CIRP u/s 9 Rejected Due to Architect Engaging Another Entity for Delayed Project, Considered a Pre-existing Dispute

Case Details: R.K. & Associates v. Suwalka & Suwalka Properties & Builders (P.) Ltd. - [2023] 151 taxmann.com 123 (NCLT-Jaipur)

Judiciary and Counsel Details

• • Deep Chandra Joshi, Judicial Member & Prasanta Kumar Mohanty, Technical Member
  • Archit Bohra, Adv. for the Applicant.
  • Amol Vyas, Adv. for the Respondent.

Facts of the Case

In the instant case, the corporate debtor issued a work order wherein the operational creditor was appointed as an architect for the project developed by the corporate debtor. The operational creditor undertook the said work and payment was to be released to the operational creditor on completion as per the work order.

However, the corporate debtor failed to make payment as per the statement raised by the operational creditor after the completion of work. Subsequently, the operational creditor issued a demand notice to the corporate debtor u/s 8 of the IBC, to which the corporate debtor responded, claiming the existence of a dispute between the parties.

Thereafter, the operational creditor filed an application u/s 9 of the IBC, seeking to initiate the CIRP against the corporate debtor for the alleged default in the repayment of debt.

It was observed that the operational creditor had undertaken to deliver drawings on various occasions, however failed to abide by same, resulting in a delay of the said project.

Further, the corporate debtor had to engage the services of another entity so as to complete the work of the said project which amounted to a dispute between the parties. The correspondence between the parties to the case clearly indicated dissatisfaction on the part of the corporate debtor with the services provided by the operational creditor, thereby creating a dispute.

NCLT Held

The NCLT held that since there was a clear pre-existing dispute between the parties, the conditions laid down under section 9 were not fulfilled and thus, the instant application was to be rejected.

List of Cases Referred to

• • Alhuwalia Contracts (India) Ltd. v. Raheja Developers Ltd. [2019] 107 taxmann.com 403/155 SCL 210 (NCLAT – New Delhi) (para 6)
  • Mrs. Kanchan Ostwal v. MEC Shot Blasting Equipment (P.) Ltd. [2020] 114 taxmann.com 75 (NCLT – Jaipur) (para 6)
  • V.K. Global v. Smaat India (P.) Ltd. [2018] 97 taxmann.com 125 (NCLT – Hyd.) (para 6)
  • Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. [2017] 85 taxmann.com 292/144 SCL 37 (SC) (para 7)
  • Shrivarad Polyfab v. OLAM Agro India (P.) Ltd. [2018] 94 taxmann.com 102 (NCLAT – New Delhi) (para 7)
  • One Coat Plaster v. Ambience (P.) Ltd. [2017] 87 taxmann.com 127 (NCLT – New Delhi) (para 7)
  • R.K. & Associates v. Pranay Infrabuild (P.) Ltd. [2022] 138 taxmann.com 153 (NCLAT – New Delhi) (para 7)
  • S.S. Engineers v. Hindustan Petroleum Corpn. Ltd. [2022] 140 taxmann.com 524/173 SCL 477 (SC) (para 18).