NCLAT Upholds Rejection Of Section 9 Plea Against Tea4Health, Says Disputes Over Unusable Premises And Disruption Of Essential Services Constitute Genuine Pre-Existing Dispute

May 6, 2026 : The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has held that disputes concerning unusable commercial premises, disruption of essential services and obstruction to business operations constitute a genuine pre-existing dispute under Section 9 of the Insolvency and Bankruptcy Code, 2016, sufficient to reject initiation of Corporate Insolvency Resolution Process (CIRP). The Appellate Tribunal observed that such allegations could not be dismissed as “moonshine” disputes when supported by contemporaneous records and prior judicial orders.

A Bench comprising Justice Mohd. Faiz Alam Khan and Technical Member Naresh Salecha dismissed Company Appeal (AT) (Ins) No. 1443 of 2023 filed by Hotel Horizon Private Limited against Tea4Health Private Limited, affirming the order of the National Company Law Tribunal (NCLT), Mumbai Bench-IV, which had rejected the operational creditor’s Section 9 application.

The dispute arose from a registered leave and licence agreement dated March 6, 2018 under which Tea4Health Private Limited obtained a commercial unit in Hotel Horizon’s Juhu property for operating a restaurant under the name “Wine Villa” for five years commencing from February 21, 2018. Hotel Horizon alleged that Tea4Health defaulted in payment of licence fees, common area maintenance charges, HVAC running costs, water consumption charges, infrastructure charges and interest. According to the operational creditor, invoices raised between 2018 and 2019 reflected an outstanding operational debt of approximately ₹2.62 crore.

Hotel Horizon further contended that Tea4Health had acknowledged its liability through part-payments, deduction of TDS and issuance of cheques, though the cheques were subsequently dishonoured. It argued that despite continuing in possession of the premises till September 2019, the corporate debtor failed to clear substantial dues which exceeded the statutory threshold under the IBC.

Tea4Health, however, disputed the claims and asserted that the premises became commercially unusable after Hotel Horizon itself entered CIRP on January 29, 2019. The corporate debtor alleged that water supply was discontinued, centralised air-conditioning services failed, sanitation and security services ceased functioning and access to the premises was obstructed by persons associated with the former management. It also claimed that it had invested nearly ₹2.5 crore in the project after assurances that a 4-5 star category hotel would be operational, but the project remained incomplete after Hotel Horizon’s account was declared NPA and CIRP proceedings commenced against it.

The NCLAT examined MA No. 2011 of 2019 filed by Tea4Health before the NCLT during CIRP proceedings against Hotel Horizon. Through that application, Tea4Health had sought restoration of water supply, functioning of the air-conditioning chiller plant, sanitation measures, police protection for access to the premises and prevention of interference by anti-social elements. The Tribunal noted that the NCLT had passed multiple interim orders directing restoration of water supply and air-conditioning services and also directed police authorities to provide assistance for ensuring unhindered access to the premises.

The Appellate Tribunal observed that these orders demonstrated that the grievances raised by Tea4Health were genuine and supported by material on record. Referring to the factual background, the Bench held:

“the allegations and disputes mentioned in IA No. 2011 of 2019 could not be termed as moonshine particularly when the effective orders has been passed by the Ld. Adjudicating Authority to restore water electricity etc. and also for police assistance.”

The Tribunal also relied on the Supreme Court’s judgment in Mobilox Innovations Private Limited v. Kirusa Software Private Limited and reiterated that at the Section 9 stage, the adjudicating authority only needs to determine whether there exists a plausible contention requiring further investigation and whether the dispute is genuine rather than spurious, hypothetical or illusory.

After analysing the record, the NCLAT concluded that there existed a genuine pre-existing dispute between the parties regarding liability arising after commencement of CIRP against Hotel Horizon. The Bench also noted that the security deposit paid by Tea4Health had apparently not been adjusted or set off by the operational creditor despite provisions in the agreement permitting such adjustment. Holding that the NCLT had rightly rejected the Section 9 application, the Appellate Tribunal dismissed the appeal as devoid of merit.

Case Title: Hotel Horizon Private Limited v. Tea4Health Private Limited
Case No.: Company Appeal (AT) (Ins) No. 1443 of 2023