NCLT Bengaluru Admits Cauvery Neeravari Nigam To Insolvency Over ₹9.36 Crore Default

The National Company Law Tribunal (NCLT) at Bengaluru on Wednesday admitted a Karnataka government undertaking Cauvery Neeravari Nigam Limited into the Corporate Insolvency Resolution Process for a default of over Rs 9.36 crores. The bench of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada, while admitting an insolvency plea filed by project contractor and operational creditor SPML Infra, said “It hardly matters that the respondent is a going concern or a Govt undertaking when it is patently distancing itself from discharging its liabilities. The parties were referred for mediation in an effort to strive for ending the stalemate and finding solution to the issues but the endeavour did not end in resolution.” The tribunal noted that Cauvery Neeravari Nigam Limited, a Karnataka government enterprise managing Cauvery basin water resource projects since 2003, had repeatedly acknowledged liability over more than a decade. It added that the corporate debtor had argued that these were only internal administrative exchanges. Rejecting that contention, the tribunal recorded that the corporate debtor “repeatedly requested the OC to sign modified EIRL item bills and proposals for submission to higher authorities, which is an admission of the work done and the corresponding payment obligation. These are not mere internal administrative communications, as the Respondent argues, but formal official correspondence acknowledging liability and the quantum of debt, particularly when their existence and authenticity has not been doubted.” SPML Infra had been awarded a contract in 1999 for the Nanjapura Lift Irrigation Scheme. During execution, it undertook extra item rate list works, meaning additional works outside the original contract scope, valued at about Rs 4 crore, which were approved by Cauvery Neeravari officials in August 2009. A final bill was submitted on June 12, 2013. From 2012 to 2019, officials issued several communications confirming liability, including a 2 June 2012 direction from the Chief Engineer to expedite approvals for Rs 4.04 crore and a July 6, 2019 confirmation that consolidated EIRL items totalled Rs 3.07 crore. SPML issued a demand notice in December 2019 seeking Rs 9.36 crore including interest. The corporate debtor responded more than a year later merely seeking time to verify documents, after which SPML filed the insolvency petition. Cauvery Neeravari Nigam argued that an arbitration pending since 2004 covered the dispute, that internal correspondence did not amount to admission of debt, and that the petition was a misuse of the insolvency process. It also contended that insolvency was unnecessary as it continued to function as a going concern. The tribunal rejected these objections. It held that the 2004 arbitration could not cover the extra works because they were assigned pursuant to a decision taken after arbitration commenced. On the requirement of a pre-existing dispute, it reiterated that “it must have been raised by the CD prior to the receipt of the statutory demand notice,” which had not occurred here. It found that the belated response seeking time for verification “cannot be treated as an objection or dispute raised contemporaneously.” The tribunal also noted a significant series of admissions made by the CD itself through its own officials over more than a decade, which were not mere internal administrative communications but formal official correspondence acknowledging the debt. Subsequently, It held that the petition filed on August 31, 2020 was well within three years of the last acknowledgement dated July 6, 2019. Finding no merit in the allegation of forum hunting and refusing to exempt a state undertaking from the Code, the tribunal admitted the petition, declared a moratorium and appointed Addanki Haresh as Interim Resolution Professional, directing that operations continue as a going concern. Case DetailsCase Title: SPML Infra Ltd v. Cauvery Neeravari Nigam Ltd.Case Number: CP(IB) No. 39/BB/2022For Petitioner: Advocate Sirisha ShettyFor Respondent: Advocates Sunita Srinivas and Pavan SrinivasClick Here To Read/Download Order

NCLT Bengaluru Admits Cauvery Neeravari Nigam To Insolvency Over ₹9.36 Crore Default

Shivangi Bhardwaj

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