The National Company Law Tribunal (NCLT), New Delhi Bench, has declined to initiate corporate insolvency resolution proceedings against Khao Gali Restaurants Pvt. Ltd., holding that the dispute raised by liquor wholesaler Diwan Spirits was not a straightforward case of non-payment but involved reconciliation of accounts linked to the now-withdrawn Delhi Excise Policy 2021–22.
The Bench comprising Judicial Member Manni Sankariah Shanmuga Sundaram and Technical Member Atul Chaturvedi dismissed the application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, observing that the claims required detailed examination of mutual adjustments, which is beyond the scope of summary insolvency proceedings.
Diwan Spirits had supplied liquor to Khao Gali Restaurants, which operated retail liquor outlets under the brand name “Alcomart” during the period when the Delhi Excise Policy was in force. The operational creditor claimed that invoices worth about ₹1.38 crore were raised, against which only around ₹6,000 was paid, resulting in a substantial unpaid operational debt. It relied on a balance confirmation letter dated August 22, 2022, allegedly acknowledging dues of ₹1.40 crore as on July 31, 2022, and contended that the liability stood crystallised. The applicant also pointed to invoice terms providing for 18 percent interest on delayed payments.
Khao Gali Restaurants, however, disputed the quantum of debt. While admitting liability of ₹81.38 lakh, it argued that the remaining amount was liable to be adjusted against market schemes, expired stock and breakages. According to the corporate debtor, after such adjustments, the outstanding amount would fall below the statutory threshold required to trigger insolvency proceedings.
The Tribunal noted that email correspondence on record showed that even after issuance of the statutory demand notice, both parties had discussed reconciliation of accounts. It also recorded that Diwan Spirits had agreed, though “without prejudice”, to undertake reconciliation. The Bench observed that this itself indicated that the liability was neither crystallised nor undisputed at the time the demand notice was issued.
Holding that the matter involved reconciliation of accounts and determination of mutual claims rather than a clear case of default, the Tribunal reiterated that once a genuine pre-existing dispute regarding the debt or its quantum is shown, an application under Section 9 of the Code cannot be admitted. It further observed that the balance confirmation letter only reflected the account position on a particular date and did not prevent the corporate debtor from raising bona fide disputes arising from the same commercial relationship.
Referring to the peculiar backdrop of the Delhi Excise Policy 2021–22 and the investigations surrounding its implementation, the Tribunal noted that disputes relating to market schemes, expiries and breakages assumed added significance. It concluded that Diwan Spirits had failed to establish the existence of a clear and undisputed operational debt and that the insolvency process could not be used as a substitute for recovery proceedings. The insolvency application was accordingly dismissed.
Appearance:
For Applicant: Advocates Shivam Goel, Ramya S. Goel, Sanya Sharma, Parul Garg
For Respondent: Advocates Aditya Ganju, Samanyu Sethi, Vatsal Agarwal
Case Details:
Cause Title: Diwan Spirits v. Khao Gali Restaurants Private Limited
Case No.: CP (IB)-321 (ND)/2025
Coram: Judicial Member Manni Sankariah Shanmuga Sundaram, Technical Member Atul Chaturvedi
