Uniworth Enterprises Llp vs Starco Metaplast Private Limited

(Arising out of the Order dated 09.05.2025 passed by the 'Adjudicating Authority' (National Company Law Tribunal, New Delhi Bench) in C.P.(I.B.) No. 176 of 2023 and I.A. No. 4625 of 2024 in C.P.(I.B.) No. 176 of 2023)

IN THE MATTER OF: Uniworth Enterprises LLP Having its registered office at: 804, B-Wing, Siddhivinayak Tower, Nr. Katari Arcade, Off. S. G. Highway, Makarba, Ahmedabad 380051 Gujarat, India ...Appellant

Versus

M/s. Starco Metaplast Private Limited 1/536, C-12, Gali No. 4-A, Friends Colony, Industrial Area, GT Road, Shahdara Delhi East Delhi, DL 110095 IN ...Respondent

Present: For Appellant : Ms. Natasha Dhruman Shah, Advocate

For Respondent : Mr. S.B. Chaturvedi, Mr. Akshay Sharma, Mr. R.L. Syngal and Mr. Paritosh Chaturvedi, Advocates

JUDGMENT

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

The present Appeal has been filed under Section 61 of the Insolvency

and Bankruptcy Code, 2016 (hereinafter referred to as "Code") against the

orders dated 09.05.2025 (hereinafter referred to as "impugned orders") passed

by the Hon'ble National Company Law Tribunal, New Delhi, Bench -IV

(hereinafter referred to as "Adjudicating Authority") in C.P.(IB) No. 176 of 2023

and I.A. No. 4625 of 2024 in C.P.(IB) No. 176 of 2023 wherein the Learned Adjudicating Authority has rejected the Application under Section 9 of the

code preferred by the appellant seeking, interalia, initiation/ commencement

of Corporate Insolvency Resolution Process of the respondent i.e. corporate

debtor and allowing the application filed by the Corporate Debtor/Respondent

seeking, interalia, permission to file additional documents after conclusion of

final arguments of both the parties.

2. The Appellant - Uniworth Enterprises LLP claims an undisputed

operational debt of ₹2,83,84,205/- comprising principal of ₹2,32,60,608/-

and interest of ₹51,23,597/-) for pharma packaging materials supplied to the

Corporate Debtor - Starco Metaplast Private Limited between August and

November 2021. The Appellant argues that the NCLT erred in concluding a

"pre-existing dispute" based on the Corporate Debtor's claims of non-supply

and related debit notes, especially since the Corporate Debtor continued to

place orders and failed to substantiate claims for a significant portion of the

alleged non-supplied goods.

3. The Appellant is aggrieved of NCLT allowing of the Corporate Debtor to

file additional documents (WhatsApp chats and a letter to Oxyzo Financial

Services) after the conclusion of final arguments, without proper justification

for the delay and without these documents being part of the initial pleadings.

The Appellant contends that this violated principles of natural justice and

procedural fairness. The appeal seeks to quash and set aside both the NCLT's

order rejecting the Section 9 application and the order allowing the filing of

additional documents.

Company Appeal (AT) (Insolvency) No. 1056 of 2025 2 of 29

4. Appellant - Uniworth Enterprises LLP is an Operational Creditor and

manufacturer of pharma packaging materials. The Corporate Debtor - Starco

Metaplast Private Limited approached the Operational Creditor - Uniworth

Enterprises LLP for purchase of pharma packaging materials from 2019.

Corporate Debtor placed purchase orders for a total quantity of 2,21,573 kgs

of goods, amounting to ₹4,07,63,236/- from 07.07.2021 to 04.10.2021. The

Operational Creditor supplied 1,35,567 kgs of goods amounting to

₹2,53,88,620/- and raised invoices from the period from 05.08.2021 to

09.11.2021. For short supply of about 85,250 kgs, the Corporate Debtor

issued debit notes totalling ₹40,84,275/- between 15.07.2021 to 02.12.2021.

The Operational Creditor on 23.08.2022 sent an email to the Corporate

Debtor requesting payment of pending dues of ₹2,32,65,008/-. Both parties

held a meeting in November 2022 to reconcile the accounts, where it was

decided that a credit note of ₹40,84,725/- would be issued by the Operational

Creditor. if the Corporate Debtor paid ₹1,91,80,733/- or issued post-dated

cheques.

5. Operational Creditor sent an email to the Corporate Debtor on

04.01.2023 again requesting the post-dated cheques to settle outstanding

dues and enable the credit note issuance. On 23.01.2023 Operational

Creditor issued a demand notice under Form 3 and Form 4 of the IBC Rules,

requesting payment of ₹2,32,60,608/- plus interest which is ₹2,83,84,205/-

including the interest. On 09.02.2023 Corporate Debtor replied to the

demand notice accepting payment of ₹1,91,80,733/- in monthly instalments

Company Appeal (AT) (Insolvency) No. 1056 of 2025 3 of 29 of ₹15,00,000/- each. Thereafter on 22.02.2023 the Operational Creditor filed

an Application under Section 9 of the Code for initiation of CIRP against the

Corporate Debtor which was registered as C.P.(IB) No. 176 of 2023 on

24.03.2023. The matter has been heard by NCLT on various dates and on

11.09.2024 an IA No. 4625/2024 was filed by the Corporate Debtor for filing

additional documents which was objected to by the Operational Creditor on

the point of maintainability and issuance of notice. On 09.05.2025, the

impugned order was passed by the NCLT rejecting C.P.(IB) No. 176 of 2023

i.e. Section 9 application and further allowing I.A. No. 4625 of 2024 which

was the application for additional documents.

6. The Appellant - Operational Creditor claims that the maintainability of

IA No. 4625/2024 was not argued and it was dismissed and the documents

placed in this IA were relied upon by the Adjudicating Authority while

dismissing Section 9 Application.

7. Appellant claims that the so-called a pre-existing dispute is not a

bonafide or truly pre-existing dispute which was raised prior to the issuance

of the demand notice dated 23.01.2023. The Operational Creditor is seeking

for payment of goods actually supplied which is 1,35,567 kgs. and for non-

supply of 85,250 kgs. of material for which debit note amounting to

₹40,84,275/- was allegedly issued does not constitute a bonafide or truly pre-

existing dispute. The Appellant further claims that the Corporate Debtor

continued to place purchase orders even after the alleged dispute arose

indicating acceptance of supply and waiver of dispute. And this is in

Company Appeal (AT) (Insolvency) No. 1056 of 2025 4 of 29 contravention to the judgment of Hon'ble Supreme Court in Mobilox

Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2018) 1 SCC 353,

which requires a "genuine dispute".

8. Appellant also contends that the Adjudicating Authority committed a

procedural impropriety by allowing the Corporate Debtor to file additional

documents specifically WhatsApp chats and a letter to Oxyzo Financial

Services dated 24.04.2024 after the conclusion of final arguments and

without any justifiable cause for their belated production. Appellant claims

that by allowing such filing of additional documents prior to the passing of a

final order and which is the basis of NCLT's finding of a pre-existing dispute

has deprived the Appellant an opportunity to defend its case.

9. The Corporate Debtor had admitted to an outstanding payment of

₹1,91,80,733/- in their reply to the demand notice on February 9, 2023,

accepting the payment in monthly instalments of ₹15,00,000/- to be made.

10. Appellant claims that the payments made by the Corporate Debtor and

the amounts received through Oxyzo Financial Services were appropriated by

the Operational Creditor on a FIFO basis against previously pending invoices

as is customary in a running account between the parties. Moreover, the

Corporate Debtor had not provided any specific appropriate instructions for

these payments. And therefore, NCLT's implied finding that the payments

settled the current outstanding invoices is erroneous.

Company Appeal (AT) (Insolvency) No. 1056 of 2025 5 of 29

11. The Adjudicating Authority has also not considered the inclusion of

interest @ 15% on delayed payments which was explicitly agreed on in the

invoices.

12. It is also contended by the Appellant that Corporate Debtor had failed

to provide any justification for the delay in filing the additional documents,

which were in their knowledge and possession during the initial stage of from

the initial stages of the proceedings. Further the main pleadings of the

Corporate Debtor has no averments referring to these documents or asserting

any lack of prior knowledge.

13. Appellant also claims that the Corporate Debtor failed to provide

adequate proof for a significant portion of the alleged non-supplied goods.

Specifically, 15,801 kgs out of 85250 kgs was claimed in that debit notes.

This directly impacts the legitimacy of the pre-existing dispute.

14. The Corporate Debtor did not adhere to the proposed settlement

agreement which involved the Operational Creditor issuing a credit note of

₹40,84,725/- upon the CDs commitment to make payment of ₹191,80,733 or

issue post-dated cheques. This non-compliance further demonstrate the CDs

default and lack of bonafide intention. Therefore, the order passed by the

NCLAT dated 09.05.2025 has to be set aside.

15. Respondent claims that the payment received from the Respondent

were adjusted against earlier invoices leaving the claimed amount as

outstanding and forming the basis of the Section 9 Application is misleading

Company Appeal (AT) (Insolvency) No. 1056 of 2025 6 of 29 as the earlier invoices against which such alleged adjustments were made

pertain to Covid 19 period and specifically barred by Section 10A of the Code.

The respondent brings to our notice that the Operational Creditor had

claimed payment against invoices raised between the 05.08.2021 and

09.11.2021. During this period the Respondent had made payments

amounting to ₹2,24,19,103/-. Out of this ₹1.98 Cr. was paid against the very

invoices relied by the Operational Creditor in its Section 9 Application. This

reduces the total amount which is outstanding to be less than one crore and

therefore, Section 9 is not maintainable.

16. Respondent claims that Appellant has adjusted these payments

towards earlier dues of the Respondent without disclosing that those earlier

invoices pertained to Covid 19 period which is explicitly protected under

Section 10A of the Code. And such an adjustment is in direct contravention

of the statutory mandate of Section 10A which categorically prohibits the

inclusion of any debt arising between 25.03.2020 and 24.03.2021 in his

Section 9 Application. It claims that no application can ever be filed for

initiating CIRP of a Corporate Debtor for default period from 25.03.2020 and

24.03.2021.

17. Respondent claims that it is an admitted case of the Operational

Creditor that due to short supply of the goods against the purchase orders.

The Respondent CD had issued debit notes dated 01.12.2021 amounting to

₹40,84,275/- for the difference of rate the Corporate Debtor had to bear by

purchasing the goods not supplied by the Operational Creditor from the third

Company Appeal (AT) (Insolvency) No. 1056 of 2025 7 of 29 parties and this is a pre-existing disputed amount. The parties had also

exchanged several emails between them which explicitly demonstrate that the

respondent had suffered huge monetary and other losses due to delay in

supplies against the orders placed by the Respondent on the Corporate

Debtor. Further there was change in the prices of materials forcefully and

unilaterally on the higher side by the Operational Creditor on the orders

already placed by the Respondent. It also claims that due to no supply made

at all against the order placed by the Respondent and due to unilateral

cancelling of orders by the Appellant it suffered losses. It also claims that

Respondent factory was compelled to remain shut for many days owing to

delay and non-supply of material by the Operational Creditor, despite

confirmed purchase orders. As a consequence, the Respondent were forced to

remained idle, for prolong periods leading to substantial losses. It further led

to significant erosion of the customer base and long term commercial losses

for the Respondent.

18. Respondent contends that the Appellant was heard at length on the

application for additional documents bearing IA No. 4625/2024. Respondent

claims that in the hearing on 25.10.2024, both the parties made detailed

submissions on the Interlocutory Application. Thereafter, the parties also filed

their written submissions. Respondent claims that the Appellant has for the

first time in its rejoinder claimed that the Operational Creditor had adjusted

towards the pending dues of the Respondent without disclosing that the

Company Appeal (AT) (Insolvency) No. 1056 of 2025 8 of 29 earlier invoices during the Covid 19 period and barred under Section 10A of

the Code.

19. Respondent also brings to our notice that since the Appellant had

questioned the authenticity of the documents of Oxyzo Financial Services

Limited, it had to get the confirmatory documents from them and for that

reason there was a delay in submitting the additional documents.

20. Respondent also claims that Operational Creditor falsely claims that it

was never informed that the payments were made against specific invoices

mentioned in the Application for this purpose the Respondent has relied upon

WhatsApp chat and emails between the Appellant - Operational Creditor and

Respondent showing communication of payment of ₹1.15 Cr. against specific

purchase orders / invoices. Respondent contends that the Operational

Creditor has not denied the authenticity of the WhatsApp chats, the only

defence is that a delay in filing the same.

Analysis and Evaluation

21. We have heard counsels of both sides and perused the material placed

on record. Basis the material placed on the record, and hearing both sides,

the main issue before us is whether there is a pre-existing dispute regarding

the operational debt under Section 8(2)(a) of the Insolvency and Bankruptcy

Code, 2016. The other ancillary issue is relating to the dispute regarding the

non-supplied quantity of goods and the corresponding debit notes, which

could constitute a pre-existing dispute. Also, whether there was any dispute

Company Appeal (AT) (Insolvency) No. 1056 of 2025 9 of 29 regarding the principle of running account and first in first out (FIFO) method

of payment against the outstanding debt.

22. Briefly speaking the Operational Creditor - M/s Uniworth Enterprises

LLP had supplied goods to Corporate Debtor - M/s. Starco Metaplast Private

Limited over a period of time and as on 05.08.2021 the total outstanding dues

of the Operational Creditor stood at ₹2,26,92,720. It is contended by the

Appellant that there was a running account between the Operational Creditor

and the Corporate Debtor. And the outstanding balance in this running

account was tried to be resolved through mutual discussions. To reconcile

the accounts, both the parties held a meeting and it was agreed that a credit

note would be issued by the Operational Creditor for ₹40,84,725/- on the

condition that the Corporate Debtor shall make the payment of

₹1,91,80,733/- for the supplies made or in the alternative issue post-dated

cheques ₹15 lakhs each for a total amount of ₹1,91,80,733/-. Assuming that

the credit note was to be issued by the Operational Creditor as per the above

agreement for short supply, the corporate debtor had admitted that there is

an outstanding balance of ₹1,91,80,733/- and the Corporate Debtor would

be making this payment in post-dated cheques of ₹15,00,000/- each for

₹1,91,80,733/-. In such a situation we find that there is an admitted debt

which is more than the threshold and we can un hesitatingly conclude that

the petition should be accepted under Section 9.

Company Appeal (AT) (Insolvency) No. 1056 of 2025 10 of 29

23. Now we look into as to how the Adjudicating Authority has dismissed

the petition and the relevant operative part of the impugned order is as

follows:

XXX

13. In view of the foregoing, it is noted that, as per the submissions of the Corporate Debtor, payments have been made by it, through its financier, in relation to the same invoices which are the subject matter of the present application. As per the averments of the Corporate Debtor, it has submitted that an amount of Rs. 1,98,00,000/- has been remitted by the Corporate Debtor to the Operational Creditor against these specific invoices, which are being alleged as an unpaid amount of Rs. 2,83,84,205/-

as per Part-IV of Form 5 by the Applicant. The Applicant has submitted that the amounts credited by the Corporate Debtor were adjusted by the Operational Creditor against back-dated invoices on the basis of the First- In-First-Out (FIFO) method, towards the alleged pending dues. However, it is pertinent to observe that the documentary evidence on record clearly indicates that the payments were made by the Corporate Debtor against specific and identified invoices. In such circumstances, the contention of the Applicant-that the said payments were appropriated towards older dues based on the First-In-First-Out (FIFO) method-- cannot be sustained. The adjustment of funds in a manner contrary to the express remittance instructions, particularly when specific invoices have been discharged, is untenable in the present proceedings. Accordingly, the plea of the Applicant stands discredited to that extent. The appropriate remedy for such a breach may lie in an alternate forum or jurisdiction and not necessarily before the Adjudicating Authority under the Code.

14. Upon a careful examination of the facts of the present case, it becomes evident that there exist disputes and disagreements concerning the alleged outstanding amount claimed by the Applicant/Operational

Company Appeal (AT) (Insolvency) No. 1056 of 2025 11 of 29 Creditor, which arose prior to the issuance of the statutory demand notice and the filing of the present application, particularly in relation to the invoices raised by the Applicant.

15. It is further observed that the minimum threshold limit of Rs. 1 Crore as laid down under Section 4 of the Code is the statutory requirement which has to be mandatorily complied with and no person shall be entitled to have the privilege of not complying with the statutory requirements. The threshold limit was increased from Rs. 1 lakh to 1 crore vide notification dated 24.03.2020 and the present application was filed on 18.05.2023. Therefore, the present petition failed to meet the minimum threshold amount of Rs. 1 crore. Hence, the present petition is not maintainable and is liable to be dismissed on this ground alone. XXX

24. Now we delve into the issue of the dispute in the claim of the operational

creditor. We note that the corporate debtor had admitted to an outstanding

payment of ₹19,180,733/- in their reply to the demand notice on February 9,

2023, accepting that payment in monthly instalments of ₹15 lakhs was to be

paid. It will be useful to extract the reply to the demand notice, which is as

follows:

XXX

12. That as per your demand notice your demand is totally wrong and disputed because my client maintaining a running account in which my client has paid more than Rs.9,03,97,920.98 to you since April 2020 and Rs.12917/- is paid on 31/03/2022 in form of TDS. The payment always made on account which is more than Rs.9,03,97,920.98 as a lum sum and not paid invoice to invoice so it cannot say that the invoices for payment in question are not paid. Hence your demand notice is totally unjust and disputed considering the above mentioned payments made by my client.

Company Appeal (AT) (Insolvency) No. 1056 of 2025 12 of 29

13. That It is further point out that the above demand from your organization is already under dispute and on the said dispute; you admittedly, have had various oral and written communications with my client. That your team and my client were a mutual agreement which was quite beautifully summarized in an email received from your team on 04 th January 2023.

The above mail can be further numerated as following:

 Your firm will issue a credit note of Rs.40,84,275/- (amount equivalent to debit note number GST/03, GST/04 , GST/05, GST/06, GST/07, GST/08, GST/09 Dated 01/12/2021 of my client);

 My Client will make the payments to you for balance amount in monthly instalments with each instalment of Rs. 15,00,000/- with last instalment to be the difference in monthly intervals.

14. That believing the said representation, assurance and commitment made by your team, my client was assured but till day the credit note from you is not yet received by which the post-dated cheques could not be issued.

15. That it is submitted that from December 2021, my client has been continuously following-up with your team to provide a credit note equalling the losses my client. 16. That, for the reasons stated herein, you are liable to pay too my client not only Rs. 40,84,275/- and other losses and damages of Rs.55,00,000/-.

XXX

25. From the above reply to Section 8 demand notice, we find that the

Corporate Debtor has accepted that the outstanding amount, which was to

be paid as described above; however, the corporate debtor did not make any

payment because the credit note was not issued by the Operational Creditor.

Company Appeal (AT) (Insolvency) No. 1056 of 2025 13 of 29 Assuming that the Operational Creditor had not made a credit note of

₹4,084,275/-, we find that after deducting this amount, the outstanding,

which was to be paid by the Operational Creditor is more than the threshold

amount and the petition under Section 9 could be admitted.

26. The Corporate Debtor has accepted about the settlement which is noted

at page 193 of APB, that the Operational Creditor will issue a credit note of

₹40,84,275/- and the Corporate Debtor will pay the balance amount in

monthly instalment of ₹50/- lakhs each. Respondent has also further claimed

damages of ₹55/ lakhs and also claimed to have filed a commercial suit.

Respondent has claimed that since the Appellant has failed to issue the credit

note to the Corporate Debtor and there are various issues of delay of supply

of material, therefore, there is an existence of dispute pending between them

which is prior to issuance of the notice on the grounds of deficiency in services

and poor quality of work.

27. Basis the record we do not find that this dimension of the dispute is a

moonshine and spurious dispute deserving rejection of the section 9 petition.

28. The Appellant has provided another dimension to the dispute, which is

that it made payment on invoice basis and not on running account1 basis.

1 In Black's Law Dictionary, 6th edition, Running account: An open unsettled account, as distinguished from a stated and liquidated Running accounts mean mutual accounts and reciprocal demands between the parties, which accounts and demands remain open and unsettled.

Open & Unsettled is the direct opposite of a "stated and liquidated account," meaning the final balance is not yet fixed. Transactions remain open to future adjustment. Mutual Demands: It involves ongoing credit where both parties may owe each other or have recurring exchanges.

Company Appeal (AT) (Insolvency) No. 1056 of 2025 14 of 29 We find that such an argument of the Corporate Debtor is not based on the

records and its own admitted position of the Corporate Debtor borne out from

the records in the appeal paper book. We find that this is corroborated by the

its acceptance of paying on account, which is noted in the response to the

demand notice dated 23.01.2023, under Section 8, issued on 09.02.2023 by

the advocate of the corporate debtor as noted by us here in earlier.

29. We also note two contemporaneous emails dated 23.08.2022 and

04.01.2023 at page 170 and 172 of APB giving the details of the discussions

for settlement of the accounts. Such discussion is also confirmed from the

reply of the Corporate Debtor in response to Section 8 demand notice which

is at page 192 of APB. In the said reply to Section 8 demand notice, it is

accepted by the Corporate Debtor that they were maintaining a running

account, which is extracted as below:

XXX

12. That as per your demand notice your demand is totally wrong and disputed because my client maintaining a running account in which my client has paid more than Rs.9,03,97,920.98 to you since April 2020 and Rs.12917/-is paid on 31/03/2022 in form of TDS. The payment always made on account which is more than Rs. 9,03,97,920.98 as a lum sum and not paid invoice to invoice so it cannot say that the invoices for payment in question are not paid. Hence your demand notice is totally unjust and disputed considering the above mentioned payments made by my client.

Continuous Relationship: Rather than being a series of isolated, one-time sales or standalone payments, it signifies an ongoing financial arrangement (such as a running balance with a contractor or a business line of credit) Company Appeal (AT) (Insolvency) No. 1056 of 2025 15 of 29

13. That It is further point out that the above demand from your organization is already under dispute and on the said dispute; you admittedly, have had various oral and written communications with my client. That your team and my client were a mutual agreement which was quite beautifully summarized in an email received from your team on 04th January 2023.

XXX

Thus, we find that the Corporate Debtor itself had accepted, had admitted the

position that there was a running account between the Corporate Debtor and

the Operational Creditor.

30. The Appellant has also relied on the judgment of the Hon'ble Supreme

Court in Asset Reconstruction Company (India) Ltd. vs Tulip Star Hotels

Ltd. and others, 2022 SCC Online 944. In this judgment the Hon'ble

Supreme Court has clearly brought out that the ordinary rule with regard to

payments by the debtor, which is unappropriated either to principal or

interest, is that they are first to be applied to the discharge of interest. The

normal rule was that in the case of a debt due with interest, any payment

made by the debtor was in the first instance to be applied towards satisfaction

of interest and thereafter to the principal.

31. The Appellant has also placed its reliance on another judgment of the

Hon'ble Supreme Court in Industrial Credit and Development Syndicate

v. Smita Bain, H. Patel and others, 1999 SCC Online SC 144. In this

judgment the Hon'ble Supreme Court has held that how the payment is to be

adjusted, is the option of the creditor to make adjustment first of the interest

Company Appeal (AT) (Insolvency) No. 1056 of 2025 16 of 29 and then of the principal. If the debtor has indicated the manner in which the

appropriation is to be made, then the creditor has no choice to apply the

payment in a different manner. He may not agree to the mode of the payment,

in which case he must not accept the payment and refund the amount to the

debtor.

32. Both the above judgments clearly bring out a principle that the debtor

has to clearly indicate as to how the payment is to be adjusted and in case it

is not indicated, it is up to the creditor to adjust as per its own choice. In this

case it was on the basis of first in first out and in the running account which

was being maintained historically.

33. The Appellant has also placed its reliance on another judgment of this

Appellate Tribunal in Beatle Teletech Ltd. v. Ercelia IT Services Pvt. Ltd.,

CA (AT) (Ins.) No. 1459 of 2022 (NCLAT Principal Bench Order dated

11.09.2023). In this judgment this Appellate Tribunal has relied upon

Section 60 of the Indian Contract Act2, which provides the application of

payment where the debt is to be discharged is not indicated. In this judgment

this Appellate Tribunal has held that if the debtor makes any payment

without any appropriation then the creditor can use his discretion to wipe out

any of the remaining debts which are due. The right of appropriation lies with

2 Section 60 in The Indian Contract Act, 1872

60. Application of payment where debt to be discharged is not indicated. -- Where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitations of suits.

Company Appeal (AT) (Insolvency) No. 1056 of 2025 17 of 29 the creditor if the debtor does not indicate in what manner the debt is to be

discharged. In such circumstances the creditor has a lot of scope for

exercising his rights in such a manner as to put himself in the most

advantageous position. It is also a well-settled business practice that in a debt

where the principal amount is outstanding and interest has also accrued on

the debt, sums paid by the debtor are applied by the creditor first to the

interest.

34. To further canvass the argument that the payments were made on an

invoice basis and not on a running account basis, the corporate debtor had

produced additional documents to show that the financial service provider

had discounted the invoices and transferred the money to the account of the

operational creditor.

35. We have also gone through a letter on record which is issued by the

respondent issued by them to the financial service provider, namely Oxyzo

Financial Services Pvt Ltd, with whom they were having a facility of disbursal

of purchased finance facilities sanctioned in their favour, which provided

certain credit limit to them. Obviously, such service is based on invoices

which were raised by the Operational Creditor. We have gone through this

letter issued by the corporate debtor to the financial service provider. and we

find that this is for availing the credit facility provided by the financial service

provider to them, and this cannot be equated with the payment of invoices.

Company Appeal (AT) (Insolvency) No. 1056 of 2025 18 of 29

36. Furthermore, the payments made through a financial service provider

were also on an ad-hoc basis. It is true that the Corporate Debtor had issued

instructions to finance the invoices, but there were no instructions to the

Operational Creditor that these are separate payments and should not be

adjusted on a first-in-first-out basis, that is, they are outside the running

account. Moreover, the past practise was for a running account, and that was

followed by the Operational Creditor while adjusting the amount.

37. The Respondent has made payment to Operational Creditor through

Oxyzo Financial Services to the extent of ₹83,00,000/- and also made

NEFT/RTGS payment of ₹1,08,00,000/- against the same invoices on various

dates in October. Appellant brings to our notice that payments were received

Company Appeal (AT) (Insolvency) No. 1056 of 2025 19 of 29 on adhoc basis and not on invoice basis. Furthermore, there is no intimation

as to against which invoice the payment is to be settled against and there is

a consolidated ledger for all supplies.

38. From the above table we observe that the financial service provider has

not provided the exact invoice amount. Illustratively, for the first invoice dated

03.10.2021 the invoice amount is ₹46,71,927/- and the financial service

provider has provided only ₹20,00,000 and the Corporate Debtor has

transferred ₹30,00,000/- through RTGS. This cannot be equated as payment

on invoice basis when no such communication is on record from the

Corporate Debtor to the operational creditor that this transfer has to be

treated as payment on invoice basis as an exception to the running account.

We further find that any communication between Corporate Debtor and the

financial service provider is only for availing the credit facility and this cannot

be termed as payment on invoice basis. Payment on invoice basis has to be

the exact amount of the invoice.

39. Both for the past period for which reconciliation was attempted

unsuccessfully as noted by us here in earlier and as per the above-mentioned

table, we find that it is more of a running account rather than an invoice

based account. In such a situation, the argument of the Respondent that it

was a running account and the Appellant cannot adjust the payments made

against the current invoices, against the earlier outstanding is unsustainable.

Company Appeal (AT) (Insolvency) No. 1056 of 2025 20 of 29

40. Basis the record and also CD's own admission, we find that such an

argument cannot be accepted that it was not a running account. We do not

find that this is an issue of dispute. Rather it is an admitted position of the

Corporate Debtor that it was a running account.

41. To canvass that there is a dispute, the Corporate Debtor has provided

another dimension that the appellant has deliberately failed to disclose that

the earlier invoices, against which such alleged adjustments were made

pertained to the COVID period and were specifically barred by Section 10A of

the Insolvency and Bankruptcy Code, 2016, along with its proviso. In the

application under Section 9, the Operational Creditor claimed payment

against invoices raised between 5 August 2021 and 9 November 2021.

However, the Operational Creditor suppressed a material fact from the

Hon'ble NCLT, namely, that during the period 5 August 2021 to 23 November

2021, the Respondent had already made payments amounting to

₹2,24,19,103/-. Out of this, ₹1.98 crore was paid against the very invoices

relied upon by the Operational Creditor in its Section 9 application. It was

only in its rejoinder that the Operational Creditor, for the first time, admitted

that the Respondent had paid ₹2.24 crore during the period 6 August 2021

to 23 November 2021. However, it attempted to justify this by stating that

such payments had been adjusted towards earlier dues of the Respondent,

without disclosing that those earlier invoices pertained to the COVID period,

which is explicitly protected under Section 10A of the IBC. Such an

adjustment is in direct contravention of the statutory mandate under Section

Company Appeal (AT) (Insolvency) No. 1056 of 2025 21 of 29 10A3, which categorically prohibits the inclusion of any debt arising between

25 March 2020 and 24 March 2021 in a Section 9 application. The corporate

debtor claims that Operational Creditor has very cleverly misappropriated the

payment of ₹1.98 Crores out of ₹2.24 Crores, made by the Respondent against

the very same invoices claimed in its application violating the specific

statutory mandate of Section 10A that no application can ever be filed for

initiating of Corporate Insolvency Resolution Process of a Corporate Debtor

for the default period from 25.03.2020 to 24.03.2021. It is submitted that the

Operational Creditor in a capricious and malicious manner adjusted the

amount paid by the Respondent to the previous invoices according to its own

whims and fancies though no previous invoices were mentioned in the

application.

42. To counter 10A period arguments the respondent has clarified that they

have not misappropriated the payment and even the Respondent was aware

that the amounts were being adjusted on FIFO basis as a customary practice

of running account. Further the outstanding amount has been mentioned in

various communication as well as application / submissions to the tribunals.

Considering that the account was a running account and that at no point in

time the respondent has ever communicated or intimated to the Appellant

3 Section 10A: Suspension of initiation of corporate insolvency resolution process:

Notwithstanding anything contained in sections 7,9 & 10, no application for initiation of corporate insolvency resolution process of a corporate debtor shall be filed, for any default arising on or after 25th March, 2020 for a period of six months or such further period, not exceeding one year from such date, as may be notified in this behalf:

Provided that no application shall ever be filed for initiation of corporate insolvency resolution process of a corporate debtor for the said default occurring during the said period.

Company Appeal (AT) (Insolvency) No. 1056 of 2025 22 of 29 that the payments that purportedly made were to be treated wards the subject

invoice, the appellant possesses the right under law to appropriate the

payments towards the debts as it may deem fit. Even otherwise, the Appellant

has made payment as per the prevalent business practice of settling older

invoices which were due and outstanding for a longer period than the subject

invoices. In relation to raising the defence of the invoices falling under the

prohibited period of Section 10 A does not stand since the subject invoices

are not within the said period.

43. We agree with the arguments of the Appellant and we find that the

defence is illusory, moonshine and a sheer afterthought and cannot

constitute a pre-existing dispute.

44. The Respondent has also claimed that there is deficiency of service due

to short supply and therefore there is a dispute and the Respondent has relied

upon the judgment of Swiss Ribbons Private Limited & Anr. v. Union of

India and Ors (2019) 4 SCC 17. Moreover, the Appellant has contended that

the parties were attempting to reconcile the accounts in November 2022,

which does not demonstrate any dispute. Furthermore, the Operational

Creditor is claiming only the amount with respect to the goods that have been

supplied i.e. 135567 kgs only and this was conveyed to the Corporate Debtor

vide email dated 05.09.2021.

45. The Respondent also claims that they had issued debit notes for an

amount of ₹40,84,275/- and which in turn has been admitted by the

Company Appeal (AT) (Insolvency) No. 1056 of 2025 23 of 29 Appellant. The Appellant brings to our notice that no debit notes were raised

and uploaded on the GST portal as no reference was provided. Respondent

contends that there is a delay of supply and as per the purchase orders, the

Operational Creditor was required to deliver the goods immediately. However,

there was an inordinate delay of supply. Appellant brings to our notice that

there was some delay due to covid 19 pandemic but when goods were

delivered the same were consumed by the Corporate Debtor.

46. We observe that the Corporate Debtor's claim of non-supply of 85,250

kgs of material, for which debit notes amounting to ₹40,84,427/- were alleged

to be issued, does not constitute a bona fide or truly existing dispute which

was raised prior to the Demand Notice dated January 23, 2023. We further

note that the operational creditors' claim is only for the goods actually

supplied, which is 135,567 kgs. Furthermore, the corporate debtor continued

to place purchase orders even after the alleged dispute arose, which indicates

acceptance of supply and waiver of dispute in terms of the judgement of the

Hon'ble Supreme Court in Mobilox Innovations (supra). We do not consider

this to be a genuine dispute and can be described as a spurious and

moonshine dispute.

47. The Appellant has raised another issue which is relating to allowing the

corporate debtor to file additional documents, specifically WhatsApp chats

and a letter to Oxyzo Financial Services, after the conclusion of final

arguments and without any justifiable cause for their belated production.

Appellant claims that the order dated 09.05.2024, passed in IA No. 4625 of

Company Appeal (AT) (Insolvency) No. 1056 of 2025 24 of 29 2024, allowing the additional documents to be taken on record, is perverse.

The application was filed after the final hearing was concluded with the sole

object to delay the proceedings and mislead the Adjudicating Authority.

Appellant had raised objections on the maintainability and it was not provided

any opportunity to controvert the documents. The Appellant claims that these

documents were in the possession of the Corporate Debtor during the initial

stages of the proceedings, and their belated filing violated the principles of

natural justice and procedural fairness. We note that the Adjudicating

Authority has observed that there is no absolute bar on the filing of additional

documents at any stage prior to the passing of a final order. Furthermore, it

was in the context that the Operational Creditor has described some of the

documents as forged and fabricated in its rejoinder before the Adjudicating

Authority. The respondent wanted to clarify, and for that reason it had filed

additional documents. We do not find these objections to be sustainable, and

we overrule these objections.

48. With respect to claim of interest, the respondent claims that interest

cannot be claimed as the Operational Creditor had itself claimed

₹1,91,80,773/- as final settlement of payments. The Appellant on the other

hand, brings to our notice that the invoice document already mentioned the

applicable delay interest.

49. With respect to the claim of damages of ₹55,00,000/- the Appellant

brings to our notice that there is no justification and it cannot be set off. With

respect to the filing of the claim for the damages and pre-litigation mediation.

Company Appeal (AT) (Insolvency) No. 1056 of 2025 25 of 29 The Appellant brings to our notice that mediation was initiated after demand

notice was delivered on 09.02.2022.

50. The Adjudicating Authority while passing the impugned order has come

to a conclusion that the application filed by the Appellant - M/s Uniworth

Enterprises LLP under Section 9 is not maintainable and is liable to be

dismissed as per order dated 09.05.2025 and on the same day IA No.

4625/2024 was allowed for taking additional documents on record.

51. Appellant has vehemently argued that they were not given opportunity

to defend on the maintainability of permitting additional documents to be

taken on record. The main objection of the Appellant which has been noted

by the Adjudicating Authority is that respondent had submitted forged and

fabricated documents claiming that Oxyzo Financial Services made payments

against specific invoices. Adjudicating Authority has noted confirmatory

documents filed by the Respondent including a certificate dated 24.04.2024

confirming payments were made against specific invoices.

52. We also note that the Adjudicating Authority has relied on the

judgment of Hon'ble Supreme Court in Dena Bank (now Bank of Baroda)

Vs. C. Shivakumar Reddy and Anr. Civil Appeal No. 1650 of 2020 in para

91 wherein it was held that there is no bar of filing documents at any time

until a final order either admitting or dismissing the Application has been

filed.

Company Appeal (AT) (Insolvency) No. 1056 of 2025 26 of 29 "91. On a careful reading of the provisions of the IBC and in particular the provisions of Sections 7(2) to (5) IBC read with the 2016 Adjudicating Authority Rules there is no bar to the filing of documents at any time until a final order either admitting or dismissing the application has been passed."

53. Furthermore, Respondent has also filed the WhatsApp chats which

were in the possession of Appellant but were not placed on record. These

documents were in Appellant's knowledge and possession during the initial

stages and the Adjudicating Authority has taken additional documents on

record.

54. In the facts and circumstances of the case and the legal precedents, we

do not find any infirmity in the order of the Adjudicating Authority in taking

the additional documents on record. We uphold the order in IA No.

4625/2024 in CP (IB) No. 176/2023.

55. With respect to the main petition in CP (IB) No. 176/2023, we find that

the Adjudicating Authority has come to a conclusion that there is a pre-

existing disputes and disagreements concerning the alleged outstanding

amount claimed by the Operational Creditor and has dismissed the Section 9

Petition.

Conclusions

56. We find that there is an admission of debt, as is noted in the reply to

the demand notice issued by the corporate debtor. Furthermore, assuming

that the claim of the Operational Creditor is only ₹1,91,80,773, which is

admitted by the Corporate Debtor in the final settlement of payments, still it

Company Appeal (AT) (Insolvency) No. 1056 of 2025 27 of 29 is meeting the threshold as provided under Section 4 of the IBC. The petition

meets the criteria even after the so-called damages as claimed by the

corporate debtor. Furthermore, there is no dispute with respect to the quality

of goods and services. The only issue was with respect to short supply of goods

for which there was an agreement between the two parties for issuance of a

debit note to be raised by the corporate debtor dated 01.12.2021 for

₹40,84,275/- towards alleged price difference in 85,250 kgs. With respect to

the other issue of whether it was a running account between the operational

creditor and the corporate debtor, we find that there was an admission of a

running account in the reply of Section 8 demand notice issued by the

Corporate Debtor. Furthermore, the statement of accounts also reflects that

payments were made on an ad-hoc basis. We also find that there were no

instructions issued by the Corporate Debtor to the Operational Creditor that

payments were being made against specific invoices. However, at the stage of

reply to Section 9 and during the arguments the Corporate Debtor has

adopted a contrary reply and shifted its stand without any proof in support of

the said stand, which is not permissible in law and reflects a mala fide

conduct of the Corporate Debtor. The litigant cannot be permitted to

approbate and reprobate. This has been clearly laid down by the Hon'ble

Supreme Court in the following two judgments:

o Cauvery Coffee Traders, Mangalore vs M/s Hornor Resources Company Limited, 2011 (10) SCC 420

o R N Gosain vs Yashpal Dheer 1992 (4) SCC 683

Both above judgments support the case of the Appellant.

Company Appeal (AT) (Insolvency) No. 1056 of 2025 28 of 29

57. Based on the above analysis we can conclude, that the disputes which

have been raised by the corporate debtor are moonshine and spurious and

cannot be sustained legally. Therefore, the petition cannot be rejected on the

grounds of pre-existing dispute.

58. We also observe that there is a record of default with the information

utility, which was filed on 1.2.02.2024, and it is deemed to be authenticated

and the Corporate Debtor has not raised any dispute.

Orders

59. In the noted background, we conclude that the order of the

Adjudicating Authority in not allowing the Section 9 petition cannot be

sustained. And accordingly, we set aside the orders of the Adjudicating

Authority. We allow the Respondent to make payment of ₹2,83,84,205/- as

per Part-IV of the Section 9 petition within 15 days of the issuance of this

order and in case the Respondent is not able to make this payment the

Corporate Debtor shall be admitted into insolvency and the Adjudicating

Authority shall issue the order for admission under Section 9. All related IAs

are also disposed of. No order as to costs.

[Justice Mohd. Faiz Alam Khan] Member (Judicial)

[Arun Baroka] Member (Technical) New Delhi.

July 03, 2026.

pawan

Company Appeal (AT) (Insolvency) No. 1056 of 2025 29 of 29