Authority: National Company Law Appellate Tribunal, Principal Bench, New Delhi

Order Date: July 06, 2026

Case Overview

The appeal was filed by Sukhbir Singh, suspended director and shareholder of Farm2energy Private Limited, challenging the order dated September 09, 2024, passed by the National Company Law Tribunal (NCLT), Chandigarh Bench, which admitted a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) filed by Verbio India Private Limited (Operational Creditor) and initiated Corporate Insolvency Resolution Process (CIRP) against Farm2energy.

The dispute arose from a supply agreement dated July 19, 2022, where Farm2energy agreed to supply 20,000 tons of paddy biomass bales to Verbio India for a total consideration of ₹4.40 crore, with the supply period from September 15, 2022, to December 15, 2022. Verbio India paid an advance of ₹1.54 crore (35% of contract value) in two tranches: ₹77 lakh on July 20, 2022, and another ₹77 lakh on August 18, 2022. A Deed of Hypothecation was executed to secure this advance.

Supplies commenced on October 28, 2022, but Verbio India rejected certain consignments due to high moisture content. By the contract end date (December 15, 2022), only partial supplies worth ₹34.46 lakh were accepted. Verbio India issued a legal notice on January 06, 2023, demanding refund of the unadjusted advance, followed by a statutory demand notice under Section 8 of IBC on January 17, 2023, served on January 19, 2023, claiming ₹1,19,53,864. As no response was received within the 10-day statutory period, Verbio India filed the Section 9 application.

The appellant contended that: (1) the debt was not an 'operational debt' under IBC; (2) there was a pre-existing dispute regarding quality rejections; (3) the demand notice was not properly served; (4) the application was not accompanied by the requisite affidavit; (5) the agreement contained an arbitration clause; and (6) CIRP was not suitable as the business was seasonal and interpersonal.

The NCLAT examined the record, including email correspondence produced at the appellate stage (pages 138-153), particularly an email dated December 27, 2022, from Farm2energy's representative Nitin Jain to Verbio India, which stated: "we are very clear that we have to settle your account by returning the pending amount" and proposed to clear the dues by March 31, 2023. The tribunal found this email to be an admission of liability, not evidence of a pre-existing dispute.

The tribunal also noted that proof of service of the Section 8 notice was filed before NCLT and was part of the record. The corporate debtor had filed a reply and written statement before NCLT but chose not to participate in hearings, hence the ex-parte order could not be faulted for violating natural justice.

Final Outcome

The NCLAT dismissed the appeal, upholding the NCLT's order initiating CIRP against Farm2energy. It found that the debt and default were clearly established (₹1,19,53,864 above the threshold limit), there was no pre-existing dispute, and all procedural requirements under IBC were met. The interim order dated February 06, 2025, which had restrained the consideration of any resolution plan, was vacated. The appellant was directed to cooperate with the Resolution Professional in the conduct of the CIRP.

Topics: Insolvency Appeal, Operational Debt Dispute