AA’s Decision to Admit CIRP Plea Was Justified Since No Formal Letter Was Written by CD w.r.t Pre-existing Dispute | NCLAT

Case Details: Jeevagan Narayana Swami Nadar v. Shapoorji Pallonji & Co. (P.) Ltd. - [2024] 160 taxmann.com 614 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Rakesh Kumar Jain, Judicial Member & Naresh Salecha, Technical Member
  • Palash Singhai, Karant Batura & Jayant Chawla, Advs. for the Appellant.
  • Abhijeet Sinha, Mayank Mishra, Chirag Sharma, Advs. Sudiksha Saini, Shikhar Misra, S. Niranjan Reddy, Sr. Adv. Ms Shally Bhasin, Prateek Gupta, Udbhav Nanda, Aayush Kapoor, Utkarsh Singh, Abhishek Anand, Karan Kohli, Sajal Jain, Ramakant Rai, Varun Tikmani, Saptarshi Chatterjee, Aaditya Pandey & Ms Drishti Kaunshik for the Respondent.

Facts of the Case

In the instant case, Respondent no.1 (i.e. the operational creditor) entered into a contract for Civil & Structural work with the corporate debtor for setting up a boiler and generator (BTG) for an amount of Rs.180 Crores.

Thereafter, the operational creditor raised various invoices against the corporate debtor. However, the corporate debtor had only paid Rs. 146.14 crores and thereby left an outstanding amount of Rs. 62.19 crores.

The operational creditor issued a demand notice under section 8 of the IBC and, thereafter, filed a petition under section 9 of the Arbitration and Conciliation Act, 1996 before the High Court and a stay of invocation of PBG was granted.

The appellant filed a section 9 application against the corporate debtor before the Adjudicating Authority (NCLT). The NCLT vide the impugned order admitted said application.

Thereafter, the appellant, a suspended director of a corporate debtor filed an instant appeal on the ground that there was a pre-existing dispute regarding slow progress and less mobilisation of manpower, tools and plants.

It was noted that prior to the issue of the demand notice, no formal letter was written by the corporate debtor to respondent No. 1 regarding any specific disputes on the aspect of quality and quantity of work executed under contracts.

Further, it was noted that the corporate debtor had issued a completion certificate on 09.05.2019 prior to the issue of the demand notice on 16.08.2019, stating that respondent No. 1 had completed the contract and their performance was found satisfactory.

NCLAT Held

The NCLAT held that since the corporate debtor issued the completion certificate without any reservation and to the full satisfaction of the corporate debtor, the alleged delay during the course of execution of contracts couldn’t be treated as an issue that may adversely affect the rights of the operational creditor under section 9 of the IBC. Therefore, the impugned order passed by the NCLT admitting the section 9 application was justified.

List of Cases Reviewed

• • Shapoorji Pallonji & Co. (P.) Ltd. v. Sinnar Thermal Power Ltd. [2024] 160 taxann.com (NCLT-New Delhi) (para ) affirmed See Annex