The NCLT, Mumbai Bench ruled that if there is a work contract between the parties and there exists a dispute regarding the quantum of work done and amount paid, the same would amount to pre-existing dispute and hence, Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) application will be liable to be dismissed.

Brief Facts:

The present petition has been preferred under Section 9 of the IIBC for seeking the commencement of the Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor (“CD”)

The due amount was alleged to be advance paid by the Applicant towards a work contract awarded to the CD.

Contentions of the Applicant:

It has been alleged that the Operational Creditor (“OC”) paid more amount than the work completed by the CD. Therefore, the unadjusted advance amount should be paid by the Corporate Debtor.

Further, the contract was terminated by the OC due to the poor performance of the CD. A demand notice under Section 8 IBC was also issued by the OC regarding the advance amount payable by the CD.

Contentions of the CD:

It has been alleged that there was a pre-existing dispute between the parties and therefore, the petition must be dismissed.

Observations of the Tribunal:

The Tribunal examined the communications between the parties vide emails and noted that the OC did not disclose the said communications.

It was ruled that regarding the amount being due, adjudication must be done. Therefore, there existed pre-existing dispute between the parties. It was also observed that the quantum of work done by the CD also needs to be adjudicated upon. The NCLT would not be the right forum for that. Therefore, the application cannot be said to be maintainable as there was a pre-existing dispute between the parties and the OC tried to conceal the material facts regarding the communication between the parties.

The decision of the Tribunal:

Based on the aforementioned reasons, the application was accordingly, dismissed.

Case Title: Vishwa Green Realtors Pvt. Ltd. v. Suhem Facades Pvt. Ltd.

Coram: Mr. Prabhat Kumar (Technical Member), Mr. Kishore Vemulapalli (Judicial Member)

Case No.: CP(IB) No. 365/MB-IV/2021

Advocate for Petitioner: Adv. Ms. Mily Ghoshal

Advocate for Respondent: Adv. Ms. Madhavi Nalluri

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