Saraswati Wire and Cable Industries Vs Mohammad Moinuddin Khan and others (Supreme Court of India)
Pre-existing Dispute Was Mere Moonshine: SC Restores NCLT Admission of Section 9 CIRP Against Corporate Debtor
Supreme Court set aside the NCLAT order & restored the NCLT’s admission of Section 9 application against Dhanlaxmi Electricals Pvt Ltd. The firm supplied pipes & cables to the Corporate Debtor (CD), which maintained a running ledger. The CD’s own email dated 04.08.2021 confirmed the outstanding debit balance of ₹1.79 crore after adjusting payments of ₹70 lakh, thereby acknowledging the operational debt. After issuance of the Section 8 notice, the CD even paid ₹61 lakh, clearly negating any real dispute. The suspended Technical Director’s subsequent reply dated 20.11.2021 alleging non-supply, short supply & substandard materials was held to be unauthorised, unsupported & an afterthought. The firm produced delivery challans, e-way bills & transport documents disproving the allegation of non-supply under Invoice Nos. 203 & 205, while the CD provided no credible material to substantiate its claim of faulty cables or losses.
Supreme Court held that exchanges in 2018–2019 did not crystallise into a dispute preventing further supplies or payments. The so-called dispute inflated over time—from a vague mention in 2018 to 20,000 metres in 2019 & then to 80 km in 2021—without explanation or evidence. Applying Mobilox, the Court held that only genuine, bona fide disputes can defeat a Section 9 application; moonshine defences meant to evade liability cannot. The NCLAT overlooked crucial facts including the prior CIRP initiated against the CD in September 2021, which prevented the firm from filing its own Section 9 until withdrawal proceedings surfaced. The NCLAT also ignored the CD’s own ledger that established the debt beyond the threshold.
Holding that the defence was mere bluster & not a real dispute, the Supreme Court restored the NCLT’s admission order dated 06.12.2023 in C.P.(IB)/398/2023 & directed continuation of CIRP from the stage of communication of this judgment.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
