In a significant ruling on insolvency law, the Supreme Court set aside an appellate tribunal’s decision and restored the National Company Law Tribunal (NCLT) order, holding that a “pre-existing dispute” between parties is enough to reject insolvency proceedings.
Background of the Case
The dispute arose between GLS Films Industries Private Limited and Chemical Suppliers India Private Limited over unpaid dues for chemical supplies. The supplier claimed nearly ₹2.92 crore and initiated insolvency proceedings under Section 9 of the Insolvency and Bankruptcy Code (IBC).
GLS Films, however, opposed the plea, alleging that multiple consignments were defective. The company claimed losses and even issued debit notes, asserting that the supplier owed them money instead.
The NCLT had earlier dismissed the insolvency plea, observing that the dispute required detailed examination. However, the National Company Law Appellate Tribunal (NCLAT) reversed this decision and allowed the insolvency process to proceed.
Supreme Court carefully traced the timeline of communications, invoices, and complaints between the parties.
The bench noted that correspondence regarding defective supplies existed well before the demand notice was issued. It also pointed out inconsistencies in accounts, delayed responses, and confusion over the exact amount due.
“The existence of prior disputes is evident from the record and cannot be ignored at this stage,” the bench observed.
The Court emphasized that insolvency proceedings are not meant for debt recovery where disputes already exist. It relied on earlier rulings to clarify that even a “plausible dispute” is sufficient to reject such applications.
Importantly, the Court said it is not the job of tribunals at this stage to decide whether the dispute will succeed, only whether it genuinely exists.
Setting aside the NCLAT judgment dated 11 February 2025, the Supreme Court restored the NCLT’s order dated 16 December 2022.
“The application under Section 9 did not merit consideration due to pre-existing disputes,” the Court held.
The appeal was allowed, and both parties were directed to bear their own costs.
Case Details
Case Title: GLS Films Industries Private Limited v. Chemical Suppliers India Private Limited
Case Number: Civil Appeal No. 4019 of 2025
Judge: Justice Sanjay Kumar with Justice R. Mahadevan
Decision Date: 09 April 2026
Counsels: Not specified in the judgment text
