NCLT Rightly Initiated CIRP as CD Failed to Pay for Completed Work, Despite Verified Bills | NCLAT

Case Details: Ashok Singh v. Babu Lal Sharma - [2024] 159 taxmann.com 529 (NCLAT- New Delhi)

Judiciary and Counsel Details

• Ashok Bhushan, Chairperson
• Barun Mitra & Arun Baroka, Technical Member
• Vivek Jain, Bhrigu Sharma & Rajat Jain, Advs. for the Appellant
• Priyesh Kasliwal , Bipin Garg & Ms Sangita Mishra, Advs. for the Respondent.

Facts of the Case

In the instant case, the corporate debtor entered into a sub-contractor agreement with respondent no. 2 (i.e. operational creditor), in which the operational creditor undertook to complete the construction project.

Thereafter, the operational creditor raised various invoices against the corporate debtor. Since, the corporate debtor failed to pay any amount even after work had been done and also after running bills have been signed and verified by technical persons of the corporate debtor and, thus, the operational creditor filed a petition u/s 9 of the IBC against the corporate debtor.

The Adjudicating Authority (NCLT) vide the impugned order admitted the said petition. The appellant (i.e. suspended director of corporate debtor) filed the instant appeal on the ground that despite pre-existing dispute with respect to the outstanding amount and quality of work rendered by the operational creditor, the NCLT admitted the CIRP petition and, thus, the same was to be set aside.

Thereafter, an appeal was made to the National Company Law Appellate Tribunal (NCLAT) against the order passed by the NCLT.

It was noted that apart from Rs. 11 lacs, which was paid as mobilisation advance, no other payments had been made, even though running bills had been sent over a period of time. Further, it was noted that no dispute had been raised with respect to running the bill and no reply was issued to demand notice.

The NCLAT observed that the corporate debtor had not been replying to all communications and very belatedly raised the issue that work had not been done as per the sub-contractor agreement.

The NCLAT, further observed that the invoices raised by the operational creditor were verified and confirmed by the technical person, and the appellant also paid GST on work, even though the due amount was to be paid by the corporate debtor.

NCLAT Held

The NCLAT held that the NCLT had rightly concluded that there was a debt, which was more than Rs. 1 lacs and due and had not been paid.

Further, the NCLAT held that the corporate debtor defaulted in making full payments against services rendered by the operational creditor and, therefore, the NCLT had rightly proceeded for CIRP proceedings u/s 9 of the IBC.

List of Cases Reviewed

• RG Colonizers (P.) Ltd. v. Macro Infra Contractors (P.) Ltd. [2024] 159 taxmann.com (NCLT -Jaipur)(para 30) affirmed See Annex