CIRP plea was rightly rejected as corporate debtor pointed out deficiencies in work prior to issuance of demand notice

Case Details: R.K.& Associates v. Pranay Infrabuild (P.) Ltd - [2022] 138 taxmann.com 153 (NCLAT-New Delhi) 

Judiciary and Counsel Details

• • Justice Ashok Bhushan | Chairperson, Jarat Kumar Jain | Judicial Member & Dr. Alok Srivastava, Technical Member
  • Piyush Singh, Akshay Srivastava, Ms. Aditi Sinha and Akhil Kukreja, Advs. for the Appellant.

Facts of the Case

In the instant case, an application was filed under section 9 of the IBC, 2016 by the Applicant claiming to be an Operational Creditor with a prayer for initiation of Corporate Insolvency Resolution Process against the Respondent.

As per the application, the Respondent had appointed the applicant as an architect for its project, by executing a work order.

The Applicant raised invoices from time to time for the service rendered. As per the applicant, the Corporate Debtor was negligent in making the payments; Therefore, the Applicant had sent various reminders for outstanding payments

Despite various reminders sent by the applicant, the Corporate Debtor failed to make payment of outstanding debt. Thus, the Applicant issued a notice under section 8 of the Code calling upon the Corporate Debtor to pay the total amount.

The Corporate Debtor in its reply stated that there has been a large number of disputes with the Applicant and that the Applicant has not rendered services as per the requirements and conditions as stipulated in work order and thereby project got delayed. On the other hand, on scrutiny of trail e-mails, it also appeared that the Applicant had delayed in providing drawings.

The Corporate Debtor raised the existence of a dispute with respect to the issue of service in reply to the demand notice and reiterated the same issues and contentions in reply to the instant Application. Also, copy of the meeting minutes annexed by the respondent reflects that the services provided by the Applicant were unsatisfactory. Thus, the documents produced by the Respondent show that there was a pre-existence of the dispute with respect to the providing of drawings on time and deficiency in service.

NCLAT Held

The NCLT in its order rejected the application filed u/s 9 for initiation of CIRP against the corporate debtor as there was a pre-existing dispute between the Corporate Debtor and operational creditor.

The appellant filed an appeal before the NCLAT against the order of the NCLT. The NCLAT took the same view and held that as there was a pre-existing dispute regarding the work of the Appellant, hence, the NCLT rightly rejected the application.

List of Cases Reviewed

• • R.K. & Associates v. Pranay Infrabuild (P.) Ltd. [2022] 138 taxmann.com 152 (NCLT – JP.) (para 7) affirmed [See Annex].