In Brief
ZNK Traders (a creditor) sought insolvency proceedings against the Corporate Debtor under Section 9 of the Insolvency and Bankruptcy Code. The NCLAT quashed the insolvency petition, relying solely on the debtor's claim that it had raised quality disputes about the goods before the formal notice. The Supreme Court held this reasoning flawed: the quality dispute was raised belatedly, first appearing only in the debtor's reply to a Section 138 notice after cheques were dishonored—not during the transaction itself. The Court set aside the NCLAT's order and remanded the case for fresh consideration on all merits, excluding only the quality dispute."
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