Completion Certificate Issued By Corporate Debtor With Caveat On Rectification Of Defects Is Not Unconditional Acceptance Of Work: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Rakesh Kumar Jain, Justice Mohd Faiz Alam Khan and Mr. Naresh Salecha (Technical Member) dismissed an appeal filed by Operational Creditor. The Tribunal held that issuance of completion certificate containing a caveat that the defects in the work have to be rectified cannot be construed as an unconditional acceptance of work. Therefore, it held that the petition under section 9 of the IBC was rightly rejected by the NCLT over a pre-existing dispute. Background Ahluwalia Contracts was awarded a contract by Shristi Infrastructure Development Corporation Ltd. (Corporate Debtor) to execute a civil work for a five star hotel at Kolkata. The work was completed in August 2015 and a completion certificate was also issued in November 2016. Despite multiple reminders, the corporate debtor failed to clear the dues. Subsequently, a demand notice under section 8 of the IBC was issued followed by an application under section 9 of the IBC. The Application was dismissed by the NCLT. Against that order, the present appeal has been filed. The Appellant submitted that issuance of the completion certificate shows that the work was completed on time. A letter issued in June 2020 by the corporate debtor amounted to admission of debt, and non-payment of which constituted a default. The levy of liquidated damages by the corporate debtor four years after the completion of the work is frivolous and is an attempt to manufacture a dispute. Per contra, the Respondent submitted that the work was not completed on time. The Applicant left defects in the work executed for which third party contractors were employed to rectify them at the Applicant's cost. Relying on a report of its consultant, the Respondent further submitted that the liquidated damages were rightly imposed. The June 2020 letter was merely an attempt to reconcile, not an acknowledgement of liability. Analysis The Tribunal at the outset held that whether the liquidated damages were rightly imposed or not cannot be decided in summary proceedings under the IBC. As held by the Supreme Court in Innoventive Industries, the role of the Adjudicating Authority is limited to determining whether a genuine pre-existing dispute between the parties exists, not to adjudicate contractual claims. It further noted that the Respondent had raised concerns regarding delay and quality of work through multiple correspondences which predated the demand notice issued under section 8 of the IBC. It further held that the completion certificate issued by the corporate debtor itself contained a caveat that the defects have to be rectified therefore it cannot be construed as an unconditional acceptance of work. Accordingly, the present appeal was dismissed as the dispute raised by the corporate debtor was not spurious or illusory. Case Title: Ahluwalia Contracts (India) Limited Office Versus Shristi Infrastructure Development Corporation Limited Case Number:Comp. App. (AT) (Ins) No. 1155 of 2024 & I.A. No. 4134, 4135, 4136 of 2024 Judgment Date: 04/09/2025 For Appellant: Mr. Anil K. Airi, Sr. Advocate along with Mr. Sunil Mund, Mr. Abhishek Taneja, Mr. Mritunjya K. Singh, Mr. Jagjeet Singh, Mr. Vedant Mund & Mr. Uttkarsh Gupta. For Respondent: Mr. Rishav Banerjee, Ms. Anoushka Dey & Ms. Prerna Shaha, Advocates Click Here To Read/Download The Order

Completion Certificate Issued By Corporate Debtor With Caveat On Rectification Of Defects Is Not Unconditional Acceptance Of Work: NCLAT

Mohd Malik Chauhan

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