Pre-Existing Dispute Defeats ADM Agro’s ₹2.56 Crore CIRP Plea Against Bari Foods Before NCLT Indore

Pre-Existing Dispute Defeats ADM Agro’s ₹2.56 Crore CIRP Plea Against Bari Foods Before NCLT Indore

Introduction

The National Company Law Tribunal, Indore Bench, dismissed a Section 9 application filed by ADM Agro Industries Kota & Akola Pvt. Ltd. seeking initiation of CIRP against Bari Foods Pvt. Ltd. for an alleged default of ₹2.56 crore arising out of a crude palm oil transaction. The Bench comprising Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta held that the dispute between the parties involved contested issues relating to contract formation, authority of the broker, resale of goods, prevailing market price, and quantification of damages, all of which required detailed evidentiary examination and could not be adjudicated in the summary jurisdiction under Section 9 of the Insolvency and Bankruptcy Code, 2016.

Factual Background

The operational creditor, ADM Agro Industries Kota & Akola Pvt. Ltd., claimed that the corporate debtor, Bari Foods Pvt. Ltd., defaulted in performing obligations arising from a crude palm oil supply transaction. According to the applicant, owing to the respondent’s alleged breach, the goods had to be resold at a lower market price, resulting in a financial loss quantified at ₹2.56 crore, which was claimed as operational debt.

The corporate debtor disputed the claim in entirety and contended that the alleged amount represented unadjudicated damages arising from an alleged breach of contract, and therefore did not qualify as an operational debt under the Code. It was further asserted that the very existence of a binding contract was disputed, including denial of execution of relevant documents and challenge to the authority of the alleged broker through whom the transaction was said to have been concluded. The respondent also pointed out that parallel proceedings before the Commercial Court were already pending between the parties, thereby evidencing the existence of a prior dispute.

Procedural Background

The operational creditor filed an application under Section 9 of the IBC before the NCLT, Indore Bench, seeking commencement of CIRP against the corporate debtor on the basis of the alleged outstanding amount. The corporate debtor opposed maintainability by raising the plea of pre-existing dispute, disputing both liability and the very contractual foundation of the claim. The Tribunal therefore examined whether the alleged claim could be treated as an undisputed operational debt amenable to summary insolvency jurisdiction.

Issues

1. Whether the alleged claim of ₹2.56 crore arising from resale losses and breach of contract constitutes an operational debt under the IBC?

2. Whether the disputes relating to formation of contract, execution of documents, authority of broker, resale price, and loss calculation amount to a pre-existing dispute barring admission under Section 9?

3. Whether a claim founded upon unadjudicated contractual damages can be enforced through insolvency proceedings?

4. Whether the pendency of parallel commercial proceedings reinforces the existence of a genuine dispute beyond the scope of summary CIRP jurisdiction?

Contentions of Parties

The operational creditor contended that the corporate debtor committed default in a concluded crude palm oil transaction, forcing the applicant to mitigate losses by resale of the goods at a lower market price. The difference in resale price and contracted price was claimed as the operational debt payable by the respondent.

The corporate debtor, on the other hand, argued that the claim was not a crystallised debt but merely a claim for disputed damages, which required adjudication by a competent civil or commercial forum. It denied the existence of a validly concluded contract, disputed execution of transactional documents, and challenged the authority of the broker allegedly acting on its behalf. It was further submitted that no reliable independent evidence had been produced regarding resale, prevailing market value, or actual loss computation, rendering the entire claim speculative and disputed.

Reasoning and Analysis

The Tribunal reiterated the settled principle that proceedings under Section 9 are summary in nature and are not intended for adjudication of seriously disputed questions of fact requiring oral and documentary evidence. The Bench noted that in the present case, the very existence of a binding contract was disputed, since the respondent denied both execution of documents and the authority of the broker through whom the transaction was allegedly routed.

The Tribunal further observed that the applicant had failed to place independent material establishing actual resale of goods, prevailing market price, or objective loss assessment. The claim was therefore founded upon unverified and unilateral calculations, which could not be accepted as a crystallised operational debt.

A significant factor weighed by the Tribunal was the pendency of parallel proceedings before the Commercial Court, which itself demonstrated that the disputes between the parties required adjudication upon evidence. The Bench specifically held that the Adjudicating Authority under the IBC was not expected to examine the merits of such contractual disputes in insolvency jurisdiction.

The Tribunal therefore concluded that the alleged claim arose out of an asserted breach of contract and claim for damages, which remains subject to adjudication and cannot be converted into an insolvency trigger under Section 9. Since a genuine pre-existing dispute existed, the petition was held to be not maintainable.

Decision

The NCLT, Indore Bench, held that the claim of ₹2.56 crore did not constitute an undisputed operational debt, and that the disputes raised by the corporate debtor regarding contract formation, resale, and quantification of damages clearly amounted to a pre-existing dispute. Accordingly, the Section 9 application filed by ADM Agro Industries Kota & Akola Pvt. Ltd. was dismissed as not maintainable.

In this case the appellant was represented by Advocate Arpit Dwivedi. Meanwhile the respondent was represented by Advocate Narendra M Sharma, Himanshu Tarwae, Shreya Singh.