NCLT Hyderabad Rejects Section 9 Plea Against Madhucon Projects Over Pre-Existing Dispute, Inconsistent Debt Claim

April 21, 2026 : The Hyderabad Bench-II of the National Company Law Tribunal (NCLT) has dismissed a Section 9 insolvency application filed by Sri Balaji Associates against Madhucon Projects Ltd., holding that the presence of a genuine pre-existing dispute and inconsistencies in the computation of debt rendered the petition unfit for admission.

A Bench comprising Judicial Member Rajeev Bhardwaj and Technical Member Sanjay Puri was adjudicating a plea seeking initiation of corporate insolvency resolution process (CIRP) over an alleged operational debt of ₹83.84 lakh.

Background

The Operational Creditor claimed that the dues arose from subcontract agreements executed between 2009 and 2011 for infrastructure works. It asserted that despite issuing a demand notice dated 14 December 2017, the Corporate Debtor neither responded nor cleared the outstanding amount. The creditor also argued that the subsequent invocation of arbitration was a belated attempt to manufacture a dispute.

On the other hand, Madhucon Projects Ltd. contended that the claim was disputed, uncrystallised, and subject to reconciliation. It relied on prior correspondence from 2014–2015 raising concerns over defective and substandard work, rectification costs, and contractual liabilities. It further pointed out that winding-up proceedings on the same cause of action had already been initiated earlier and remained pending.

Tribunal’s Findings

The Tribunal reiterated the settled position under Section 9 of the Insolvency and Bankruptcy Code, 2016 that an application must be rejected if there exists a prior dispute or if the debt is not clearly established as due and payable. Relying on the Supreme Court’s ruling in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., it held that even a plausible dispute is sufficient to defeat an insolvency plea.

On facts, the Bench found that disputes between the parties existed well before the issuance of the Section 8 demand notice. The record reflected sustained correspondence raising objections regarding quality of work, liability, and payments, bringing the case squarely within the ambit of “dispute” under Section 5(6) of the Code. The Tribunal observed that the material on record clearly established a real and substantial dispute predating the insolvency notice.

The Bench also flagged a material inconsistency in the quantification of the claim. While the demand notice reflected the total value of work at ₹5.31 crore, the work completion certificate recorded it as ₹5.03 crore. In the absence of reconciliation, the Tribunal held that the quantum of the alleged debt remained uncertain.

Further, the Tribunal noted that parallel proceedings had been initiated earlier before the Telangana High Court on the same cause of action. This indicated that the insolvency mechanism was being invoked as a recovery tool rather than for genuine resolution of insolvency, contrary to the scheme of the Code.

Conclusion

Taking a cumulative view of the pre-existing dispute, inconsistent computation of debt, and pendency of parallel proceedings, the Tribunal held that the statutory requirements for admission under Section 9 were not satisfied and dismissed the petition.

Case Title: Sri Balaji Associates v. Madhucon Projects Ltd.
Case No.: CP (IB) No. 260/9/HDB/2018
Coram: Rajeev Bhardwaj (Judicial Member); Sanjay Puri (Technical Member)