
Can firms withhold payments to sanctioned suppliers without facing insolvency?
Subscribe to enjoy similar stories.Law firms are closely watching a potentially precedent-setting case before India’s bankruptcy courts that could have far-reaching implications for companies dealing with entities facing international sanctions.At the heart of the dispute lies a key question: can companies legitimately withhold payments to a sanctioned supplier, or can the supplier initiate insolvency proceedings over non-payment? Whichever way this question is ultimately settled is likely to reshape bankruptcy disputes in India.The issue has surfaced after the National Company Law Tribunal (NCLT) Ahmedabad, in a 26 March order, held that foreign sanctions cannot be used as a defence to avoid payment of dues to operational creditors such as suppliers and vendors.The case involves an insolvency plea by Mumbai-based petrochemical supplier CJ Shah & Co. against Flint Group India Pvt.
Ltd, a subsidiary of global packaging firm Flint Group, over unpaid dues of more than ₹1 crore for supplies made till August 2025. Payments allegedly due between October and November 2025 were not made despite repeated follow-ups and a demand notice.Flint Group did not dispute the transactions, but withheld payment after CJ Shah was placed on the US Office of Foreign Assets Control (OFAC) sanctions list on 9 October 2025, citing compliance risks.
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