GLS Films Industries Private Limited Vs Chemical Suppliers India Private Limited (Supreme Court of India)
The Supreme Court considered an appeal arising from proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC), where initiation of the corporate insolvency resolution process (CIRP) had been denied by the National Company Law Tribunal (NCLT), but subsequently allowed by the National Company Law Appellate Tribunal (NCLAT). The Supreme Court had earlier stayed the NCLAT’s decision and ultimately examined whether a “pre-existing dispute” existed between the parties.
The operational creditor had filed an application claiming that a sum of ₹2.92 crore was due for supply of chemicals, along with interest. A demand notice was issued under Section 8 of the IBC, which was disputed by the corporate debtor. The debtor contended that multiple consignments of chemicals supplied during April and June 2021 were defective, causing losses. It claimed to have repeatedly requested reconciliation of accounts and compensation, and also issued a debit note reflecting losses, asserting that the creditor was instead liable to pay ₹70 lakh.
The NCLT examined documentary evidence, including correspondence dating back to December 2020, where the debtor had raised concerns regarding defective supplies and requested issuance of a credit note. It also considered emails, ledger entries, and a police complaint filed prior to the demand notice, indicating ongoing disputes over quality, payments, and reconciliation of accounts. Based on these materials, the NCLT concluded that there was a plausible pre-existing dispute requiring detailed examination beyond the summary jurisdiction of the IBC, and dismissed the Section 9 application.
