V. Chandrasekhar Naidu Vs. E. Muneendra & Ors. - In this regard, we place our reliance on the well-entrenched principle of law that no relief can be granted on a case not founded in the pleadings. This Court cannot entertain an entirely new case at the appellate stage at the behest of either party and is strictly confined to adjudicate the issues arising from the suit as framed by the pleadings of the parties.

 HC Andhra Pradesh  (2026.06.18) in  V. Chandrasekhar Naidu Vs. E. Muneendra & Ors.  [APHC010287242026, Writ Appeal No. 684 of 2026 ] held that;

• This view is contrary to the settled law that a question, which did not form part of the pleadings or in respect of which the parties were not at variance and which was not the subject-matter of any issue, could not be decided by the court.

• Therefore, a decision of a case cannot be based on grounds outside the pleadings of the parties. The pleadings and issues are to ascertain the real dispute between the parties to narrow the area of conflict and to see just where the two sides differ.

• In this regard, we place our reliance on the well-entrenched principle of law that no relief can be granted on a case not founded in the pleadings. This Court cannot entertain an entirely new case at the appellate stage at the behest of either party and is strictly confined to adjudicate the issues arising from the suit as framed by the pleadings of the parties."

Excerpts of the Order; 

Heard Sri Kondaparthy Kiran Kumar, learned counsel for the appellant appearing through virtual mode, Ms. Maheswari Arika, learned counsel appearing for respondent Nos.1 to 7, and the learned Government Pleader for Revenue for respondent Nos.8, 10, 12 & 13.

# 2. This writ appeal has been filed by the appellant/respondent No.7 (in the writ petition), aggrieved by the order dated 08.05.2026 passed in W.P.No.14219 of 2026, whereby the learned Single Judge directed the parties to maintain status quo, as on the date of the order, with regard to the subject land, with respect to the mutation of the names of the parties concerned for the subject land.

# 3. Respondent Nos.1 to 7 herein are the writ petitioners in W.P.No.14219 of 2026. The appellant herein is respondent No.7 and respondent Nos.8 to 13 herein are the official respondents.

# 4. The dispute between the appellant and the writ petitioners pertains to the subject land i.e., to an extent of Ac.2.48 cents in Sy.No.243/3, situated at Cherlopalle Village, Tirupati Rural Mandal, Tirupati District (erstwhile Chittoor District).

# 5. The case of the writ petitioners was that the subject land was assigned in favour of the writ petitioners' grandfather and he remained in possession and enjoyment thereof which was also so recorded in the revenue records. The Urban Development Authority issued notice dated 27.02.1987 under Section 5A of the Land Acquisition Act, 1894 and called for the objections and after submission of the objections, the proceedings were withdrawn in the year 1987. It is their further case that the petitioners' grandfather nor his sons transferred the subject land to anyone. However, respondent No.7 in writ petition claimed that his father had purchased the land from the petitioners' grandfather/his legal heirs. Respondent No.6 in the writ petition passed the order of resumption on 16.08.1987 on the ground of violation of the terms and conditions of the assignment which was challenged by the father of respondent No.7 in writ petition No.12556 of 1999 which was disposed of with the direction to the Tahsildar concerned to reconsider the issue with reference to Section 3(5) of the A.P. Assigned Lands (Prohibition of Transfer) Act, 1977. After enquiry an order was passed in favour of the father of respondent No.7 on 13.11.1990 but after his death again the proposal for resumption of the land was initiated on the ground that the land use was changed, into non-agricultural, for the setting up a brick kiln. The order of resumption was passed on 19.06.2006, which was challenged in appeal. The appeal was allowed. The resumption order was set aside on 15.03.2008 by RDO but this order was again set aside in revision on 30.10.2009 by the Joint Collector, with direction to resume the land as per the Rules and to make necessary changes in the revenue records. Respondent No.7 in writ petition, filed W.P.No.26503 of 2009 which was allowed on 03.02.2020 by setting aside the order dated 30.10.2009. Challenging the order dated 03.02.2020 two writ appeal Nos.373 and 572 of 2021 were filed, which were dismissed confirming the order passed in Writ Petition.

# 6. Petitioners further case is that respondent No.7 in writ petition without approaching the competent civil court made representation dated 19.05.2025 before the Joint Collector for deletion of the land from prohibited properties list under Section 22A of the Registration Act, 1908 for the land to the disputed extent, which was allowed vide order dated 19.02.2026 deleting the land from the prohibited property list. The writ petitioners' case is that, the order dated 19.02.2026 was passed without notice to them. Challenging the order dated 19.02.2026, the writ petitioners filed appeal along with stay application on 15.04.2026 and the same is pending adjudication before the appellate authority. Their further case is that in the meantime, the entry in revenue records was changed to certain extent of an area, and the petitioners' possession was being attempted to be disturbed by their dispossession/eviction without following due process of law. So they filed the writ petition for direction to the respondents in the writ petition not to evict/dispossess the petitioners from the subject land pending the statutory appeal.

# 7. The learned Single Judge, by order dated 08.05.2026, disposed of the writ petition No.14219 of 2026, inter alia, directing the appellate authority to consider and dispose of the statutory appeal strictly in accordance with law, by hearing all the parties concerned and upon verification of the record and the subject land within the period stipulated. The operative part reads as under :

• "6. In view of the above said facts and circumstances, since the appeal is pending before the 2nd respondent, it is just and necessary to dispose of the same in accordance with law to meet the ends of justice. For the said purpose, the 2nd respondent is directed to consider and dispose of the appeal of the petitioners dated 15.04.2026 strictly in accordance with law by hearing all the parties concerned including the petitioners and the 7th respondent herein, upon verification of the records and the subject land, appropriate decision shall be taken on its own merits as expeditiously as possible, preferably within a period of four (4) months from the date of receipt of this order. In the meanwhile, there shall be an order of status quo as on today to be maintained with respect to the mutation of the names of the parties concerned for the subject land covered under the, said appeal.

• 7. Accordingly, the writ petition is disposed of. Interim order, if any, deemed to have been vacated. There shall be no order as to costs."

# 8. Learned counsel for the appellant submits that so far as the direction to the statutory appellate authority to dispose of the appeal is concerned, the appellant has no grievance which is confined only to that part of the order whereby the parties have been directed to maintain status quo as on the date of the order, with regard to the mutation in respect of the subject land. He submits that in the writ petition there was no challenge on the point of mutation of entries and no relief was sought in that regard. The only relief claimed in the writ petition was with respect to the alleged possession and dispossession from the subject land during the pendency of the statutory appeal before the respondent No.2. Learned counsel submits that such a direction in the judgment under appeal is beyond the scope of the relief sought in the writ petition. He places reliance in State of Himachal Pradesh and Others v. Himachal Pradesh Nizi Vyavsayik Prishikshan Kendra Sangh [(2011) 6 SCC 597].

# 9. Learned counsel for the writ appellant/7th respondent in writ petition further submits that the mutation of the name of the appellant had already taken place in respect of an extent of Ac.1.65 cents out of the total extent of Ac.2.48 cents of the subject land.

# 10. Learned counsel for the writ appellant further submits that the appellant has already instituted O.S. No.47 of 2026 on the file of the Principal Civil Judge (Senior Division), Tirupati, against the writ petitioners (defendants in the suit), in which, the learned Civil Judge, by order dated 21.04.2026, has granted an ad interim temporary injunction to the effect, "accordingly ad-interim injunction is granted in favour of the petitioner against the respondents from restraining them not to interfere with the peaceful possession of the plaintiff's over the petition schedule property by dispensing the notice to them" which also finds mention in paragraph No.5 of the impugned judgment. If the writ petitioners are aggrieved from the grant of the ad interim injunction, they should take recourse to the remedy open to them under law.

# 11. Learned counsel for the write petitioners/respondent Nos.1 to 7 in writ appeal, submits that, pursuant to the order passed by the learned Single Judge in the writ petition, the statutory appeal is required to be decided expeditiously so, the direction to maintain status quo with respect to the mutation entries in the revenue records is justified and calls for no interference.

# 12. Learned counsel for respondent Nos.1 to 7 further submits that respondent Nos.1 to 7 were not served with the notice of the suit proceedings. The ad interim temporary injunction is ex parte. They came to know about the said order in the course of the writ proceedings and they are taking steps to enter appearance and take appropriate steps before the learned trial Court in the suit proceedings. However, the writ appellant is attempting to dispossess the writ petitioners from the subject land and in such a case, irreparable injury would be caused to the petitioners/respondent Nos.1 to 7.

# 13. We have considered the aforesaid submissions of the learned counsels for the parties and perused the material on record.

# 14. Insofar as the direction issued by the learned Single Judge for expeditious disposal of the pending statutory appeal is concerned, learned counsels for both the sides have no grievance.

# 15. The grievance of the writ appellant is with respect to the direction to maintain status quo in relation to the mutation entries.

# 16. We find force in the submission of the learned counsel for the appellant. The relief sought in the writ petition did not pertain to the mutation entries in the revenue records, but was with respect to the alleged attempt of the respondent Nos.5 and 6 in writ petition to dispossess the writ petitioners from the subject land, without following due process of law.

# 17. The prayer in writ petition reads as under:

• ".....to issue a writ, order or direction more particularly one in the nature of Writ of Mandamus declaring the action of the Respondents in trying to dispossess the petitioners from the land to an extent of Ac. 2.48 cents in No.243/3 of Cherlopalle Village, Tirupati Rural Mandal, Tirupati District, (erstwhile Chittoor District) pending appeal dated 15.04.2026 before the 2nd Respondent as illegal, arbitrary, unconstitutional against the principles of natural justice and consequently direct the Respondents not evict/dispossess the Petitioners from the land to an extent of Ac. 2.48 cents in Sy.No.243/3 of Cherlopalle Village, Tirupati Rural Mandal, Tirupati District, (erstwhile Chittoor District) pending appeal dated 15.04.2026 before the 2nd Respondent and to pass....."

# 18. The writ petition did not contain any prayer with respect to the mutation entries. Learned counsel for respondent Nos.1 to 7 could not dispute that there was any prayer in the writ petition with respect to the mutation entries. In State of Himachal Pradesh (supra), the Hon'ble Apex Court held at paragraph No.17, as follows:

• "17. We have already adverted to the relief prayed for by the respondent Association in the said writ petition. Admittedly, there is no prayer for quashing of even earlier Cabinet decision or order of the Government. The conclusion of the High Court quashing the Cabinet decision dated 18-7-2009 and as a consequence issuing several directions is unacceptable and contrary to the well- established principles. First of all, there was no prayer for quashing of any decision of the State Government much less the subsequent Cabinet decision dated 18-7-2009. If the High Court was interested in going into the said decision that too after reserving the judgment on 3-7-2009, it is but appropriate to reopen the case, permit the petitioner Association to amend the relief portion and afford adequate opportunity to the State to put forth its stand for modifying this "policy" curtailing certain courses under SCVT. Admittedly, the High Court has not resorted to such a recourse and simply quashed the decision of the Cabinet dated 18-7-2009 and issued various directions which are impermissible."

# 19. The settled legal proposition, therefore, is that a Court ought not to grant a relief which has not been prayed in the writ petition being beyond the scope of the writ petition.

# 20. In Union of India V. E.I.D.Parry (India) Ltd., 2 , the High Court on its own proceeded to consider the validity of the Rule and ultimately held that it was not in consonance with the relevant provisions of the Railways Act,1890 and consequently held that it was ultra vires. The Hon'ble Apex Court held that the view taken by the High Court was contrary to the settled law that a question, which did not form part of the pleadings or in respect of which the parties were not at variance and which was not the subject matter of any issue, could not be decided by the Court. It was further held that the High Court travelled beyond the pleadings in declaring the Rule to be ultra vires. So, the judgment of the High Court could not be sustained. The relevant portion of paragraph No.4 reads as under :

• ".....4. This view is contrary to the settled law that a question, which did not form part of the pleadings or in respect of which the parties were not at variance and which was not the subject-matter of any issue, could not be decided by the court. The scope of the suit was (2000) 2 SCC 223 limited. The pleadings comprising of the averments set out in the plaint and the defence put up by the present appellant in their written statement did not relate to the validity of the rule struck down by the High Court. The High Court, therefore, travelled beyond the pleadings in declaring the rule to be ultra vires. The judgment of the High Court, therefore, on this question cannot be sustained."

# 21. In State of Orissa and another V. Mamata Mohanty3, the Hon'ble Apex Court held that the relief not claimed could not have been granted. The relevant paragraph No.55 reads as under:

• "Relief not claimed--cannot be granted

• 55. Pleadings and particulars are required to enable the court to decide the rights of the parties in the trial. Thus, the pleadings are more to help the court in narrowing the controversy involved and to inform the parties concerned to the question in issue, so that the parties may adduce appropriate evidence on the said issue. It is a settled legal proposition that "as a rule relief not founded on the pleadings should not be granted". Therefore, a decision of a case cannot be based on grounds outside the pleadings of the parties. The pleadings and issues are to ascertain the real dispute between the parties to narrow the area of conflict and to see just where the two sides differ. [Vide Sri Mahant Govind Rao v. Sita Ram Kesho [(1897-98) 25 (2011) 3 SCC 436 IA 195 (PC)] , Trojan & Co. v. Nagappa Chettiar [(1953) 1 SCC 456 : AIR 1953 SC 235] , Ishwar Dutt v. Collector (L.A.) [(2005) 7 SCC 190 : AIR 2005 SC 3165] and State of Maharashtra v. Hindustan Construction Co. Ltd. [(2010) 4 SCC 518 : (2010) 2 SCC (Civ) 207] ]"

# 22. Recently in Divyagnakumari Harisinh Parmar and Others V. Union of India and Others [2025 SCC Online 2064] the Hon'ble Apex Court held that it is settled principle of law that no relief can be granted on a case not found in the pleadings. The relevant paragraph No.18 reads as under :

• "18. In this regard, we place our reliance on the well-entrenched principle of law that no relief can be granted on a case not founded in the pleadings. This Court cannot entertain an entirely new case at the appellate stage at the behest of either party and is strictly confined to adjudicate the issues arising from the suit as framed by the pleadings of the parties."

# 23. We find that the writ petition did not contain any prayer relating to the mutation entries nor a prayer for maintaining status quo with respect to the mutation entries pending disposal of the statutory appeal.

# 24. Consequently, we are of the view that the part of the judgment pertaining to the directions issued by the learned single Judge to maintain status quo in respect of the mutation entries cannot be legally sustained. The same is accordingly, set aside to that extent.

# 25. However that is not the end of the matter. The fact remains that the prayer made in the writ petition has not been considered, regarding threat of alleged dispossession by not following the due process of law, in correct perspective.

# 26. The question as to which of the parties is in possession of the subject property and whether there is any attempt for illegal dispossession are matters which are directly in issue in the pending civil suit. It is not in dispute that the competent Civil Court has already granted an ad interim temporary injunction restraining the defendants therein, (the present respondents 1 to 7), and that notice has also been issued in the suit proceedings. Once the dispute is in the civil suit, the parties are required to work out their remedies before the learned trial Court. If the respondents 1 to 7 (writ petitioners) are aggrieved by the ad interim order of injunction or they intend to seek any further interim protection, it is open to them to approach the learned trial Court by filing an appropriate application in the suit or/and to institute the suit; whichever remedy may be available and as may be advised to them.

# 27. Learned counsel for the appellant submits that the writ petitioners had no knowledge of the ad interim temporary injunction order passed in the suit, while filing the writ petition. Learned counsel for the writ appellant disputes and contends that they had the knowledge. We refrain from expressing any views on the said disputed question of fact.

# 28. Having regard to the submission advanced by the writ petitioners' counsel that there exists an imminent threat of dispossession of the writ petitioners, and further considering their contention that ad interim temporary injunction was granted in the pending civil suit ex parte and as the writ petitioners are now taking appropriate steps to enter appearance in the suit, we deem it appropriate to protect their interest for a limited period on the principle that no one can be dispossessed except by following due process of law.

# 29. We make it clear that we have not observed nor be understood as observing about the possession or/and alleged attempt of dispossession not by due process of law, in favour of or against any of the parties.

# 30. Accordingly, the writ petitioners shall be at liberty to approach the learned trial Court in an appropriate proceedings within a period of three (03) weeks from today. For the aforesaid period, if the writ petitioners are in possession of the subject property, they shall not be dispossessed except by due process of law.

# 31. It is further made clear that this order shall not preclude the learned trial Court from considering and passing appropriate orders on the applications strictly on its own merits and in accordance with law, uninfluenced by any observations made in this judgment.

# 32. The statutory appellate authority shall also proceed and dispose of the pending statutory appeal expeditiously, in terms of the direction issued by the learned Single Judge for expeditious disposal.

# 33. With the above observations and directions, the Writ Appeal is allowed in part.

No order as to costs.

As a sequel thereto, miscellaneous petitions, if any pending, shall also stand closed.

---------------------------------------------------------

Status of Disputed Claim in Insolvency Proceedings (CIRP) - Creditor’s perspective

 Disputed claim admitted for notional amount of INR 1.

NCLT Ahmedabad (08.03.2019)  in IA 49 of 2018 (Essar Power Limited vs. Resolution Professional of ESIL & Anr), directed RP to include this claim (Rs 893,21,52,807 ) as disputed and admit notional amount of INR 1 against this claim subject to final outcome of dispute pending.(Page-52/153 of the order). The said views of the NCLT were upheld by the Hon’ble SCI.

 

Case reference;

SCI (15.11.2019) in CoC of Essar Steel India Limited Vs Satish Kumar Gupta & Ors.(Civil Appeal No. 8766-67 OF 2019) ruled as under:

• # 102. So far as Dakshin Gujarat Vij Co. (Respondent No. 11 in Civil Appeal Diary No. 24417 of 2019), State Tax Officer (Respondent No. 12 in Civil Appeal Diary No. 24417 of 2019), Gujarat Energy Transmission Corporation Ltd. (Respondent No. 17 in Civil Appeal Diary No. 24417 of 2019) and Indian Oil Corporation Ltd. 162 (Respondent No. 18 in Civil Appeal Diary No. 24417 of 2019) are concerned, the resolution professional admitted the claims of the abovementioned respondents notionally at INR 1 on the ground that there were disputes pending before various authorities in respect of the said amounts. However, the NCLT through its judgment dated 08.03.2019 directed the resolution professional to register the entire claim of the said respondents. The NCLAT in paragraphs 43 and 196 of the impugned judgment upheld the order passed by the NCLT as aforesaid and admitted the claim of the abovementioned respondents. We therefore hold that this part of the impugned judgment deserves to be set aside on the ground that the resolution professional was correct in only admitting the claim at a notional value of INR 1 due to the pendency of disputes with regard to these claims.

 

Now with this ruling of Hon’ble SCI, the matter stands settled that in case of pendency of  dispute the claim of a creditor has to be taken at the notional value of INR 1.

 

When the claim of the creditor has been admitted at the notional value of INR 1, the concerned creditor will be deprived of any share in the distribution of funds in the resolution plan approved by CoC & AA, and adding to the injury, the said resolution plan shall be binding on the creditor in terms of section 31(1) of the code which reads as under.

 

# Section 31. Approval of resolution plan. -

(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan.

Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.

 

As far as other recourse available to the creditor of a disputed claim are concerned, the following rulings of Hon’ble SCI are of paramount importance, which have effectively sealed /denied any other recourse available to the creditor of a disputed claim.

 

Case Law;

i). SCI (15.11.2019) in CoC of Essar Steel India Limited Vs Satish Kumar Gupta & Ors.(Civil Appeal No. 8766-67 OF 2019) ruled as under;

• # 67.   . . . . .  A successful resolution applicant cannot suddenly be faced with “undecided” claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove. For these reasons, the NCLAT judgment must also be set aside on this count.

 

ii). Supreme Court (13.04.2021) in Ghanashyam Mishra and Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company Ltd.  [Civil Appeal No. .8129 of 2019] held that;

• # 95. In the result, we answer the questions framed by us as under:

• (i) That once a resolution plan is duly approved by the Adjudicating Authority under subsection (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan;

• (ii) 2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect;

• (iii) Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued.

• # 130.  . . . .As such, when the resolution plan is approved by NCLT, the claims, which are not part of the resolution plan, shall stand extinguished and the proceedings related thereto shall stand terminated. . . . .

 

Conclusion

Thus, in the case of a disputed claim, it will be in the interests of the creditor to settle the dispute as early as possible, preferably before the approval of the resolution plan by the CoC. Now the question arises, with whom  the creditor can settle the dispute during CIRP. Here following provisions of the Code may be of some help.

 

# Section 17. Management of affairs of corporate debtor by interim resolution professional. -

(1) From the date of appointment of the interim resolution professional, -

• (a) the management of the affairs of the corporate debtor shall vest in the interim resolution professional;

• (b) the powers of the board of directors or the partners of the corporate debtor, as the case may be, shall stand suspended and be exercised by the interim resolution professional;

(2) The interim resolution professional vested with the management of the corporate debtor, shall-

• (a) act and execute in the name and on behalf of the corporate debtor all deeds, receipts, and other documents, if any;

 

# Section 23. Resolution professional to conduct corporate insolvency resolution process. -

(1) Subject to section 27, the resolution professional shall conduct the entire corporate insolvency resolution process and manage the operations of the corporate debtor during the corporate insolvency resolution process period:

Provided that the resolution professional shall, if the resolution plan under sub-section (6) of section 30 has been submitted, continue to manage the operations of the corporate debtor after the expiry of the corporate insolvency resolution process period until an order is passed by the Adjudicating Authority under section 31

(2) The resolution professional shall exercise powers and perform duties as are vested or conferred on the interim resolution professional under this Chapter.

 

In my view, the IRP /RP while managing the affairs of the Corporate Debtor, as a going concern, has powers to settle the disputes etc. Settlement of disputes with the creditors, in due course of business, is within the powers vested in IRP/RP for management of  CD. (Section 17 read with Section 23, quoted supra above). In my opinion, this will not require the prior approval of CoC under the provisions of Section 28. 

 

Now the question arises, which claims, during the insolvency process (CIRP), are / can be taken as “Disputed Claims”. Let’s look the provisions of the Code and some of the case laws’

 

# Section 5. Definitions;

(6) “dispute” includes a suit or arbitration proceedings relating to–

• (a) the existence of the amount of debt;

• (b) the quality of goods or service; or

• (c) the breach of a representation or warranty;

 

Case-law on Disputed claims 

i). Supreme Court of India (31.08.2017) in Innoventive Industries Ltd. v. ICICI Bank & Anr.(Civil Appeal Nos. 8337 - 8338 of 2017) held that;

• # 27. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning non-payment of a debt once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount. For the meaning of “debt”, we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a “claim” and for the meaning of “claim”, we have to go back to Section 3(6) which defines “claim” to mean a right to payment even if it is disputed.

• # 29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration  proceedings, which is pre existing – i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code.

 

ii). Supreme Court of India(01.09.2017) in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited (Civil Appeal No. 9405 Of 2017) held that;

• # 30. It is settled law that the expression “and” [occurring in section 8(2)(a)] may be read as “or” in order to further the object of the statute and/or to avoid an anomalous situation.

• # 35. We have already noticed that in the first Insolvency and Bankruptcy Bill, 2015 that was annexed to the Bankruptcy Law Reforms Committee Report, Section 5(4) defined “dispute” as meaning a “bonafide suit or arbitration proceedings…”. In its present avatar, Section 5(6) excludes the expression “bonafide” which is of significance. Therefore, it is difficult to import the expression “bonafide” into Section 8(2)(a) in order to judge whether a dispute exists or not.

• # 40. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the “existence” of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties.  …....The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application

• # 43. ………. a “dispute” is said to exist, so long as there is a real dispute as to payment between the parties that would fall within the inclusive definition contained in Section 5(6).

 

iii). Supreme Court of India (14.08.2018) in K. Kishan Vs. M/S Vijay Nirman Company Pvt. Ltd.(Civil Appeal No. 21824 of 2017 With Civil Appeal No. 21825 of 2017) held that;

• # 18. We repeat with emphasis that under our Code, insofar as an operational debt is concerned, all that has to be seen is whether the said debt can be said to be disputed, and we have no doubt in stating that the filing of a Section 34 petition against an Arbitral Award shows that a pre-existing dispute which culminates at the first stage of the proceedings in an Award, continues even after the Award, at least till the final adjudicatory process under Sections 34 & 37 has taken place.

• # 19. There may be cases where a Section 34 petition challenging an Arbitral Award may clearly and unequivocally be barred by limitation, in that it can be demonstrated to the Court that the period of 90 days plus the discretionary period of 30 days has clearly expired, after which either no petition under Section 34 has been filed or a belated petition under Section 34 has been filed. It is only in such clear cases that the insolvency process may then be put into operation

• # 20) We may hasten to add that there may also be other cases where a Section 34 petition may have been instituted in the wrong court, as a result of which the petitioner may claim the application of Section 14 of the Limitation Act to get over the bar of limitation laid down in Section 34(3) of the Arbitration Act. In such cases also, it is obvious that the insolvency process cannot be put into operation without an adjudication on the applicability of Section 14 of the Limitation Act.

• # 23. ……… Even if it is clear that there be a record of an operational debt, it is important that the said debt be not disputed. If disputed within the parameters laid down in Mobilox Innovations, an insolvency petition cannot be proceeded with further.

 

iv). NCLT Ahmedabad Bench (10.08.2020) Raghuvir Buildcon Private Limited Vs. Ketan Construction Limited.[C.P. (I.B.) No.57/9/NCLT/AHM/2019 With IA 201 of 2020 IA 123 of 2020] held that;

• # 18 Thus, the parameter to ascertain as to whether there is a dispute or otherwise can be summarized as under:

• i) The dispute should have prima facie bona fide and exists naturally in a given fact;

• ii) The grounds for alleging the existence of a dispute should not be spurious, hypothetical, illusory or misconceived;

• iii) The existence of a dispute need not require further to be proved;

• iv) The dispute should be natural and not a made to believe dispute.

• The extent of ascertainment/ examination of such parameters defines the scope of exercise of jurisdiction by the Adjudicating Authority. It has been pleaded that  Adjudicating Authority has limited jurisdiction as compared to a Trial Court and Civil Court. We do not have any quarrel or dispute with this proposition. However, intensity of the examination would depend upon the facts and documentary evidences produced by each of the parties in support of their claims. Having said so, it would also be an endeavor of the Corporate Debtor to prove that there is a pre-existing dispute to avoid its obligation. The Hon’ble Supreme Court has said that such defense should not be feeble legal argument or an assertion of fact unsupported by evidence. Further, such defence should not be spurious or merely bluster, frivolous or vexatious. It should not be a made to believe story. However, merits of the case need not to be a factor to decide the matter. These observations itself define the scope that the Adjudicating Authority has to look into the material produced before it and to analyze the same to reach some conclusion. It can neither be precluded from doing so nor it is precluded by these observations, hence, the Adjudicating Authority is well within its jurisdiction when it analyzes the accounting records, correspondences, contract etc. as produced by the parties to arrive at a conclusion as regard to nature and existence of dispute. This exercise may require some deep analysis in some case or in some cases it may be a very minor examination based upon the facts of each case and material produced by the parties. In cases, in our considered view, where greater analysis is required then in that situation, such analysis would not amount to roving inquires or exercise beyond jurisdiction as it would be the demand of the situation.

• # 19. Apart from the above legal position, the question which comes to our mind is that in what circumstances a fact situation can be categorized as dispute i.e. when does a disagreement or difference of opinion become a dispute. As observed earlier that the term ‘dispute’ has been defined inclusively in IBC, 2016, however, basic meaning of the term ‘dispute’ has not defined, hence, we would have to look for the meaning of this term as per law dictionaries/other legal forums.

• 19.1.The Black’s Law Dictionary defines the term ‘dispute’ as under:  A conflict or controversy, esp. one that has given rise to a particular law suit.

• 19.2. West’s Encyclopedia of American Law, edition 2 describes the term “dispute” as under:  A conflict or controversy; a conflict of claims or rights; an assertion of a right, claim, or demand on one side, met by contrary claims or allegations on the other. The subject of litigation; the matter for which a suit is brought and upon which issue is joined, and in relation to which jurors are called and witnesses examined. A labor dispute is any disagreement between an employer and his or her employees concerning anything job-related, such as tenure, hours, wages, fringe benefits, and employment conditions.

• 19.3. The term ‘dispute’ as per U.S Legal.com is described as under:  “Dispute means a controversy. It refers to an allegation of fact by one person denied by another person, both acting with some show of reason.

• # 20. Thus, at a glance itself, it can be said that a threshold or stage is to be crossed to convert a difference/disagreement into dispute. In other words, normally commercial / legal differences per se are not dispute unless such differences are ascertained into a claim on which both the parties have opposite /different views and want to settle the same through some legal process or otherwise. Thus, in our view, routine correspondence in commercial relationship cannot automatically or necessarily be considered and admitted as dispute unless such stage is reached.

v). NCLT (PB) New Delhi.(21.03.2018) in Grasim Industries Limited vs. Tecpro Systems Ltd. [CA -19(PB) /2018 in (IB) -197(PB)/2017] held that,

• he (IRP) is  under mandatory duty to verify every claim and maintain the  list of creditors containing their names along with the amount claimed by them and the amount of their claim admitted.

• Such a claim is not verifiable from the books of accounts of the Corporate Debtor. Moreover, the same amount is subject matter of arbitration before the Arbitral Tribunal and there is a specific bar created by the admission order in terms of Section 14 of the Code

Disclaimer: The sole purpose of this blog is to create awareness on the subject and must not be used as a guide for taking or recommending any action or decision. A reader must do his own research and seek professional advice if he intends to take any action or decision in the matters covered in this blog.

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