NCLAT Rejects L&K Saatchi & Saatchi’s Plea Citing Pre-Existing Dispute

NCLAT Rejects L&K Saatchi & Saatchi’s Plea Citing Pre-Existing Dispute

The application was filed under Section 9 of the Insolvency and Bankruptcy Code

The National Company Law Appellate Tribunal (NCLAT) has ruled that a clash over Non-Objection Certificates constitutes a ‘pre-existing dispute’ under the Insolvency and Bankruptcy Code, 2016.

The bench of Justice Yogesh Khanna (Judicial Member), and Ajai Das Mehrotra (Technical Member) observed that email and letter exchanges before issuing a notice under Section 8 demonstrated a genuine dispute before any formal insolvency notice. Thus, it was valid to reject the insolvency application under Section 9.

Law & Kenneth Saatchi & Saatchi Pvt Ltd had appealed against the Allahabad bench of the National Company Law Tribunal (NCLT) ruling, wherein the appellant’s application was dismissed under Section 9.

The NCLAT noted that emails and letters were exchanged by the corporate debtor’s legal department and the operational creditor’s representative responded. The correspondence was prior to the notice under Section 8.

The appellate tribunal relied on the judicial precedents which held that the adjudicating authority was required to examine the validity of the dispute prior to the issuance of a demand notice.