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M/s Saraswati Wire and Cable Industries vs Mohammad Moinuddin Khan and Others

Not available · 2025 INSC 1410Decided 10 Dec 2025
Not available
Justice Sanjay Kumar · Justice Alok Aradhe

Background

The appellant firm, an operational creditor, supplied goods to a corporate debtor and, after issuing a statutory demand notice under Section 8 of the IBC for unpaid dues of about ₹1.8 crore, filed an application under Section 9 of the IBC before the NCLT, Mumbai to trigger insolvency proceedings. The NCLT admitted the application and began CIRP. Mohammad Moinuddin Khan, a suspended director of the corporate debtor, appealed to the NCLAT, arguing there was a "pre-existing dispute" over the debt (which under the IBC would bar admission of a Section 9 application). The NCLAT agreed and set aside the CIRP admission, prompting the firm's appeal to the Supreme Court.

Decision Breakdown

The Supreme Court reviewed the correspondence and ledger records between the firm and the corporate debtor and found that the debtor had continued to make payments and place orders even after the Section 8 demand notice was issued, and had not raised any genuine, pre-existing dispute about the debt before that notice: objections raised later did not amount to a real pre-existing dispute capable of defeating the Section 9 application. The Court held the NCLAT had wrongly attached importance to minor issues that did not actually stop supplies or payments, and had overlooked an email and ledger account confirming the amount due exceeded the statutory threshold. It therefore set aside the NCLAT's judgment and restored the NCLT's original order admitting the CIRP application, directing that insolvency proceedings continue in accordance with law.

Lesson Learnt

A corporate debtor cannot defeat a legitimate insolvency claim by raising disputes only after receiving a demand notice, for a "pre-existing dispute" to block an operational creditor's Section 9 application, it must be genuine and must have existed before the demand notice, not manufactured afterward.

Official source (sci.gov.in)View Judgment (PDF)

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