Corporate Debtor Denying Liability Prior To Issuance Of Demand Notice Is Pre Existing Dispute: NCLAT New Delhi

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Shri Barun Mitra (Technical Member) and Shri Arun Baroka (Technical Member), has held that when Corporate Debtor denied its liability to pay even prior to issuance of Demand Notice under Section 8 of IBC, then the petition under Section 9 of IBC is liable to be dismissed on the ground of pre-existing dispute. Background Facts Larsen and Toubro Ltd. (“Corporate Debtor”) issued a work order to Panjwani Electrical Engineers and Consultants (“Appellant”) for carrying out certain work. On 28.02.2019, the Appellant issued a legal notice to the Corporate Debtor, demanding payment of Rs.1,80,81,534/-. The Corporate Debtor immediately replied to the said notice, stating that no amounts are payable to the Appellant. Further, the Corporate Debtor also terminated the work order on 02.01.2019. On 20.05.2019, the Appellant issued a demand notice under Section 8 of IBC to the Corporate Debtor demanding payment of Rs.1,49,39,386/-. Subsequently, the Appellant filed a petition under Section 9 of IBC before NCLT, seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor. The NCLT dismissed the Section 9 petition on the ground of pre-existing dispute. The Appellant filed an appeal before NCLAT challenging the dismissal. It was argued that the Corporate Debtor has not disputed the amount and termination of work order cannot be treated as pre-existing dispute. NCLAT Verdict The Bench opined that the Corporate Debtor had denied its liability to pay even prior to issuance of the Demand Notice under Section 8 of IBC. Therefore, dismissal of Section 9 petition on the grounds of pre-existing dispute has been upheld by the Bench. “We are of the view that the Adjudicating Authority did not commit any error in holding that there is a pre-existing dispute. When the Corporate Debtor even prior to issuance of demand notice has denied liability to pay, preexisting dispute was there. We do not find any ground to interfere with the impugned order rejecting Section 9 application. Appeal is dismissed. However, it is always open for the Appellant to pursue proceedings as per agreement between the parties before an appropriate forum in accordance with law.” The appeal has been dismissed. Case title: Panjwani Electrical Engineers and Consultants v Larsen And Toubro Ltd. Case No.: Company Appeal (AT) (Insolvency) No.1399 of 2023 Counsel for Appellants: Mr. Gursat Singh and Mr. Pranav Khanna, Advocates. Counsel for Respondent: Mr. Anand Shankar Jha, Mr. Sachin Mintri, Mr. Abhilekh Tiwari and Mr. Arpit Gupta, Advocates. Click Here To Read/Download Order

Corporate Debtor Denying Liability Prior To Issuance Of Demand Notice Is Pre Existing Dispute: NCLAT New Delhi

Pallavi Mishra

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