Forged invoices? NCLAT says that's exactly why CIRP must stop.

Printland’s invoices were disputed. NCLAT says that’s enough to stop CIRP.

When Nirmal Trading Company knocked on the doors of the National Company Law Tribunal seeking to push Printland Digital (India) Pvt. Ltd. into insolvency, it claimed the printing company owed it roughly Rs 1.67 crore. The debt, it said, arose from 70 unpaid invoices raised between 2017 and 2019. Printland’s response was blunt: those invoices were forged, we don’t owe a rupee, and in fact, you owe us money. The NCLT admitted the insolvency application anyway. The Corporate Debtor was dragged into CIRP. A Resolution Professional took over. The company’s fate hung in the balance.

That order has now been reversed. The National Company Law Appellate Tribunal, Principal Bench, New Delhi, in Sandeep Behl v. Nirmal Trading Company & Ors., has set aside the CIRP initiation. The stakes were existential for Printland — and the ruling sends a clear signal to operational creditors who try to use the IBC as a debt-collection tool when genuine disputes exist.

The story behind the invoices

Printland Digital (India) Pvt. Ltd. was in the business of digital printing. Nirmal Trading Company supplied it with materials. Between 2017 and 2019, Nirmal Trading raised 70 invoices. When the money didn’t come, it sent three demand notices under Section 8 of the Insolvency and Bankruptcy Code, 2016. The first was dated 18.04.2019. The second on 20.12.2019. The third on 18.02.2020.

Printland responded to each. On 24.04.2019, it sent a Notice of Dispute denying the debt and calling the invoices forged. It followed up with another Notice of Dispute on 20.01.2020, reiterating the denial and demanding account reconciliation. Printland pointed to its audited balance sheets, which showed no outstanding liability to Nirmal Trading. In fact, Printland claimed the boot was on the other foot — Nirmal Trading owed money to Printland.

Despite these disputes, Nirmal Trading filed a Section 9 application before the National Company Law Tribunal, New Delhi Bench-IV, on 30.10.2023. The NCLT admitted the application, holding that the cut-off date for a pre-existing dispute was the date of the first demand notice, and that allegations of forgery could not be investigated in summary proceedings. Printland was pushed into CIRP.

Sandeep Behl, a shareholder and former director of Printland, appealed to the NCLAT under Section 61 of the IBC.

What each side argued

Before the NCLAT, the Appellant — Sandeep Behl, representing Printland — argued that the NCLT had erred in ignoring the Notices of Dispute. These notices, sent before the Section 9 application was filed, clearly raised a pre-existing dispute. The audited balance sheets, the Appellant said, were conclusive evidence that no debt existed. The invoices were forged, and the NCLT had no jurisdiction to adjudicate such a serious factual dispute in summary proceedings. The Appellant relied on Sabarmati Gas Ltd. v. Shah Alloys Ltd. (2023) 3 SCC 229, where the Supreme Court held that once a Corporate Debtor raises a dispute regarding dues prior to receipt of the Demand Notice, and the correctness is a matter of evidence, the defence cannot be brushed aside as spurious.

The Operational Creditor, Nirmal Trading Company, countered that the Notices of Dispute were mere denials, not genuine disputes. It argued that the cut-off date for a pre-existing dispute was the date of the first demand notice — 18.04.2019 — and since Printland’s first Notice of Dispute was dated 24.04.2019, it came after the cut-off. The Operational Creditor also pointed to a letter from Printland’s auditor, which it claimed amounted to an acknowledgment of debt. It relied on Ahluwalia Contracts (India) Ltd. v. Raheja Developers Ltd. (CA(AT)(Ins) No. 703 of 2018) to argue that merely disputing a claim is not enough to bar a Section 9 application.

The witness rule the NCLAT applied

The NCLAT, in a judgment authored by Barun Mitra, Member (Technical), with Justice Ashok Bhushan concurring, rejected the Operational Creditor’s arguments. The core question was straightforward: did a pre-existing dispute exist before the Section 9 application was filed?

The NCLAT held that it did. The Notices of Dispute dated 24.04.2019 and 20.01.2020 were clear, specific, and timely. They denied the debt, called the invoices forged, and demanded reconciliation. The audited balance sheets supported the denial. The NCLAT found that the dispute was not moonshine, spurious, hypothetical, or illusory. It was a genuine, pre-existing dispute.

The NCLAT distinguished Naresh Sevantilal Shah v. Malharshanti Enterprises (CA(AT)(Ins) No. 415 of 2020), which the NCLT had relied upon. In that case, the cut-off date was fixed at the date of the first demand notice. But here, the NCLAT noted, the first demand notice was not followed by a Section 9 application. The Operational Creditor issued two more demand notices. The Section 9 application was filed only after the third demand notice. The disputes raised in response to the earlier demand notices were reiterated in response to the final demand notice. The cut-off date, the NCLAT held, is not rigidly fixed at the first demand notice when the application is filed after a later demand notice.

The NCLAT also distinguished Ahluwalia Contracts, noting that in that case, the arbitration was initiated after the demand notice. Here, the Notices of Dispute were sent before the Section 9 application was filed.

On the auditor’s letter, the NCLAT referred to Gautam Sinha v. U.V Asset Reconstruction Company Ltd. (CA(AT)(Ins) No. 1382 of 2019), which held that a director’s report must be seen from the audited balance sheet to make out an acknowledgment of debt; a mere auditor communication is insufficient. The auditor’s letter here did not amount to an acknowledgment.

THE PLAY: If you are a Corporate Debtor facing a Section 9 application, send a detailed Notice of Dispute under Section 8(2)(a) IBC as soon as you receive the Demand Notice. Support it with audited balance sheets. If the dispute is genuine, the NCLAT will not allow the CIRP to proceed.

Why the NCLT got it wrong

The NCLT had held that allegations of forgery and fabrication could not be investigated in summary proceedings under the IBC. The NCLAT acknowledged this limitation — the Adjudicating Authority’s power to investigate such disputes is circumscribed by the summary nature of its jurisdiction. But the NCLAT turned this on its head: if the NCLT cannot investigate forgery, then the very existence of such an allegation should be treated as an indicator of a dispute, not a reason to ignore it. The NCLAT observed that the IBC does not contemplate adjudication of disputes relating to forgery and fabrication, as that would require calling for evidence. This obiter dictum reinforces the limited scope of the NCLT’s inquiry and may be cited in future cases to argue that allegations of fraud or forgery should themselves be treated as evidence of a dispute.

The NCLAT also found that the NCLT had erred in applying the cut-off date rigidly. The NCLT had relied on Naresh Sevantilal Shah to hold that the cut-off date was the date of the first demand notice. But the NCLAT clarified that this principle applies only when the Section 9 application is filed after the first demand notice. Here, the Operational Creditor issued three demand notices. The Section 9 application was filed after the third. The disputes raised in response to the earlier notices were reiterated in response to the final notice. The cut-off date, therefore, was not fixed at the first demand notice.

What this means in practice

For operational creditors, this judgment is a warning. Filing a Section 9 application when the Corporate Debtor has raised a genuine dispute — supported by audited balance sheets — is a waste of time and money. The NCLAT has made it clear that the IBC is not a debt-collection mechanism. It is a resolution mechanism for genuine insolvencies, not for disputed debts.

For corporate debtors, the message is equally clear. If you receive a demand notice, do not ignore it. Send a detailed Notice of Dispute under Section 8(2)(a) IBC. Cite your audited balance sheets. Demand reconciliation. If the dispute is genuine, the NCLAT will protect you from being dragged into CIRP.

For practitioners, the key takeaway is the importance of timing and documentation. The cut-off date for a pre-existing dispute is not rigidly fixed at the first demand notice when multiple demand notices are issued. But the dispute must be raised before the Section 9 application is filed. A Notice of Dispute sent after the application is filed will not help.

The NCLAT also clarified that the Adjudicating Authority’s power to investigate disputes is limited. If the dispute involves allegations of forgery or fabrication, the NCLT cannot adjudicate it in summary proceedings. The very existence of such an allegation should be treated as a dispute, not ignored.

The bottom line

The NCLAT has set aside the CIRP initiation against Printland Digital (India) Pvt. Ltd. The Corporate Debtor is released from the rigours of CIRP with immediate effect. The Resolution Professional’s fees and expenses are to be paid by the Operational Creditor, Nirmal Trading Company. No costs.

If you are a Corporate Debtor, send a detailed Notice of Dispute under Section 8(2)(a) IBC as soon as you receive a Demand Notice. If the dispute is genuine, the NCLAT will not allow the CIRP to proceed.