NCLT Dismisses Insolvency Proceedings Against Burnpur Cement Limited
NCLT Kolkata has dismissed Mittal Polysacks Private Limited's insolvency petition against Burnpur Cement Limited for ₹1,25,14,519 in operational debt. The tribunal found substantial disputes regarding transaction existence, delivery proof, and invoice authenticity. Following a 2019 management change, irregularities were discovered and the contested balance sheet entries were reversed prior to the demand notice, establishing a pre-existing dispute that made the insolvency application non-maintainable under the Code.
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Burnpur Cement Limited has successfully defended against insolvency proceedings after the National Company Law Tribunal (NCLT) Kolkata dismissed an application filed by operational creditor Mittal Polysacks Private Limited. The tribunal's order dated 20-04-2026 ruled in favor of the cement manufacturer, allowing it to continue operations as a going concern.
Case Background and Claims
Mittal Polysacks Private Limited had filed the insolvency application under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking to recover an operational debt of ₹1,25,14,519. The operational creditor claimed this amount was due for polypropylene cement bags allegedly supplied to Burnpur Cement's Asansol plant between January 16, 2016 and December 23, 2016.
| Claim Details: | Amount |
|---|---|
| Principal Amount: | ₹1,25,14,519 |
| Interest (18% p.a.): | ₹1,00,47,273 |
| Total Claim: | ₹2,25,61,792 |
The operational creditor argued that the goods were accepted without objection and that Burnpur Cement had acknowledged the outstanding amounts through account confirmations dated March 31, 2018 and February 1, 2019. A demand notice under Section 8 of the Code was issued on September 29, 2021.
Burnpur Cement's Defense
Burnpur Cement mounted a comprehensive defense challenging multiple aspects of the claim. The company argued there was no written agreement or purchase orders between the parties, with invoices describing the arrangement as "verbal." Significantly, no primary evidence of delivery such as transport receipts, lorry challans, or goods receipt notes was provided.
The company highlighted that Mittal Polysacks was an "Associate" during the relevant period, with transactions disclosed as related party dealings. A key figure, Mr. Manoj Kumar Agarwal, served as director of both companies during the alleged supply period (January 2016 to December 2016).
Management Change and Irregularities
A crucial turning point came when UV Asset Reconstruction Company Ltd. assumed management control of Burnpur Cement on October 1, 2019 under SARFAESI proceedings. The new management discovered serious irregularities including:
- Embezzlement and diversion of funds
- Siphoning of money by previous management
- Window dressing of accounts
- Substantial mismatch between recorded entries and actual documents
Consequently, the alleged outstanding entry of ₹1,25,14,519 in favor of Mittal Polysacks was reversed in subsequent financial statements and not carried forward beyond FY 2020-21, prior to the demand notice.
NCLT's Analysis and Ruling
The NCLT, comprising Member (Judicial) Smt. Bidisha Banerjee and Member (Technical) Cmde Siddharth Mishra, conducted a thorough analysis based on established legal precedents. The tribunal referenced the Supreme Court's judgment in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., emphasizing that if a plausible dispute exists, the petition must be rejected.
| Key Disputes Identified: | Status |
|---|---|
| Existence of underlying transaction: | Disputed |
| Proof of delivery of goods: | Lacking |
| Authenticity of invoices: | Questioned |
| Balance sheet entries validity: | Contested |
The tribunal found that Burnpur Cement had raised substantial and bona fide disputes that were "neither illusory nor spurious." The reversal of entries prior to the demand notice constituted a clear repudiation of liability, establishing a pre-existing dispute within the meaning of Sections 5(6) and 9(5)(ii)(d) of the Code.
Previous Judicial Precedent
The NCLT also noted a previous case, Prarthna Sales Pvt. Ltd. & Anr. v. Burnpur Cement Ltd., where similar allegations of sham and collusive transactions during the previous management tenure were judicially considered. That judgment, affirmed by the NCLAT and Supreme Court, recognized serious irregularities in Burnpur Cement's affairs during the relevant period.
Final Outcome
The tribunal concluded that the disputes required detailed evidence and adjudication beyond the limited jurisdiction under Section 9 of the Insolvency and Bankruptcy Code. The five-year delay in issuing the demand notice without contemporaneous written demands further supported the finding of a plausible dispute.
With this dismissal, Burnpur Cement continues its operations without the threat of insolvency proceedings, while Mittal Polysacks retains the right to pursue its claim under other provisions of law if permissible.
Will Mittal Polysacks pursue alternative legal remedies to recover the disputed ₹2.25 crore claim outside of insolvency proceedings?
How might this successful defense against insolvency impact Burnpur Cement's credit rating and ability to secure future financing?
Could other operational creditors from the pre-2019 management era file similar insolvency petitions, and how vulnerable is Burnpur Cement to such claims?
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