NCLAT Upholds Rejection of Section 9 Plea Against Essar Power, Cites Pre-Existing Dispute and Ongoing Arbitration

April 10, 2026 : The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has upheld the rejection of a Section 9 application filed by Narayani Resources Pvt. Ltd. against Essar Power Gujarat Ltd., reiterating that insolvency proceedings cannot be invoked where a genuine pre-existing dispute exists between the parties.

The Appellate Tribunal, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member), dismissed the appeal challenging the order of the NCLT, Ahmedabad Bench, which had refused to admit the operational creditor’s application. The Tribunal found no infirmity in the adjudicating authority’s conclusion that the dispute between the parties regarding reconciliation of accounts and settlement of dues was real and pre-existing.

The dispute arose from coal supply agreements executed between March 2023 and June 2024. Narayani Resources had issued a demand notice on 11.08.2025 claiming an outstanding amount exceeding ₹85 crore. However, Essar Power Gujarat Ltd. responded within the statutory period on 21.08.2025, raising a detailed notice of dispute and referring to a settlement dated 16.01.2025 under which ₹107 crore was agreed to be paid in a structured manner.

The corporate debtor contended that the principal amount of ₹58.30 crore had already been fully paid and that the remaining components were subject to issuance of debit and credit notes. It further claimed that ₹8 crore had been paid as advance interest and that no amount remained due. The reply also relied on documentary material, including credit notes and WhatsApp communications evidencing reconciliation discussions.

The Tribunal noted that even the rejoinder filed by the operational creditor acknowledged ongoing discussions and contested the nature and finality of the alleged settlement. Extracts of WhatsApp exchanges placed on record (as seen on pages 19–20 of the judgment) reflected continuing negotiations, reinforcing the existence of disputes over reconciliation and payment terms.

Affirming the NCLT’s findings, the Appellate Tribunal held that unreconciled claims and disputed settlement figures cannot form the basis of initiating insolvency proceedings. It emphasized that Section 9 of the Insolvency and Bankruptcy Code, 2016 is not a recovery mechanism and cannot be used to adjudicate contractual disputes requiring detailed examination of evidence.

Relying on the Supreme Court’s rulings in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. and Sabarmati Gas Ltd. v. Shah Alloys Ltd., the Tribunal reiterated that once a plausible dispute exists prior to the issuance of a demand notice, the application under Section 9 must be rejected. It clarified that the adjudicating authority is only required to assess whether the dispute is genuine and not spurious, without examining its merits in detail.

Significantly, the Tribunal also took note of the order dated 20.01.2026 passed by the Bombay High Court, whereby disputes between the parties arising out of multiple agreements were referred to arbitration with consent. This, according to the Tribunal, further established that the issues raised in the Section 9 application were already subject to adjudication in an appropriate forum outside the insolvency framework.

In view of these findings, the Appellate Tribunal concluded that the defence raised by the corporate debtor was neither illusory nor unsupported by evidence, but a plausible contention requiring adjudication. Accordingly, it dismissed the appeal and upheld the rejection of the insolvency application.

Case Details:
Case Title: Narayani Resources Pvt. Ltd. v. Essar Power Gujarat Ltd.
Case No.: Company Appeal (AT) (Insolvency) No. 158 of 2026
Coram: Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member)