Petition U/S 9 Of IBC Is Inadmissible Without Payment Received By Corporate Debtor In Subcontracted Work Done By Operational Creditor: NCLT Hyderabad

The National Company Law Tribunal (NCLT) Hyderabad bench of Sri Rajeev Bhardwaj (Hon'ble Judicial Member) and Sri Sanjay Puri (Hon'ble Member Technical) has held that in absence of any payment received by the Corporate Debtor in a subcontracted work executed by the Operational Creditor, application under section 9 of the IBC cannot be entertained. Filing such an application would be an attempt to use the IBC as a forum to recover the debt which is against the objectives of the IBC. The present application has been filed under section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor (CD). The Applicant submitted that the CD is unable to pay its operational debt and, therefore, seeks initiation of the CIRP under Section 9 of the Code. It was submitted that the CD's claim of a pre-existing dispute is groundless and fabricated. The Writ Petition filed by the CD before the Hon'ble High Court of Manipur pertains to a dispute with PWD, not with the Operational Creditor. Per contra, the Respondent submitted that under the payment terms5 as outlined in the Sub-Contract Agreement, payments to the Petitioner are contingent upon the Respondent receiving funds from the main client. Due to an ongoing dispute with the client, these payments to the Respondent have been withheld. It was further submitted that Since the Sub-Contractor did not furnish the required guarantees, the Respondent arranged them and is recovering the cost at 3% per annum plus GST, as agreed. This default has caused an ongoing dispute. The Tribunal observed that the Applicant has failed to establish with conclusive evidence that the Corporate Debtor received full payment from the Executive Engineer, PWD, Government of Manipur for the subcontracted work on the Capital Complex project. The statement of accounts submitted with the rejoinder also show that the corporate debtor received the amount but entry in the received column is missing. It held that all this shows that no payment was received by the Corporate Debtor for the work executed by the Operational Creditor. The present petition appears to be an attempt to use the NCLT as a forum to recover the money instead of resolution of the corporate debtor's insolvency which is against the objectives of the IBC. The Supreme Court in M/s S.S. Engineers v. Hindustan Petroleum Corporation Ltd held that the National Company Law Tribunal (NCLT) cannot function as a debt recovery forum. Accordingly, the present application was dismissed. Case Title: M/s. S.K. CONSTRUCTION Vs. SRI AVANTIKA CONTRACTORS (I) LIMITED Case Number: CP (IB) No.128/09/HDB/2024 Order Date: 15/07/2025 Click Here To Download Order/Judgement

Petition U/S 9 Of IBC Is Inadmissible Without Payment Received By Corporate Debtor In Subcontracted Work Done By Operational Creditor: NCLT Hyderabad

Mohd Malik Chauhan

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