NCLT Ahmedabad Rejects Section 9 Plea Against Electrotherm, Cites Pre-Existing Dispute

April 17, 2026 : The Ahmedabad Bench of the National Company Law Tribunal (NCLT) has dismissed a Section 9 application filed by A.T. Trade Overseas Pvt. Ltd. seeking initiation of Corporate Insolvency Resolution Process (CIRP) against Electrotherm (India) Ltd., holding that the claim was vitiated by a pre-existing dispute between the parties.

A Bench comprising Judicial Member Shammi Khan and Technical Member Sanjeev Sharma, in its order dated April 17, 2026, held that insolvency proceedings cannot be invoked in cases where disputes regarding the underlying transaction existed prior to issuance of the statutory demand notice.

Background

The operational creditor filed the petition on July 7, 2025, claiming default of ₹15.70 crore arising from supply transactions. The creditor contended that goods were supplied pursuant to purchase orders issued between May and October 2022, and invoices were raised from September to November 2022. Despite repeated follow-ups, the dues allegedly remained unpaid.

A demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 was issued on February 7, 2025, which was replied to by the corporate debtor on February 24, 2025, disputing the claim. A rejoinder followed on May 13, 2025, after which the Section 9 application was filed.

Corporate Debtor’s Defence

Electrotherm opposed the petition on the ground that the claim was disputed well before initiation of insolvency proceedings. It pointed to multiple communications, including emails and debit notes, raising concerns about defective quality and short supply of goods.

The corporate debtor submitted that debit notes were issued as early as December 2022 and subsequently in 2023, supported by quality control reports and laboratory findings. It also relied on correspondence exchanged in December 2023, which, according to it, clearly demonstrated ongoing disputes regarding quality and reconciliation of accounts.

Further, Electrotherm highlighted pending proceedings under Section 138 of the Negotiable Instruments Act, arguing that these also evidenced the existence of disputes within the meaning of Section 5(6) of the Code.

Findings of the Tribunal

The Tribunal acknowledged that the operational creditor had produced documents such as purchase orders, invoices and ledger accounts indicating supply of goods. However, it emphasised that the critical test under Section 9 is whether the debt is undisputed.

On examining the record, the Bench found that disputes relating to quality, quantity, debit notes and financial adjustments had been raised prior to the issuance of the demand notice. These disputes were supported by contemporaneous correspondence and documentary material placed on record.

The Tribunal observed that such issues would require detailed adjudication, including examination of technical evidence and reconciliation of accounts, which falls outside the scope of summary insolvency proceedings.

It reiterated that the Insolvency and Bankruptcy Code is not a substitute for recovery proceedings and cannot be used to adjudicate contentious contractual disputes.

Conclusion

In view of the existence of a pre-existing dispute, the Tribunal held that the essential requirement of an undisputed operational debt was not satisfied. Accordingly, the Section 9 application was dismissed as not maintainable at the threshold.

Case Title: A.T. Trade Overseas Private Limited v. Electrotherm (India) Limited
Case No.: C.P. (IB) No. 289/AHM/2025
Coram: Shammi Khan (Judicial Member); Sanjeev Sharma (Technical Member)