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Transmission Corporation of Andhra Pradesh Limited v. Equipment Conductors and Cables Limited

Civil Appeal · 2018 INSC 980Decided 23 Oct 2018
Civil Appeal No. 9597 of 2018
Justice A.K. Sikri · Justice Ashok Bhushan

Background

A power transmission company (the government-owned APTRANSCO) had old disputes with a supplier over invoices, which went through arbitration, execution proceedings, and multiple rounds in the Punjab & Haryana and Hyderabad High Courts. The supplier eventually filed an insolvency petition under Section 9 of the IBC against the transmission company, claiming unpaid dues; the NCLT dismissed this petition, but the NCLAT (appellate insolvency tribunal) passed an interim-looking order effectively pressuring the transmission company to settle or face insolvency proceedings.

Decision Breakdown

The Supreme Court held that although the NCLAT's order looked procedural, it in substance exposed the appellant to coercive insolvency action over a claim that was genuinely disputed. Relying on its earlier ruling in Innoventive Industries v. ICICI Bank, the Court reiterated that under Section 9 of the IBC, if a "dispute" already existed (here, through arbitration/litigation predating the insolvency notice) and is not spurious or illusory, the adjudicating authority must reject the insolvency application rather than examine its merits. Finding the NCLT's original dismissal of the insolvency petition fully justified, the Court set aside the NCLAT's order and, instead of remanding, directly dismissed the underlying company appeal before the NCLAT to avoid further delay.

Lesson Learnt

The insolvency process (IBC) cannot be used as a substitute for recovering a genuinely disputed commercial debt: if a real pre-existing dispute exists, courts/tribunals must reject the insolvency petition rather than let it proceed.

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

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