NCLAT: Operational Debt Must Independently Meet ₹1 Crore Threshold; Cannot Combine Liabilities of Distinct Entities

April 21, 2026 : The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has dismissed an appeal filed by Bhushan Power & Steel Limited, reiterating that operational debts of separate legal entities cannot be aggregated to meet the minimum threshold requirement under Section 4 of the Insolvency and Bankruptcy Code, 2016 (IBC).

The Appellate Tribunal, comprising Justice N. Seshasayee (Judicial Member) and Arun Baroka (Technical Member), upheld the order of the National Company Law Tribunal (NCLT), New Delhi, which had rejected the Section 9 application on the ground of maintainability. The Tribunal found that the debt attributable to the corporate debtor, A.G. Pipes Pvt. Ltd., was only ₹13,09,505, far below the statutory threshold of ₹1 crore.

Bhushan Power & Steel Limited had claimed an operational debt of approximately ₹1.49 crore arising from steel supplies made pursuant to various purchase orders. However, a detailed scrutiny of invoices revealed that the bulk of the claim—about ₹1.42 crore—pertained to A.G. Pipes, a sole proprietorship concern, and not the corporate debtor.

The Tribunal noted that only two invoices, reflected in the record (as seen in the tabulation on page 14 of the judgment), were issued in the name of A.G. Pipes Pvt. Ltd., while the remaining invoices were raised against the proprietorship concern. This distinction was further supported by differing GST numbers and statutory registrations of the two entities.

Rejecting the appellant’s attempt to club liabilities, the Tribunal held that A.G. Pipes Pvt. Ltd. and A.G. Pipes are separate and independent legal entities, notwithstanding common management. It emphasised that insolvency proceedings under the IBC are entity-specific and cannot be triggered by combining debts of different legal persons.

The Appellate Tribunal also clarified that the issue of pre-existing dispute, heavily relied upon by the appellant, was not determinative in the present case. The primary question was whether the statutory threshold under Section 4 of the IBC had been met. Since the debt attributable solely to the corporate debtor fell significantly short, the insolvency application was not maintainable.

Further, the Tribunal found no infirmity in the NCLT’s findings and held that reliance on precedents concerning pre-existing disputes was misplaced, as the appeal failed on the threshold requirement itself.

Accordingly, the NCLAT dismissed the appeal and affirmed that insolvency proceedings cannot be invoked unless the minimum default requirement is satisfied independently by the corporate debtor concerned.

Case Details:
Case Title: Bhushan Power & Steel Limited vs A.G. Pipes Private Limited
Case No.: Company Appeal (AT) (Insolvency) No. 2057 of 2024
Decision Date: April 21, 2026
Coram: Justice N. Seshasayee (Judicial Member) and Arun Baroka (Technical Member)