NCLAT Dismisses Appeal Against DLF U/S 61 Of IBC For ₹4.65 Crores Debt, Says Multiple Exchanges Between Parties Prove Pre-Existing Dispute

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Barun Mitra and Mr. Arun Baroka (Technical Member) has dismissed an appeal filed by the contractor under Section 61 of the Insolvency and Bankruptcy Code, 2016 (Code) against DLF, claiming a debt of Rs. 4.65 crores, was dismissed on the grounds that multiple exchanges between the corporate debtor and the operational creditor prior to the issuance of the demand notice under Section 8 of the Code demonstrate the existence of a pre-existing dispute. This dispute, the Tribunal held, must be adjudicated by an appropriate forum and not by the National Company Law Tribunal (NCLT) under the Code. Brief Facts: On 08.10.2021, M/s DLF Limited (Corporate Debtor) issued a tender for piling works at its commercial project located at 35, Patto Plaza, Panji, Goa- 403001. M/s Drilltech Engineers Pvt. Ltd. (Operational Creditor) submitted a bid and was declared the successful bidder. Following discussions and negotiations, a Letter of Intent (LOI) was issued on 18.11.2021 for 335 piles. On 02.07.2022, a notice under Section 8 of the Code was sent by the Operational Creditor. It was served via email and speed post. On 12.07.2022, Corporate Debtor replied with alleged frivolous and fabricated claims. On 30.07.2022, the Operational Creditor filed a Section 9 Application under the Code, before the NCLT, Chandigarh Bench. The Application was dismissed due to the existence of a pre-existing dispute between the parties. Against this order, the present appeal has been filed. Contentions: The Appellant submitted that the work carried out at the site located at 35, Patto Plaza, Panji, Goa, was inspected and duly approved by engineers representing both parties. As per Clause 69.2 of the binding agreement dated 25.11.2021, the final approval of work by engineers constituted conclusive acceptance of the same and, by extension, approval of the corresponding invoices. It was further submitted that the reply to the Section 8 notice served by the Operational Creditor was riddled with vague, concocted, and unsubstantiated allegations, raised only after the demand notice was issued on 01.07.2022. Lastly, it was submitted that initial payments made on earlier invoices and continued issuance of work orders serve as clear acknowledgments of debt. Such behaviour constitutes an admission of liability, as against any subsequent denial. Observations: The Tribunal noted that the Corporate Debtor claimed to have incurred losses and continued to do so due to the non-performance of the Contractor (Operational Creditor). It reserved the right to recover these losses from the Operational Creditor. On 23.05.2022, another letter was issued, stating that since the Operational Creditor had expressed its inability to perform the work, the Corporate Debtor was entitled to engage another contractor at the risk and cost of the Operational Creditor. It further opined that based on the materials on record and the facts and circumstances, we find significant communication exchanged between the two parties indicating a pre-existing dispute. This dispute cannot be ignored, and it is not frivolous or spurious. The dispute predates the issuance of the demand notice by the Operational Creditor. It further added that the final Show Cause Notice (SCN) dated 21.06.2022, issued by the Corporate Debtor, prior to the demand notice from the Operational Creditor on 01.07.2022, clearly highlights the pre-existing dispute. It further held that these are pre-existing disputes that cannot be adjudicated by the NCLT and must be settled in the appropriate forum. As per Section 9(5)(ii)(d) of the Code, an application is not maintainable in the presence of a pre-existing dispute. The Supreme Court in Mobilox Innovation Pvt. Ltd. Vs. Kirusa Software Private Limited (2018) held that once the operational creditor files a complete application, the adjudicating authority must reject it under Section 9(5)(ii)(d) if a notice of dispute has been received or if there is a record of dispute in the information utility. The notice must inform the operational creditor of the "existence" of a dispute or pending legal proceedings. The Apex Court also held that the adjudicating authority only needs to determine whether the dispute is plausible and supported by evidence, not to assess the likelihood of success. If the dispute is genuine and not spurious or hypothetical, the application must be rejected. Accordingly, the present appeal was dismissed. Case Title: M/s Drilltech Engineers Pvt. Ltd. Versus M/s DLF Limited Case Number:Company Appeal (AT) (Insolvency) No. 394 of 2025 Judgment Date: 01/05/2025 For Appellant : Mr. P. Nagesh, Sr. Advocate with Mr. Rishabh Singh and Mr. S. Shiva, Advocates. For Respondent : Ms. Meghna Mishra, Mr. Ankit Rajgarhia and Ms....

NCLAT Dismisses Appeal Against DLF U/S 61 Of IBC For ₹4.65 Crores Debt, Says Multiple Exchanges Between Parties Prove Pre-Existing Dispute

Mohd Malik Chauhan

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