NCLT Admits Insolvency Petition Against Al-Dua Food Processing Pvt. Ltd.

Ashu Agencies' Application for Corporate Insolvency Resolution Process Accepted; Moratorium Declared

In a significant ruling, the National Company Law Tribunal (NCLT), New Delhi Bench, has admitted an application filed by Ashu Agencies against Al-Dua Food Processing Pvt. Ltd. for initiating the Corporate Insolvency Resolution Process (CIRP). The judgment, delivered on September 24, 2025, was presided over by Shri Manni Sankariah Shanmuga Sundaram and Shri Atul Chaturvedi.

The case revolves around an operational debt of Rs. 2,48,46,299.76 claimed by Ashu Agencies, the operational creditor, against Al-Dua Food Processing Pvt. Ltd., the corporate debtor. The NCLT found that Al-Dua Food Processing had acknowledged the debt, which was incurred due to the supply of Kraft Paper Reels during the financial years 2017-18 and 2018-19.

The corporate debtor, Al-Dua Food Processing, had argued that the liability was transferred to its erstwhile holding company, M.K. Overseas Pvt. Ltd., through internal arrangements and a consent letter. However, the tribunal ruled that such internal arrangements without a valid tripartite agreement could not absolve the corporate debtor of its obligations towards third-party creditors.

The tribunal emphasized that the goods were supplied directly to Al-Dua Food Processing, invoices were issued in its name, and GST returns reflected these supplies. Moreover, part payments had been made by the corporate debtor, thereby confirming its liability. The NCLT rejected the defense of debt novation to M.K. Overseas Pvt. Ltd. as unsupported by a tripartite agreement.

Additionally, the tribunal declared a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016. This moratorium imposes prohibitions on suits, asset transfers, foreclosure of security interests, and recovery actions against the corporate debtor. Exceptions are provided for essential goods and services and surety in a contract of guarantee.

The NCLT appointed Mr. Pawan Kumar Goyal as the Interim Resolution Professional (IRP) to manage the insolvency process. Ashu Agencies has been directed to deposit Rs. 2 lacs with the IRP to cover initial expenses. The tribunal also highlighted the potential liability of directors from both the corporate debtor and M.K. Overseas Pvt. Ltd. for any fraudulent activities aimed at defrauding creditors.

The judgment underscores the importance of clear contractual obligations and the limitations of internal corporate arrangements in insolvency proceedings. The case serves as a reminder for companies to ensure compliance with statutory provisions to avoid similar legal challenges.

Bottom Line:

Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process (CIRP) initiated against Corporate Debtor - Liability cannot be shifted to a third party without a valid tripartite agreement - Internal arrangements between group companies cannot absolve liability towards third-party creditors - Debt acknowledged by Corporate Debtor.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 9, 5(21), 14

Ashu Agencies v. Al-Dua Food Processing Pvt. Ltd., (NCLT)(New Delhi Bench) : Law Finder Doc Id # 2796865