NCLAT sets aside Polycab India insolvency admission over pre-existing dispute with supplier

NCLAT has set aside the admission of Polycab India Ltd. into the corporate insolvency resolution process (CIRP) and handed the company back to its board of directors with immediate effect. A three-member bench held on 30 October 2026 that emails and WhatsApp messages exchanged before the demand notice showed a real dispute over credit notes, detention and demurrage charges, and account reconciliation. NCLT Ahmedabad should therefore have rejected the Section 9 application filed by supplier Asier Metals Pvt. Ltd. over a claimed ₹2.78 crore.

A. Key Highlights :

• NCLT Ahmedabad admitted Polycab into CIRP on 7 October 2026; NCLAT reversed the order 23 days later.
• Claimed operational debt: ₹2.78 crore for aluminium ingots (the payment reminder in the record cites ₹2,78,70,157.22).
• A without-prejudice holding reply of 19 August 2026, which denied any admission of the claim without giving details, was itself treated as a notice of dispute under Section 9(5)(ii)(d) of the IBC (para 17).
• Polycab's email of 22 July 2026 asked for an ₹80 lakh detention and demurrage credit note and reconciliation of ledgers, and stated that nothing was payable (para 25).
• Counsel for Asier Metals accepted that NCLT had not examined the communications that preceded the demand notice (para 5).
• Bench: Justice Yogesh Khanna (Officiating Chairperson), Barun Mitra and Ajai Das Mehrotra (Members, Technical). No order as to costs.

B. Background :

The two companies had traded since around December 2019. Polycab paid in advance for monthly shipments, provisional invoices were adjusted through credit and debit notes, and accounts were reconciled from time to time.

Timeline: Section 8 demand notice on 6 August 2026; holding reply on 19 August; Section 9 petition on 24 August; detailed reply on 2 September; Asier's claim on the NeSL information utility on 9 September, disputed by Polycab on 11 September.

NCLT held that the earlier correspondence related to dealings before the purchase orders of 8 June and 25 June 2026, and found no dispute on quantity, quality or delay charges.

Polycab pleaded that it is a solvent listed company with standalone revenue of ₹2,81,851.77 million (about ₹28,185 crore) in FY 2025-26 and bank facilities classified as standard assets.

C. What Has Changed :

• Issue: Does a detailed reply sent after the Section 9 filing count? Finding (paras 16–17): Following Brand Realty Services Ltd. v. Sir John Bakeries India Pvt. Ltd., CA(AT)(Ins) No. 958 of 2020, missing the 10-day window does not stop a corporate debtor from proving a pre-existing dispute. Separately, the holding reply of 19 August 2026 denied the debt and qualified as a notice of dispute. Outcome: NCLT erred.
• Issue: Was the NeSL dispute entry too late? Finding (para 18): Asier itself filed its records on NeSL after the demand notice, so Polycab could not have disputed them earlier. Outcome: NCLT's reasoning on this point was flawed.
• Issue: Did the pre-notice messages show a genuine dispute? Finding (paras 21–26): A WhatsApp exchange of 19 January 2026 on deducting ₹80 lakh for detention charges, to which Asier replied "this will be done"; emails of 2 and 3 February 2026 on delayed delivery and Asier's offer to work out detention and demurrage; messages of 30 June to 7 July 2026 chasing credit notes; and the 22 July 2026 email. Together these showed a dispute that was not spurious, hypothetical or illusory. Outcome: the test in Mobilox and Rajratan Babulal Agarwal was met.
• Outcome (para 29): Appeal allowed. The admission order and all orders passed under it were set aside, and Polycab was released from CIRP to function through its board with immediate effect.

D. Who Is Affected :

Polycab India Ltd., its board, employees, shareholders and lenders.

The interim resolution professional, Sunit Jagdishchandra Shah, whose appointment falls with the admission order.

Asier Metals Pvt. Ltd. NCLAT did not decide the debt on merits and observed that the dispute needs adjudication by a competent court.

Operational creditors and corporate debtors in Section 9 proceedings generally.

E. Compliance Action Points :

1. Corporate debtors: reply to every Section 8 demand notice within 10 days, expressly denying the debt even in a short holding reply → reply to the operational creditor → within 10 days of receipt → otherwise the creditor may file under Section 9(1).

2. Corporate debtors: keep emails, WhatsApp messages and reconciliation sheets that record disputes over credit notes or charges → internal records, later filed with NCLT → before and during any recovery correspondence → without them, a defence of pre-existing dispute is hard to prove.

3. Operational creditors: before filing under Section 9, check for open credit notes, reconciliation requests or promises to adjust charges → internal review → before filing → such a record will lead to rejection under Section 9(5)(ii)(d).

4. Polycab (General context, not stated in the order): as a listed company, it would ordinarily disclose the outcome to the stock exchanges under the SEBI listing regulations.

F. Analysis & Impact :

For CA / CS / Tax & Legal Professionals: A short holding reply that denies the debt can be enough to bar admission, so draft every holding reply on that basis. NCLAT read WhatsApp messages and a creditor's promise to work out deductions as evidence of an existing dispute. Advise creditor clients that informal assurances on credit notes may later defeat a Section 9 filing.

For Businesses & Investors: Polycab spent about three weeks under CIRP before its board regained control. Even large, solvent companies face Section 9 filings over modest trade disputes, so written records of commercial disagreements are a governance matter. This summary offers no view on the company's shares.

For News Readers: The appeals tribunal ruled that a ₹2.78 crore dispute with a supplier should not have pushed a large cable maker into insolvency proceedings.

Points to Watch: Any appeal by Asier Metals to the Supreme Court under Section 62 of the IBC, and any civil or arbitration claim for the amount. The order gives two dates for Asier's NeSL filing: 9 September 2026 (para 3) and 9 October 2026 (para 18).

G. References :

• IBC, Section 5(6) – definition of "dispute".
• IBC, Section 8(1) and 8(2) – demand notice and the corporate debtor's 10-day reply.
• IBC, Section 9(1) and 9(5)(ii)(d) – operational creditor's application; rejection where a notice of dispute was received or the information utility records a dispute.
• IBC, Section 61 – appeal to NCLAT.
• Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd., (2018) 1 SCC 353 – plausible-dispute test.
• Rajratan Babulal Agarwal v. Solartex India (P) Ltd., (2023) 1 SCC 115 – limited scope of inquiry into a pre-existing dispute.
• Brand Realty Services Ltd. v. Sir John Bakeries India Pvt. Ltd., CA(AT)(Ins) No. 958 of 2020 – a dispute can be shown even without a reply to the demand notice.

H. Source & Attribution :

Primary source: NCLAT, Principal Bench, New Delhi – Judgment dated 30 October 2026 in Company Appeal (AT) (Insolvency) No. 1940 of 2026, Bharat Ajay Jaisinghani (Suspended Director of Polycab India Ltd.) v. Asier Metals Pvt. Ltd. & Anr.

Link: Not stated in source. Prepared from the copy of the judgment supplied by the user (9910105118762026_copy.pdf).

Disclaimer: This summary is an editorial aid prepared from publicly available information. It is not legal, tax or investment advice. Refer to the original notification, circular, order or report before acting.