NCLT Hyderabad Rejects Section 9 CIRP Application in Shakti International LLP vs Steel Exchange India Pvt Ltd: Pre-Existing Dispute Over Extension Charges Proves Fatal
Overview of the Case
The National Company Law Tribunal, Hyderabad Bench, delivered a significant ruling in Shakti International LLP Vs Steel Exchange India Pvt Ltd, dismissing a petition filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). The petition sought initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor on account of alleged non-payment of a staggering ₹162.57 crore, which the Operational Creditor characterised primarily as "delayed charges" or "extension charges" rooted in a series of contractual agreements between the two parties.
What makes this ruling particularly instructive is that the Tribunal did not reject the petition merely on procedural grounds — it undertook a careful examination of the nature of the debt, the quality of evidence, and the genuineness of the dispute, ultimately concluding that the claim lacked the hallmarks of a crystallised operational debt capable of sustaining a Section 9 application.
Background and Contractual Framework
Shakti International LLP is a Limited Liability Partnership engaged in the trading of edible oils, agro-based commodities, iron and steel, and coal. Steel Exchange India Pvt Ltd, the Corporate Debtor, operates in the business of trading steel rebars.
The contractual relationship between the parties originated with a Master Supply Agreement dated 29.09.2016, under which the Corporate Debtor engaged the Operational Creditor for the supply of MS rebars. This foundational agreement was subsequently supplemented by:
- A Supplementary Agreement dated 25.10.2017
- A Second Supplementary Agreement dated 20.09.2018
Pursuant to this contractual chain, Request for Orders (RFO) Nos. 19 to 26 were issued by the Corporate Debtor for procurement of MS Rebars.
The Charging Mechanism
Under Annexure A to the Master Supply Agreement, a specific delayed-charge framework was built into the contract:
- Extension charges at 2% per month became payable after 90 days from the date of opening of the Letter of Credit (LC)
- Escalated charges at 2.5% per month triggered after 97 days from the LC opening date
- Trade margin charges of 2% per 30-day period were also applicable on pending dues
The Operational Creditor contended that this charging mechanism continued to govern all subsequent transactions, including those executed under the Second Supplementary Agreement, which — through Clause 1.5 read with Annexure 4 — recorded outstanding amounts as inclusive of all charges, additional charges, and extension charges.
The Role of Nominee Entities
In respect of RFO Nos. 23 to 26, the Corporate Debtor issued nomination letters dated 27.03.2019 and 08.06.2019, nominating Vizag Rebars Pvt. Ltd. (VRPL) and Amaravati Building Materials Pvt. Ltd. (ABMPL) to lift the goods and discharge payment obligations. The Operational Creditor relied on the express recital in these nomination letters that, in the event of default by the nominee entities, the Corporate Debtor would be liable to make good the shortfall.
When Section 8 demand notices were issued to VRPL and ABMPL:
- VRPL, vide reply dated 25.04.2024, acknowledged the principal liability but disputed the delayed payment charges
- ABMPL, vide reply dated 28.06.2024, similarly admitted the principal but contested the levy and computation of extension charges
Subsequently, Section 9 petitions filed against VRPL and ABMPL before the NCLT Amaravati Bench were withdrawn on 24.06.2025, following receipt of principal amounts on 23.06.2025, with liberty reserved to pursue the delayed-charge component before an appropriate forum. These developments proved critical to the outcome of the present petition.