NCLT Rejected CIRP Plea Due to Pre-Existing Dispute Over Delayed Charges Claim

Shakti International LLP Vs Steel Exchange India Pvt Ltd (NCLT Hyderabad)

The NCLT Hyderabad considered a petition filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for non-payment of ₹162.57 crore, primarily claimed as “delayed charges” or “extension charges” arising from contractual arrangements. The parties had entered into a Master Supply Agreement dated 29.09.2016, followed by supplementary agreements, governing the supply of steel rebars. While the underlying supply transactions and principal dues were largely admitted, the dispute centered on the legality, enforceability, and characterization of the delayed charges.

The Operational Creditor contended that such charges were contractually stipulated under Annexure A of the agreement and continued under subsequent agreements. It relied on nomination letters and calculation sheets to assert that the Corporate Debtor remained liable, especially where nominee entities failed to pay. A demand notice under Section 8 quantified the delayed charges, while the Corporate Debtor disputed only these charges and not the supply transactions.

The Corporate Debtor challenged the maintainability of the petition, arguing that delayed charges did not constitute “operational debt” under the Code. It further contended that the claim was unascertained, unsupported by invoices or ledger entries, and based solely on a unilateral calculation sheet. It pointed out that prior reconciliations and payments did not reflect any delayed charges, and that such charges had been disputed earlier by nominee entities. The Corporate Debtor also raised a plea of waiver and argued that the matter involved pre-existing disputes requiring adjudication outside insolvency proceedings.

The Tribunal noted that the core issue was confined to the delayed charges, as the supply transactions themselves were not in dispute. It observed that nominee entities had previously disputed these charges, establishing the existence of a dispute prior to the issuance of the Section 8 notice. It also found that although principal dues had been settled, there was no clear reconciliation or segregation of delayed charges from the principal amounts.

Importantly, the Tribunal highlighted the absence of contemporaneous evidence such as ledger entries, invoices, debit notes, or account extracts showing that delayed charges were consistently levied in the ordinary course of business. The claim was primarily supported by a calculation sheet prepared for the proceedings, without invoice-level identification or contractual triggers. This raised a substantial factual dispute regarding whether the charges had crystallized as payable dues or were later reconstructions based on contractual interpretation.

The Tribunal further held that whether delayed charges constitute “operational debt” and their quantification required detailed examination of evidence, which falls beyond the limited scope of Section 9 proceedings. Applying the principle that a plausible and bona fide dispute must lead to rejection of a CIRP application, it concluded that the dispute was real and not spurious.

Accordingly, the Tribunal held that the claim was unascertained, disputed, and not a crystallized operational debt. The petition was dismissed as not maintainable under Section 9, with liberty to the Operational Creditor to pursue other remedies in accordance with law.

FULL TEXT OF THE NCLT JUDGMENT/ORDER

Orders pronounced recorded vide separate sheets. In the result, this Petition is dismissed.

The present petition has been filed by the Operational Creditor under Section 9 of the IBC¹, seeking initiation of CIRP² against the Corporate Debtor on the ground of non-payment of Rs. 162,57,29,678/-, claimed principally under the caption “Delayed Charges” / “Extension Charges” arising out of the contractual documents executed between the parties.

APPLICANT’S CASE

2. The Applicant submits that the Operational Creditor, Shakti International LLP, a Limited Liability Partnership engaged in the business of trading in edible oils, agro-based commodities, iron and steel, coal, etc., entered into a Master Supply Agreement³ dated 29.09.2016 with Steel Exchange India Limited, the Corporate Debtor, which is engaged in the business of trading in steel rebars, for the supply of steel rebars; and the said Agreement was subsequently supplemented by a Supplementary Agreement⁴ dated 25.10.2017 and a Second Supplementary Agreement⁵ dated 20.09.2018.

3. Pursuant to the aforesaid contractual framework, RFO⁶ Nos. 19 to 26 were issued by the CD for the supply of MS Rebars. According to the Operational Creditor, payments under RFO Nos. 19 to 22 fell due on various dates between 20.01.2018 and 19.03.2018, but the same were not made on the due dates, resulting in the accrual of delayed charges.

4. It has been pointed out that under Annexure A to the Master Supply Agreement, after expiry of 90 days from the opening of the LC, extension charges at 2% per month, and thereafter escalated charges at 2.5% per month (after expiry of 97 days from opening of LC), became payable on the pending dues, apart from the trade margin charges of 2% for every 30-day period.

5. The case of the Operational Creditor is that the said charging mechanism continued to govern the transactions even under the subsequent agreements, including the Second Supplementary Agreement, which, in Clause 1.5, reads with Annexure 4 records the outstanding amount as inclusive of all charges, additional charges, and extension charges.

6. In respect of RFO Nos. 23 to 26, it is pleaded that the Corporate Debtor issued nomination letters⁷, particularly the ones issued on 27.03.2019 and 08.06.2019, nominating Vizag Rebars Pvt. Ltd. (VRPL) and Amaravati Building Materials Pvt. Ltd. (ABMPL) to lift the goods and make payment. The Operational Creditor relies on the recital in the nomination letters that, in the event of failure by the nominee entities to pay, the Corporate Debtor would make good the shortfall. It is pleaded that while VRPL and ABMPL admitted the principal outstanding in their replies to Section 8 notices, they disputed the delayed charges, and separate Section 9 petitions against them were filed and later withdrawn with liberty to pursue the delayed-charge claim before the appropriate forum.

7. The Operational Creditor further pleads that the Section 8 demand notice dated 09.12.2024 issued to the Corporate Debtor quantified the total delayed charges claim at Rs. 162,57,29,678/-, based on the Master Supply Agreement, Supplementary Agreements, Renewal Letter, nomination letters, and the calculation sheet annexed thereto. It is the case of the Operational Creditor that the Corporate Debtor’s reply disputes only the delayed charges while not disputing the underlying supply transactions and the admitted principal amounts.

RESPONDENT’S COUNTER-REPLY

8. The Respondent CD, in its counter reply, reply to the Section 8 notice,
and written synopsis, has disputed the very maintainability of the claim. Its principal case is that the amount claimed represents only “Delayed Charges”, which, according to it, do not constitute operational debt within Section 5(21) of the Code. It is specifically contended that although the Operational Creditor in the rejoinder equates “Delayed Charges” with “Extension Charges”, the invoices and ledger accounts filed along with the petition do not contain any separate debit entries towards such charges.

9. It is further submitted by the Respondent Corporate Debtor that the contractual framework provides for computation of extension charges in a structured and transaction-specific manner with reference to each Letter of Credit, and in the absence of such computation, as well as any crystallised demand supported by contemporaneous accounting entries, the alleged claim remains unascertained and contingent in nature, and therefore does not constitute an operational debt under the provisions of the Code.

10. The Corporate Debtor further pleads that the ledger accounts show only purchase entries, while the invoices also do not show any separate extension-charge component. According to the Corporate Debtor, what is filed is only a calculation sheet prepared by the Operational Creditor, which is not part of the regular ledger account and was never confirmed by the Corporate Debtor. It is on this basis contended that the quantum of the alleged delayed charges is itself disputed and requires computation transaction-wise.

11. A further defence of the Corporate Debtor is that the email reconciliation dated 31.08.2022 and 11.09.2022, the said email communication was not filed by the Corporate Debtor along with its counter, reflected the dues of all three entities, namely itself, VRPL, and ABMPL, and that the amounts shown therein had been paid by the respective entities. It is specifically pleaded that the said reconciliation does not mention any delayed charges as due. The Corporate Debtor, therefore, asserts that the liability towards delayed charges had already been disputed much prior to the issuance of the Section 8 notice.

12. The Corporate Debtor has additionally contended that during FY 2022– 23, the Operational Creditor was converting its status from a limited company to a Limited Liability Partnership. During this period, negotiations were held between the Operational Creditor and the Corporate Debtor, along with the nominated companies. It is further stated that, as a result of such deliberations, the Operational Creditor agreed to waive the delayed charges, and on that understanding, the Corporate Debtor confirmed the balance statement shared by email dated 11.09.2022; the said email communication was not filed with the counter, wherein no delayed charges were shown as outstanding.

13. The Corporate Debtor has also relied upon the fact that VRPL and ABMPL had, in their replies to the Section 8 notices issued in April and June 2024, disputed the liability towards delayed charges. It is further pleaded that the Section 9 petitions earlier filed against VRPL and ABMPL were contested by the said entities on the ground that the “delayed charges” stood waived and, in the alternative, did not form part of the operational debt. It is stated that the said entities deposited the admitted amounts as per the demand made by the Operational Creditor vide email dated 31.08.2022, whereupon, after receipt of payment of the principal admitted amounts on 23.06.2025, both petitions were withdrawn, with liberty reserved to the Operational Creditor to pursue the claim towards “delayed charges” before the appropriate forum.

14. On this basis, the CD submits that the present proceedings also indicate a pre-existing dispute. The Corporate Debtor further contends that, having so represented in the earlier proceedings, the Operational Creditor cannot initiate CIRP against the present Respondent on the pretext of guarantor liability, and that the appropriate remedy, if any, is before the Civil Court. It is also specifically pleaded that simultaneous proceedings before two judicial forums would amount to “forum shopping”, and that the present petition is hit by the rule of estoppel.

REJOINDER & WRITTEN SUBMISSIONS

15. In rejoinder and written synopsis, the Operational Creditor denies the plea of waiver and disputes the Corporate Debtor’s interpretation of the ledger accounts. It reiterates that the charging mechanism is expressly embedded in Annexure A of the Master Supply Agreement, that the Second Supplementary Agreement expressly includes extension charges in the outstanding amount, and that the calculation sheet annexed to the demand notice is only the mathematical working of the contractually payable dues.

16. The Operational Creditor additionally submits that Clause 18.8 of the Master Supply Agreement and Clause 10 of the Second Supplementary Agreement clearly stipulate that no modification, amendment, or waiver shall be valid unless made in writing and duly signed by both parties. Accordingly, in the absence of any such document, the plea of waiver is contrary to the contractual framework and wholly untenable.

17. The Operational Creditor further contends that the absence of a separate ledger head does not extinguish a contractual liability, and that the Corporate Debtor’s defence is only an afterthought raised to avoid payment of charges expressly recognised in the contractual framework.

FINDINGS & DECISION

18. We have heard the Learned Counsel for the Operational Creditor and the Learned Counsel for the Corporate Debtor at considerable length. We have also carefully perused the pleadings, the Master Supply Agreement dated 29.09.2016, the Supplementary Agreement dated 25.10.2017, the renewal communication dated 06.04.2018, the Second Supplementary Agreement dated 20.09.2018, the Section 8 demand notice, the reply thereto, and the written synopses filed by both sides.

19. The basic facts are not in dispute. The supply transactions between the parties under the Master Supply Agreement and the subsequent contractual continuations up to 2019 stand admitted. The nomination of VRPL and ABMPL under the nomination letters is also not in dispute. Equally, the Corporate Debtor has, in its reply to the Section 8 notice, acknowledged the principal components relatable to the nominee entities. Thus, the controversy before this Adjudicating Authority is not with respect to the existence of the underlying supply transactions, but is narrowly confined to the legality, enforceability, and character of the claim towards “extension / delayed charges.”

20. The principal submission of the Operational Creditor is that the said charges arise under Clause 6 read with Annexure A of the Master Supply Agreement, and that the same stood carried forward even under the later agreements, including the Second Supplementary Agreement dated 20.09.2018, particularly by reference to the outstanding amount reflected in Annexure 4 thereof.

21. It is further noted that demand notices dated 12.04.2024 were issued under Section 8 of the Code to VRPL and ABMPL, pursuant to which VRPL, vide reply dated 25.04.2024, and ABMPL, vide reply dated 28.06.2024, acknowledged the principal liability but disputed the levy and computation of delayed payment charges, thereby establishing the existence of a dispute on this aspect even prior to the initiation of the present proceedings through the issuance of the demand notice under Section 8 on 09.12.2024.

22. It is further observed that the Section 9 applications filed against the said entities before the NCLT, Amaravati Bench, were withdrawn on 24.06.2025 upon receipt of the principal amounts on 23.06.2025, with liberty reserved to pursue claims towards delayed payment charges.

23. Furthermore, while the principal dues stood discharged, the dispute relating to delayed charges remained unadjudicated. However, no material has been placed on record to demonstrate a clear segregation or reconciliation of the discharged principal amounts and the disputed delayed charge components, and in the absence of such demarcation, the composite nature of the claim prevents it from being treated as a crystallised operational debt for the purposes of Section 9 of the Code.

24. At the admission stage of a petition under Section 9, this Adjudicating Authority is not required to finally adjudicate upon the merits of the rival monetary claims. The limited enquiry is whether there exists a real dispute, and not a patently feeble legal assertion or unsupported bluster, within the parameters laid down by the Hon’ble Supreme Court in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd⁸. The dispute must be bona fide and supported by material that warrants further examination in appropriate proceedings.

25. In the present case, what assumes decisive significance is that, despite the extensive contractual documentation, the Operational Creditor has not produced any prior ledger statement, invoice, debit note, or contemporaneous account extract demonstrating that extension/delayed charges were historically and consistently levied upon the Corporate Debtor in the ordinary course of dealings. The record contains only a calculation sheet prepared for the purpose of the present claim, which was sent for the first time to the CD along with the Section 8 notice, and which does not clearly identify the specific invoices or the invoice-wise contractual trigger for such charges.

26. This omission is material. The substantial part of Rs 143.42 crores out of the total claim of Rs 162.57 crores is founded on delayed / extension charges, which would ordinarily be expected to be reflected in running ledger statements, invoice-level debit entries, balance confirmations, contemporaneous debit notes, or periodic commercial correspondence.

27. The absence of such documentary reflection in the regular books of account creates a serious and substantial factual dispute as to whether these charges were ever crystallised as payable dues in the ordinary course, or whether the present computation is a later reconstruction based on a disputed interpretation of the contract.

28. The Second Supplementary Agreement and its Annexure 4, though relied upon by the Operational Creditor, do not conclusively resolve this controversy at the Section 9 stage. While the said documents may lend support to the broader case that outstanding amounts inclusive of charges were contemplated, the Corporate Debtor’s defence that the later reconciliation statements, balance confirmations, and subsequent payments did not separately reflect any extension-charge liability cannot be brushed aside as moonshine, especially when the contemporaneous ledgers themselves do not show such a separate levy.

29. Insofar as the plea of waiver raised by the Corporate Debtor is concerned, even though it remains to be conclusively established from the record, the absence of invoice-backed delayed-charge entries certainly raises a plausible contention regarding the very survival and quantification of the delayed-charge component.

30. We are also unable, at this stage, to conclusively accept the Operational Creditor’s submission that the delayed / extension charges by themselves constitute an admitted and undisputed “operational debt” under Section 5(21). Whether such charges are like contractual consideration integrally linked to the supply transaction, or whether they partake the character of a consequential compensatory commercial claim requiring detailed evidence, is itself a matter requiring fuller adjudication. The absence of contemporaneous invoice recognition further reinforces this dispute.

31. Since the very substratum of the present Section 9 petition is the disputed extension-charge claim, and the same has been shown by the Corporate Debtor to be supported by a plausible contractual and accounting defence that cannot be summarily rejected, the threshold test under Mobilox stands satisfied, as such a dispute existed prior to the Section 8 notice.

32. It is also material to note that even the dues stated to arise from the underlying supply transactions, which form part of the total claim projected by the Operational Creditor, are not unequivocally admitted by the Corporate Debtor. In the reply to the Section 8 demand notice, the Corporate Debtor has raised detailed objections even in respect of such dues, and the said objections, on a prima facie consideration, cannot be said to be illusory or sham. The nature of the objections indicates that the quantification and subsistence of these dues are themselves matters requiring reconciliation, examination of accounts, and factual enquiry between the parties. Consequently, this component of the claim also bears the character of a disputed debt and cannot be treated as a crystallised operational liability for the purposes of admission under Section 9 of the Code

33. In this context, reliance is placed on the judgment of the Hon’ble NCLAT in Attluru Sreenivasulu Reddy v. AS Met Corp Pvt. Ltd. and Anr⁹., wherein it is held that once the Corporate Debtor raises a plausible and bona fide contention in reply to the demand notice, such defence cannot be brushed aside as spurious or moonshine, and the same constitutes a valid notice of dispute under Section 9(5)(ii)(d) of the Code, thereby mandating rejection of the application under Section 9. The relevant extract is reproduced below:

“59. In view of the foregoing discussions, we do not subscribe to the view taken by the Adjudicating Authority rejecting the defence, taken in reply to Demand Notice and counter affidavit on the ground that the defence is spurious and moonshine. A plausible contention was raised by the CD in its reply to Demand Notice within the meaning of Section 9 sub­section 5 (ii) (d).

60. In view of foregoing discussions, we answer Question Nos. (I) and (II) in following manner:

Answer to Question No. (I) Reply dated 15.06.2022 issued by CD in response to Demand Notice dated 31.05.2022 is a notice of dispute within the meaning of Section 9 sub-section (5) of the IBC.

Answer to Question No. (II) Defence raised by the CD in reply to Demand Notice dated 15.06.2022 (Notice of dispute) as well as in reply to Section 9 application, cannot be held spurious or moonshine defence and the application under Section 9 was required to be rejected under Section 9 sub-section (5)(ii) (d) of the IBC.

A plain reading of the above extract makes it clear that a plausible contention raised by the Corporate Debtor in reply to the demand notice constitutes a valid notice of dispute under Section 9(5) of the Code and cannot be treated as spurious or moonshine; consequently, such a defence attracts rejection of the application under Section 9(5)(ii)(d).

34. Applying this principle, it is seen that, in the present case, a bona fide and pre-existing dispute exists between the parties. The claim for delayed and extension charges remains unascertained, unsupported by contemporaneous financial records, and lacks clear reconciliation with the principal amounts already discharged. No prior ledger, invoice, debit note, or account extract has been produced to establish that such charges were consistently levied in the ordinary course of dealings, and the claim rests only on a unilateral calculation sheet prepared for these proceedings. The quantification of the dues arising from the supply transactions also requires reconciliation of accounts and factual inquiry. Accordingly, these amounts too constitute a disputed and uncrystallised debt, rendering the present application not maintainable under Section 9 of the Code.

35. We are therefore of the considered view that the present proceedings are not fit for admission under Section 9 of the Code, as the dispute raised by the Corporate Debtor is real, substantial, and requires detailed adjudication on evidence, including contractual interpretation, reconciliation statements, account entries, and quantification methodology, all of which lie beyond the limited summary jurisdiction contemplated at the admission stage.

36. In view of the foregoing discussion, we hold that the claim raised by the Operational Creditor, insofar as it relates to the extension / delayed charges component forming the substantial basis of the petition, is the subject matter of a bona fide and pre-existing dispute.

37. Consequently, the present petition filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, is dismissed. However, it is open to the Operational Creditor to avail such other remedies as may be available in law for adjudication and recovery of its alleged dues.

Consequently, the application is dismissed.

Notes: 

¹ Insolvency and Bankruptcy Code, 2016,

² Corporate Insolvency Resolution Process.

³ Page No 223-237 of the Application.

⁴ Page No 238-240 of the Application.

⁵ Page No 242-253 of the Application

⁶ ‘Request for Orders’ at Pages 39 to 46 of the Application.

⁷ Page 206-222 of Application

⁸ (2018) 1 SCC 353; AIR 2017 SC 4532

⁹ (2026) ibclaw.in 365 NCLAT