2024 (8) TMI 213 - AT - Insolvency and Bankruptcy

Maintainability of application - petition filed under Section 9 of the Code was rejected on the contentions of the Corporate Debtor that there lies a preexisting dispute between the Parties - both sides have made allegations of Forgery against each other - forgery of termination notice. HELD THAT - It is to be noted that both sub-contracts specified a payment schedule in Clause 7, stating that 85% of the contract value was payable at certain stages, and the remaining 15% was payable upon full commissioning of the project. The Appellant did not complete the project, finishing only 11 out of 17 gates by July 2017, when they abandoned the site. Therefore, it cannot be concluded that the Appellant's claim for the outstanding amount aligns with the contractual terms, as the project was not completed or commissioned. Since there were claims and counter claims leading into a dispute. These cannot be gone into by us under the framework of the Code. Respondent has also raised the issue of limitation and claims that petition is barred by limitation, as the statutory demand notice was issued on December 27, 2021, well beyond the prescribed period from the date of the last invoice. The issue of limitation was taken up by the Adjudicating Authority in its order dated 11.05.2022 in which it was noted that since the first default had occurred in April 2013 and the present application is filed on 23rd February 2022 and where as in terms of Article 137 of the limitation Act, the applicant is required to file an application within 3 years, when the right to apply accrues. Since the invoices had been raised from 2013 and the applicant claims that the amount was also defaulted in the year 2013. Therefore, the first date of the default was in the year 2013, when the payment of the invoices was due and not paid period. Hence the present application is barred by limitation and was dismissed. The Corporate Debtor had raised a plausible contention about a pre - existing dispute, which in the instant case is not a moonshine or feeble legal argument. Therefore, the Adjudicating Authority was not incorrect to reject the application filed under Section 9 of the Code. Thus, in the instant case there were agreed-upon tasks which remained incomplete, and dispute regarding the payment amount existed prior to issuance of Demand Notice by the Petitioner to the Respondent. Based on the detailed analysis and appraisal of the facts and contentions presented, it is evident that there exists a pre-existing dispute between the Appellant and the Respondent, which is not moonshine. The Impugned Order dated May 7, 2024, passed by the NCLT dismissing the petition filed under Section 9 of the IBC is upheld - Appeal dismissed.

Issues Involved:
1. Pre-existing dispute between the parties.
2. Completion and commissioning of the project.
3. Allegations of forgery and false documents.
4. Limitation period for filing the insolvency petition.

Issue-wise Detailed Analysis:

1. Pre-existing dispute between the parties:
The Appellant contended that they fulfilled their contractual obligations and submitted invoices reflecting the agreed-upon charges, which the Respondent partially paid but failed to settle in full. The Appellant made several attempts to resolve the outstanding payment, including sending emails and legal notices. However, the Respondent claimed there was a pre-existing dispute, alleging overpayment and substandard work. The Respondent's email dated September 11, 2018, raised a dispute regarding the work completed and claimed an overpayment of Rs. 2,12,35,200, which was acknowledged by the Appellant in their response dated September 17, 2018. The Tribunal found that these communications indicated a pre-existing dispute, which was not a mere moonshine or feeble legal argument.

2. Completion and commissioning of the project:
The Respondent argued that the Appellant did not complete the project, having finished only 11 out of 17 gates by July 2017, and subsequently abandoned the site. The Respondent had to pay a third party to complete the remaining work. The sub-contract agreements stipulated that the final payment was contingent upon the complete commissioning of the project, which was not achieved. The Tribunal noted that the payment schedule outlined in the sub-contract agreements required the completion and commissioning of the project for the final payment, which the Appellant failed to accomplish.

3. Allegations of forgery and false documents:
Both parties accused each other of forgery. The Appellant presented a letter indicating work acceptance and payment, which the Respondent alleged to be forged. The Respondent also claimed that the Appellant had filed false documents with the NCLT. The Tribunal noted the existence of these allegations but did not delve into the genuineness of the claims, as the pre-existing dispute was evident from other facts on record.

4. Limitation period for filing the insolvency petition:
The Respondent argued that the petition was barred by limitation, as the statutory demand notice was issued on December 27, 2021, well beyond the prescribed period from the date of the last invoice. The Adjudicating Authority initially dismissed the petition on the grounds of limitation, but this was later set aside by the Appellate Tribunal, which revived the Section 9 Application. The Tribunal noted that the issue of limitation had been settled in the earlier order and did not need to be reconsidered.

Conclusion:
The Tribunal concluded that there was a pre-existing dispute between the Appellant and the Respondent, which was not a mere moonshine. The existence of such a dispute necessitated the rejection of the application filed under Section 9 of the IBC. Consequently, the Appeal was rejected, and the Impugned Order dated May 7, 2024, passed by the NCLT dismissing the petition filed under Section 9 of the IBC was upheld.

Order:
The Appeal is dismissed. The Order dated May 7, 2024, of the National Company Law Tribunal, New Delhi Bench-V, in Company Petition (IB) No. 298 of 2022, is hereby affirmed. No order as to costs.

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