Vipul Ganda is an Independent Litigation Counsel with over 14 years of experience and a proven track record in Litigation and Dispute Resolution.
M/s Naik Investment Engineers Pvt. Ltd. Versus M/s Indiabulls Construction Ltd.
Court / Forum : National Company Law Appellate Tribunal Citation : Company Appeal (AT) (Insolvency) No. 790 of 2019 Coram : Justice Venugopal M, Member (Judicial), Mr. V.P. Singh, Member (Technical) and Ms. Shreesha Merla, Member (Technical) Subject : Section 9 of the Insolvency and Bankruptcy Code, 2016 Date of Decision : 2020-06-08
The Respondent had placed Work Orders and Purchase Orders for carrying out certain work at the project sites. The Appellant fulfilled its part under the Work Order/ Purchase Order to the entire satisfaction of the Respondent and thereafter raised seven (7) invoices upon the Respondent.
After making part payment towards the aforesaid invoices, the Respondent failed and neglected to make the payment under the Purchase Orders and Work Orders. The Appellant issued a legal notice to the Respondent, but the Respondent failed to make the payment on the aforesaid invoices. The Respondent had complained about deficiency of service in Sky Forest Project.
The Appellant filed an application under section 9 of the Insolvency and Bankruptcy Code, 2016 (“Code”) which was rejected by the Hon’ble Adjudicating Authority vide order dated June 14, 2019 (“Impugned Order”) on the ground that there was pre-existing dispute between the parties.
Aggrieved by the Impugned Order, the Appellant preferred Appeal before the Hon’ble National Company Law Appellate Tribunal (“NCLAT”).
Whether pre-existing dispute exists before issuance of demand notice?
The Hon’ble NCLAT held that the Appellant had issued different demand notices for Hyderabad and Panvel Projects and no demand notice was issued for Sky Forest Project. The Appellant had not filed application with respect to Sky Forest Project and therefore, deficiency with respect to Sky Forest Project is not in question in this case.
The Adjudicating Authority had given a finding that there is a running composite account between same parties and there is no differentiation between different work orders issued between parties. The Appellant had filed section 9 application in respect of outstanding dues for Purchase Orders and Work Orders issued for projects at Hyderabad and Panvel. But the Adjudicating Authority had dismissed the aforesaid application on the ground that there is a dispute with respect to Sky Forest Project.
The Hon’ble NCLAT also observed that every Purchase Order/ Work Order constitutes a separate contract having separate payment terms and conditions and independent dispute resolution clause. The Respondent had sent a common reply to separate demand notices issued under section 8 of the Code and only ground for non-payment was Sky Forest Project. The service was only deficient with respect to Sky Forest Project but there was no dispute with respect to projects at Hyderabad and Panvel.
The Hon’ble NCLAT referred to the decision of Hon’ble Supreme Court in Mobilix Innovations (P) Ltd. Vs. Kirsusa Software Pvt. Ltd. [(2018) 1 SCC 353], which had laid down the principle for determining pre-existing dispute and for allowing or rejecting an application under section 9 of the Code.
Therefore, for the alleged deficiency of service relating to Sky Forest Project, the outstanding payment relating to other invoices cannot be stopped and finding of Adjudicating Authority that a pre-existing dispute exists between the parties is erroneous.
Accordingly, the Hon’ble NCLAT allowed the Appeal and directed the Adjudicating Authority to pass an admission order under section 9 of the Code.
Vipul Ganda is a Delhi based Advocate practicing largely at the Delhi High Court. His practice focus is Dispute Resolution and Litigation and his practice areas include Arbitration, Commercial, Civil, Constitutional, Corporate and Criminal Litigation.