand notice had clearly

mentioned about the substandard quality of material supplied by the Page 17 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025 Operational Creditor and that the Operational Creditor had not taken any action

to take back the damaged material and replace the same. The Adjudicating

Authority has also noted the contention of the Corporate Debtor that mere issue

of invoices without corresponding work being executed cannot be construed as

creating a legitimate liability. The Adjudicating Authority has also noted that the

Corporate Debtor had requested for reconciliation of accounts prior to making

payments which clearly shows pre-existing disputes between parties.

23. Further, it has been the contention of the Corporate Debtor that the

alleged cost of unreturned goods was claimed for the first time by the Appellant

only in the Section 8 Demand Notice dated 18.06.2024 and that this issue had

also been disputed by the Respondent in their reply dated 29.06.2024 to the

Section 8 Demand Notice.

24. It will therefore be constructive to have a look at the reply of the Corporate

Debtor to the Section 8 Demand Notice which is extracted below:

"Subject: Reply to Demand Notice dated 18.06.2024

Re: Demand Notice dated 18.06.2024 under Rule 5 o/the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. ......

5 .....

b) That in terms of the Hiring orders, which formed the principal contract between the parties, it was incumbent upon you to provide all the scaffolding material in good quality and further ensure that the technical specifications as required by our Client were met.

.....

10. Furthermore, your mala fide is evident from the fact that despite our Client raising disputes with respect to the quality of material supplied by you and the consequential damage caused to our Client due to stalling of

Page 18 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025 work, you continued to raise invoices on our Client in total disregard of your contractual obligations.

11. That you were further requested to replace the dilapidated material supplied by you, which led to delay in construction targets at our Client's site thereby causing substantial loss to our Client. However, your careless and negligent attitude to exploit our Client through issuance of purported invoices when the material agreeably could not be used by our Client shows your clear intention to extort our Client.

.....

13. It is further evident that the purported amount due has yet not crystalized. Therefore, by its inherent nature, reconciliation of accounts proves that there was dispute on the amount of money owed (if any) .....

15. Moreover, a discrepancy in amount of debt in terms of Hiring orders and the invoice raised is a prima-facie dispute relatable to the existence of the amount of the debt and hence, a pre-existence of dispute. Therefore, it is evident from the above facts and circumstances that the Demand Notice is not maintainable and must be withdrawn by you at once.

.....

17. It is also stated that the letter dated 10.06.2024 evidencing pre- existence of dispute is enough proof to show that this Demand Notice is premature and is prima facie malicious and ill-intended. ....

20. At the very outset it is pertinent to note that none of these alleged debts is either due nor payable. Firstly, the invoices raised by you have been disputed on multiple occasions by our Client. The sub-standard material supplied by you was unusable at the UP site and the Jharkhand site of our Client. Moreover, no replacement material was issued by you for the material damaged and rendered unusable for no fault of our Client. Therefore, the invoices claimed by you under default were never due, and thus not payable."

(Emphasis supplied)

25. The statutory provision under Section 8(2)(a) of IBC makes it clear that

the Corporate Debtor has to bring to the Operational Creditor the fact of the

existence of a dispute within ten days of the receipt of the demand notice. We

find that the Corporate Debtor in their above reply on 29.06.2024 to the Section

8 notice dated 18.06.2024 has denied the claim raised by the Operational Page 19 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025 Creditor inter alia on the grounds of ongoing disputes related to the debt amount

that has been claimed besides raising the issue of supply of damaged material.

It is clear that the defence which was raised by the Corporate Debtor in its reply

to Section 8 Demand Notice cannot be said to be moonshine. The

correspondence exchanged between the Corporate Debtor and the Operational

Creditor on 01.01.2024, 10.04.2024 and 10.06.2024 prior to Section 8 Demand

Notice also clearly establishes that there was real pre-existing dispute. Hence

the reliance placed on the judgment of this Tribunal in B.V. Gautam judgment

supra by the Appellant is misplaced because in that case the dispute was raised

after a prolonged delay post the Section 8 Demand Notice. However, in the

present case, the dispute was raised on 10.06.2024 which clearly pre-dated the

Section 8 Demand Notice and hence we are of the view that this judgment does

not come to the relief of the Appellant.

26. We are of the considered view that it is not the remit of Adjudicating

Authority to investigate into contractual/business disputes or to look into their

merits and as long as a dispute truly exists in fact and is not spurious,

hypothetical or illusory, the Adjudicating Authority has no other option but to

reject the Section 9 application. In the present factual matrix, the defence raised

by the Corporate Debtor cannot be held to be moonshine, spurious, hypothetical

or illusory and for such disputed amounts, Section 9 proceedings under IBC

cannot be initiated at the instance of the Operational Creditor in terms of

Mobilox judgment supra which is as reproduced below:

Page 20 of 22

Company Appeal (AT) (Insolvency) No. 1666 of 2025 "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)(2)(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."

27. Where Operational Creditor seeks to initiate insolvency process against a

Corporate Debtor, it can only be done in clear cases where no real dispute exists

between the Operational Creditor and Corporate Debtor. In case the Corporate

Debtor raises a dispute which dispute is pre-existing in nature, the Adjudicating

Authority is not required to be satisfied as to whether the defence raised is likely

to succeed or not as long as it finds the defence raised to be plausible. In the

present facts of the case, the Corporate Debtor having successfully raised pre-

existing disputes within the meaning of IBC and which has been substantiated

from material placed on record, we are of the considered opinion that the

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

application.

Page 21 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025

28. With the aforesaid discussion, we find no merit in the Appeal. The Appeal

is dismissed. We are of the considered view that the Adjudicating Authority has

rightly rejected the application under Section 9 of the IBC and find no reasons

to interfere with the impugned order. No order as to costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical) Place: New Delhi Date: 19.01.2026

Abdul

Page 22 of 22 Company Appeal (AT) (Insolvency) No. 1666 of 2025