In a significant judgment delivered on 10 December 2025, the Supreme Court of India clarified the legal framework governing admission of applications under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Court reinstated the order of the National Company Law Tribunal (NCLT), Mumbai Bench, admitting the corporate insolvency resolution process (CIRP) against Dhanlaxmi Electricals Pvt. Ltd., filed by M/s. Saraswati Wire and Cable Industries as an operational creditor.
Background of the Case
The operational creditor had supplied pipes and cables to the corporate debtor (CD) over several years. The CD maintained a running account and periodically made payments. According to the CD’s own ledger (updated until March 2022), the amount due and payable to the operational creditor stood at ₹1.79 crore.
A demand notice under Section 8 of the IBC was issued on 25 August 2021. Instead of raising genuine disputes, the suspended director of the CD questioned two invoices and raised vague allegations of substandard goods and short supply.
However, the CD continued making payments even after receiving the demand notice—something that would not have occurred if a real dispute existed.
Key Facts Considered by the Supreme Court
1.A prior CIRP was already running
A separate insolvency proceeding had already been initiated against the CD in September 2021. Therefore, the operational creditor could not immediately file its own Section 9 petition and instead had to lodge its claim with the then IRP.
The delay in filing the Section 9 petition (filed in February 2023) was therefore justified and could not be held against the creditor.
2.CD’s own ledger confirmed the debt
On 04 August 2021, the CD itself sent its ledger showing:
–Confirmed outstanding dues
–Adjustments for earlier debit notes
–A closing balance of ₹1,79,93,690.80 payable to the creditor
–These documents clearly negated any pre-existing dispute.
3.Payments continued even after the demand notice
After the Section 8 notice, the CD paid ₹61 lakh, a clear sign that the CD acknowledged the debt.
4.Suspended director had no authority to raise disputes
When the Section 8 reply was issued, a CIRP was already underway. Thus, the suspended Technical Director had no authority to issue the reply or raise alleged disputes.
5.Alleged disputes were vague, inflated, and unsupported
– Claims of short supply varied drastically—from 20,000 meters to 80 km—with no explanation for the inflated figures.
– Allegations of substandard cables were not backed by any documentation.
– Claims of losses and threat of blacklisting were unsupported.
–Documentary evidence (delivery challans, e-way bills, transport invoices) proved that supplies under the disputed invoices were actually made.
The Supreme Court observed that the supposed disputes were “moonshine”—mere bluster intended to avoid payment.
Legal Principles Reaffirmed
Mobilox Test
The Court reiterated the principles laid down in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., namely:
A pre-existing dispute must be real, not illusory.
The adjudicating authority is not required to decide the merits, but must filter out frivolous or spurious defences.
Moonshine Defence Not Acceptable
Citing earlier judgments, the Court emphasized that a company cannot avoid insolvency by presenting groundless or manufactured disputes.
Supreme Court’s Final Decision
The Supreme Court held that:
There was no genuine pre-existing dispute as on the date of the Section 8 notice.
The NCLAT ignored critical facts and wrongly concluded that disputes existed.
The NCLT’s order admitting the Section 9 application was correct.
Result: The Supreme Court set aside the NCLAT judgment dated 13 March 2024 and restored the NCLT order dated 06 December 2023 admitting the CIRP.
Proceedings will continue from the stage of admission.
Significance of This Judgment
This decision reinforces vital principles:
A corporate debtor’s own ledger is compelling proof of liability.
Post-notice payments strongly negate the existence of disputes.
Suspended directors cannot raise disputes during an active CIRP.
The IBC process cannot be derailed by vague, unsubstantiated, or belated claims.
Courts must distinguish real disputes from moonshine or afterthought defences.