NCLT rightly dismissed CIRP u/s 9 because of dispute regarding progress & quality of work: NCLAT

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  • Last Updated on 3 May, 2022

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Insolvency and Bankruptcy Code 2016; Corporate insolvency resolution process; Dispute;

Case Details: ABC India Ltd. v. Oriental EPC (P.) Ltd. - [2022] 137 taxmann.com 322 (NCLAT)

Judiciary and Counsel Details

    • Justice Ashok Bhushan, Chairperson
    • Dr. Ashok Kumar Mishra and Dr. Alok Srivastava, Technical Member
    • Tritharkar Das, Ms. Rituparna Saha, Kaushik Chatterjee and Samridhi Solanki, Advs. for the Appellant. 
    • Pinaki Reddy and Sharda Garg, Advs. for the Respondent.

Facts of the Case

In the instant case, the Appellant-operational creditor was awarded three work orders against the Letter of Intent (LOI) by the respondent-corporate debtor. The Appellant raised bills and despite repeated reminders, the outstanding amount was not cleared by the corporate debtor.

The Appellant issued a demand notice under section 8 of the Code to the Respondent. The Respondent disputed the dues on various counts such as Liquidated Damage (LD) issue, performance bank guarantee issue etc. The Appellant filed an application under section 9 for initiation of CIRP against the corporate debtor.

The NCLT by impugned order rejected said application holding that various correspondence between parties reflected slow progress of work, dispute in quality of work, issue of submission of Performance Bank Guarantee, levy of Liquidated Damages (LD) as per contract terms, etc., and that in its reply to demand notice, respondent-corporate debtor had disputed claim

The NCLT further observed that in case of dispute, the NCLT was not a forum to examine and adjudicate the claim and determine the due recoverable amount.

NCLAT Held

The NCLAT referred to the case law Transmission Corpn. of Andhra Pradesh Ltd. v. Equipment Conductors & Cables Ltd. [2018] 98 taxmann.com 375/150 SCL 447 (SC) wherein it was held that IBC is not intended to be a substitute to a recovery forum and also laid down that whenever there is the existence of a real dispute, the IBC provisions cannot be invoked.

Considering the facts and circumstances of the case and the law laid down on the subject, the NCLAT stated that it was not in a position to set aside the order of the NCLT and, accordingly, upheld the order.

Case Review

List of Cases Referred to

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