NCLT Allahabad Admits Section 9 Plea Against Magma Industries; ₹8.21 Crore Default Triggers CIRP

April 9, 2026 : The Allahabad Bench of the National Company Law Tribunal (NCLT) has admitted a Section 9 application filed by Aarti Industries Limited against Magma Industries Limited, initiating the Corporate Insolvency Resolution Process (CIRP) after finding clear evidence of operational debt and default exceeding ₹8.21 crore.

The order, pronounced on April 9, 2026 by a bench comprising Judicial Member Praveen Gupta and Technical Member Ashish Verma, held that the defence raised by the corporate debtor was unsupported by credible evidence and did not constitute a valid pre-existing dispute under the Insolvency and Bankruptcy Code, 2016.

Debt, Default, and Transactions Established

The Tribunal noted that Aarti Industries, a manufacturer and supplier of speciality chemicals, had supplied Para Nitro Chloro Benzene (PNCB), Ortho Chloro Nitro Benzene (ONCB), and PNCB flakes to Magma Industries pursuant to multiple purchase orders issued between July 2022 and January 2023.

Invoices stipulated a 90-day payment period. However, Magma Industries failed to discharge its dues, resulting in a total outstanding of ₹8,21,04,743, including principal of ₹6.04 crore and interest of ₹2.16 crore. The Tribunal relied on invoices, delivery records, and the Record of Default issued by the National E-Governance Services Limited (NeSL), which reflected the date of default as October 31, 2022.

Importantly, the record showed part payments, issuance of post-dated cheques, and email communications acknowledging liability—factors that reinforced the existence of a legally enforceable debt. Dishonour of cheques due to insufficient funds further corroborated default.

Pre-Existing Dispute Rejected

Magma Industries argued that delays in supply and quality issues caused operational losses. However, the Tribunal found that no such dispute had been raised contemporaneously during the course of transactions or at the time of delivery.

Applying the Supreme Court’s test in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., the Bench held that a dispute must be real and supported by evidence. In this case, the allegations were deemed “feeble and not supported by credible evidence,” particularly in light of prior acknowledgments of liability and absence of supporting documents.

The Tribunal emphasized that a belated defence raised only after issuance of the demand notice cannot qualify as a genuine pre-existing dispute under Section 8(2) of the Code.

Limitation and Maintainability

The application, filed on October 30, 2024, was held to be within limitation, as it fell within three years from the date of default recorded in the NeSL data. The Tribunal also confirmed that the operational debt exceeded the statutory threshold of ₹1 crore, satisfying the requirement under Section 4 of the Code.

CIRP Initiated; IRP Appointed

Finding that all conditions under Section 9 were fulfilled, the Tribunal admitted the application and initiated CIRP against Magma Industries Limited. It appointed Mr. Rajesh Srivastava as the Interim Resolution Professional (IRP) and declared a moratorium under Section 14, prohibiting:

• Institution or continuation of proceedings against the corporate debtor
• Transfer or disposal of assets
• Enforcement of security interests
• Recovery of property in possession of the corporate debtor

The IRP was directed to make a public announcement, invite claims, and constitute the Committee of Creditors in accordance with the Code.

Key Takeaway

The ruling reinforces that unsupported, afterthought disputes will not defeat a Section 9 petition. Where documentary evidence shows supply of goods, acknowledgment of liability, and default, the threshold for admission of CIRP is readily met.

Cause Title: Aarti Industries Limited v. Magma Industries Limited
Case No.: CP (IB) No.154/ALD/2024