A Company Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC), was filed by Rohit Garg, proprietor of Garg Infratech, seeking initiation of CIRP against Bridge & Roof Company (India) Limited over an alleged default of ₹1,43,37,562.14 towards principal and ₹46,95,367.96 towards interest, outstanding as on March 31, 2024.

The claim arose from civil works undertaken by Garg Infratech, including excavation, PCC, reinforcement, shuttering and RCC work, for trestle foundations and other structures at various sites of the Corporate Debtor.

In support of its claim, Garg Infratech relied on ledger accounts, invoices, payment and deduction details, a calculation sheet, the demand notice and information of default recorded with the information utility.

Bridge & Roof Company disputed the claim, contending that Garg Infratech had failed to complete the contracted work within the stipulated timelines. It relied on email communications dated February 9, March 12 and March 31, 2022, calling upon Garg Infratech to expedite the work and warning that liquidated damages would be imposed or the remaining work would be completed at its risk and cost.

The Corporate Debtor also pointed out that completion certificates had been issued for only seven of the 12 Letters of Intent (LOIs), and contended that these were issued for future tendering purposes.

The demand notice issued through the National E-Governance Services Limited (NeSL) on July 19, 2024, was replied to by the Corporate Debtor on July 29, 2024, marking the claim as incorrect.

The NCLT observed that Garg Infratech had itself disclosed in its application that the Corporate Debtor had disputed the claim before the information utility. However, it had not specifically pleaded that the dispute recorded in the information utility was not genuine or was merely a moonshine dispute.

The Tribunal further noted that Garg Infratech, in its email dated March 31, 2022, had admitted the slow progress of work in response to the Corporate Debtor's communication.

Referring to the Supreme Court's decision in Saraswati Wire and Cable Industries v. Mohammad Moinuddin Khan, which relied on the principles laid down in Mobilox Innovations Private Limited v. Kirusa Software Private Limited, the Tribunal reiterated that a Section 9 application may be rejected where a genuine pre-existing dispute exists and is not spurious, hypothetical or illusory.

The NCLT held that the contractual disputes between the parties could not be adjudicated in proceedings under Section 9 of the IBC. It also referred to the NCLAT's decision in Anita Jindal v. M/s Jindal Buildtech Pvt. Ltd. Through IRP, observing that the IBC is intended for insolvency resolution and cannot be used as a debt recovery mechanism against a solvent company that is a going concern.

Accordingly, the Tribunal held that the Section 9 application was not maintainable in view of the pre-existing dispute between the parties and dismissed the petition, with no order as to costs.

Advocates for Garg Infra - Mr. Shounak Ghosh, Mr. Abishek Anand and Ms. Shreyashi Matity

Advocates for B&R – Ms. Urmila Chakrborty, Ms. Paramita Banerjee, Mr. Rohan Raj and Ms. Anushka Sarkhel (MCO Legals – Meharia & Company)