Structured Summary of the Opinion

Panel: Justice Venugopal M. (Member Judicial); Kanthi Narahari (Member Technical); V. P. Singh (Member Technical). Decision date recorded in the text: 03 January 2020.

Factual and Procedural Background

The appeal challenges an order dated 18 July 2019 of the Adjudicating Authority, National Company Law Tribunal, New Delhi Bench (Company Petition No. (IB)-645(ND)/2019), which rejected a petition filed under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Appellant is the Operational Creditor who had entered into contracts (four work orders between January 2010 and January 2014) with the Corporate Debtor to carry out civil construction at the PAN OASIS project, Sector 70, Noida. The Operational Creditor performed the work and the Corporate Debtor made part payments and deducted TDS and WCT. The Operational Creditor claims that Rs. 16,83,03,963/- was paid in total (including TDS and WCT) and that bills amounting to Rs. 2,41,58,130/- remained due; this includes an asserted retention amount of Rs. 69,00,000/-. A debit note of Rs. 6,21,164/- raised by the Corporate Debtor was not accepted by the Operational Creditor. The Operational Creditor issued a demand notice (under Section 8 of the I&B Code) on 5 January 2019. The Corporate Debtor replied, asserting inter alia that there existed a pre-existing dispute (including an e-mail dated 24 October 2018 requesting supporting documents and describing the claim as "exaggerated") prior to the demand notice. The Adjudicating Authority rejected the Section 9 petition on the ground of a pre-existing dispute; the Operational Creditor appealed that rejection.

Legal Issues Presented

Whether there existed a pre-existing dispute between the Operational Creditor and the Corporate Debtor prior to the issuance of the Section 8 demand notice (5 January 2019) such that the Section 9 petition was not maintainable.
Whether the facts and documents on record (including the e-mail dated 24 October 2018) disclosed a plausible contention by the Corporate Debtor that required further investigation, within the test laid down by the Supreme Court in Mobilox Innovation Pvt. Ltd. v. Kirusa Software Pvt. Ltd.
Whether the Operational Creditor had submitted and obtained certification/acceptance of the final bill (a contract term the Corporate Debtor asserted was necessary to conclude the contract and establish the debt claimed).

Arguments of the Parties

Appellant (Operational Creditor)'s Arguments

The Operational Creditor asserted that it executed the work under the four work orders and that despite payments totalling Rs. 16,83,03,963/-, an amount of Rs. 2,41,58,130/- remained due from the Corporate Debtor (including Rs. 69,00,000/- retention).
It presented the Section 8 demand notice dated 5 January 2019 and relied on the alleged outstanding running/final bills to initiate insolvency proceedings under Section 9.

Respondent (Corporate Debtor)'s Arguments

The Corporate Debtor disputed the Operational Creditor's claim, contending that the Operational Creditor had not adhered to the specifications of the work order and that the claim related only to running bills while the final bill had neither been raised nor accepted.
It asserted that under the contract the contract would be concluded only upon submission and approval/certification of the final bill; the Operational Creditor had not produced evidence of submission/acceptance of the final bill.
The Corporate Debtor relied on an e-mail dated 24 October 2018 which (a) requested supporting documents and reconciliations to substantiate the Operational Creditor's claim and (b) stated that, "Up to Finalization of submitted bills, we negate your exaggerated claim," thereby asserting a pre-existing dispute prior to the Section 8 Notice.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Mobilox Innovation Private Limited v. Kirusa Software Private Limited, 2018 (1) SCC 353 (Supreme Court)	The test for determining existence of a pre-existing dispute at the admission/rejection stage under Sections 8 & 9 of the I&B Code: - The Adjudicating Authority should assess whether there is a plausible contention requiring further investigation. - The dispute must not be patently feeble, spurious, hypothetical or illusory. - The authority need not be satisfied that the defence would succeed, only that it is bona fide and requires investigation.	The court applied the Mobilox test and held that the Corporate Debtor's contentions were plausible and not patently feeble or spurious, warranting rejection of the Section 9 petition. The presence of the e-mail dated 24 October 2018 and lack of documentary proof of a submitted/acknowledged final bill supported the conclusion that a pre-existing dispute existed.

Court's Reasoning and Analysis

The court's analysis proceeded in the following steps, based strictly on the material on record:

Identification of timeline and documentary record: The court noted the e-mail dated 24 October 2018 from a senior manager of the Corporate Debtor which explicitly asked the Operational Creditor to submit supporting documents and stated that, until finalisation of submitted bills, the Corporate Debtor negated the Operational Creditor's "exaggerated claim." The Section 8 demand notice was issued on 5 January 2019, i.e., after the e-mail.
Application of the Mobilox test: The court referenced the Supreme Court's guidance in Mobilox as the controlling test for deciding whether a dispute is "pre-existing" at the admission stage. The test requires the Adjudicating Authority to determine whether there is a plausible contention that requires further inquiry, and that the dispute is not merely spurious, hypothetical or an unsupported assertion.
Assessment of the Corporate Debtor's contentions: Applying that test, the court found the Corporate Debtor's contentions to be plausible and supported by record (not merely bluster). The email's specific requests for reconciliations and documents, combined with the statement negating the claim until finalisation, were evidence of a pre-existing dispute.
Assessment of the Operational Creditor's documentary support: The court observed that the Operational Creditor did not file documents demonstrating submission and certification/acceptance of the final bill (a contractual step the Corporate Debtor said was required to conclude the contract and establish the debt). The absence of such documentation undermined the Operational Creditor's contention that there was an undisputed debt ripe for Section 9 adjudication.
Conclusion drawn from combined analysis: Because the Corporate Debtor raised a plausible, non-frivolous contention that required further investigation, and because the Operational Creditor lacked documentary proof of the final bill's submission/acknowledgment, the court concluded that a pre-existing dispute existed prior to the Section 8 notice and therefore the Adjudicating Authority had correctly rejected the Section 9 petition.

Holding and Implications

Holding: The appeal is rejected; the Adjudicating Authority's order dated 18 July 2019 rejecting the Section 9 petition is upheld. There is no order as to costs.

Implications:

Direct effect on parties: The Operational Creditor's appeal failed and the Corporate Insolvency Resolution Process was not initiated because the petition under Section 9 was held not maintainable on account of a pre-existing dispute.
Reasoning effect: The decision applies the Mobilox test to find that the Corporate Debtor raised a plausible dispute prior to the demand notice and that the Operational Creditor did not sufficiently demonstrate that the debt was undisputed (notably by failing to produce evidence of submission/acceptance of the final bill).
Precedential impact: The court did not indicate the setting of any new legal precedent; it applied the existing Supreme Court test from Mobilox. The decision affirms that documentary evidence showing absence of a disputed, finalized claim (for example, lack of a submitted/accepted final bill) is relevant when applying the Mobilox test at the admission stage.

Opinion recorded by: [Justice Venugopal M. (Member Judicial)], [Kanthi Narahari (Member Technical)], [V. P. Singh (Member Technical)]. Decision date in text: 03 January 2020.

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Ved Contracts Pvt. Ltd. v. Pan Realtors Pvt. Ltd. .

[Per; V. P. Singh, Member (T)] This appeal has been filed against the order dated 18th July 2019 passed by the Adjudicating Authority, National Company Law Tribunal, New Delhi Bench, in Company Petition No. (IB)-645(ND) 2019 M/s Wed construction Pvt. Ltd. whereby the petition filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (for short I&B Code) has been rejected. Feeling aggrieved by the said order, the Appellant - Operational Creditor has filed this Appeal. Brief facts as stated by the Operational Creditor is engaged in the business of construction and was awarded a contract by the Corporate Debtor to undertake civil construction of their project PAN OASIS at Sector

70 Noida. Four work orders were awarded to the Operational Creditor between January 2010 and January 2014 under which the work was executed. The Corporate Debtor made part payment of the running bills raised and deducted TDS. The Operational Creditor claims that Rs. 16,83,03,963/- has been paid by the Corporate Debtor including TDS and WCT through cheques and RTGS. The bills of Rs. 2,41,58,130/- is due and payable against the Corporate Debtor. The Corporate Debtor had raised a debit note of Rs. 6,21,164/- which was never accepted by the Operational Creditor when the defaulted in making the payment, therefore, a demand notice under Section

8 of the Insolvency and Bankruptcy code, 2016 was issued on 5th January 2019 against the Corporate Debtor demanding the outstanding balance together with the interest accruing thereon as well as the GST and other charges payable. The demand notice was duly replied to by the Corporate Debtor. The Adjudicating Authority has rejected the petition on the ground of pre-existing dispute before the issuance of demand notice. We have heard the argument of both the parties and perused the record. Learned counsel for the Corporate Debtor submitted that the Operational Creditor has not adhered to the specification of the work order. The demand raised in only in respect of the running and the final bills has neither been raised nor accepted by the Corporate Debtor. The contract stands concluded only on submission of the final bill duly approved and certified by them. We have heard the arguments of the Learned Counsel for the parties and perused the record. The Learned Counsel for the Operational Creditor has claimed Rs.2,41,58,130/- as outstanding amount towards Corporate Debtor including Rs.69,00,000/- as the retention amount. Learned Counsel for the Corporate Debtor disputed the allegations and submitted that Operational Creditor has not adhered to the specification of the work order. The demand raised is only in respect of the running bills and the final bills has neither been raised nor accepted by the Corporate Debtor. It is further, pleaded that the contract stands concluded only on submission of the final bill. The Corporate Debtor has also pleaded that there was pre-existing dispute before the issuance of the demand notice. Therefore, the petition under Section 9 is not maintainable on account of pre-existing dispute. The Respondent has placed reliance on the e-mail communication dated 24th October 2018 copy of the e-mail is given as under: - From- Rahul Rajvanshi, Dear Prashant, With reference to trailing mail regarding updated payment to you (M/s. Ved Contracts), confirmation is still pending, please do the needful on a priority basis. Further; you have shared a statement Claim PAN 3.10.2018 without references and supporting documents, it seems to be totally baseless, please submit your claim with the consideration of work orders Terms & Conditions and mutually agreed, as following: Final Bill certified Amount w.r.t. work order Payment Received in any Account Recovery against electricity Recovery against client supplied Machinery as Tower Crane, Boom place etc. Recovery against client supplied material as Bricks, Scaffolding material, Sand, Badarpur etc. Recovery against client-supplied labour Debit against incomplete work which was executed by third party on your risk and cost Debit against quality. Tax deductions as per work done and payment. Recovery against reconciliation of material as per work order terms and condition. Balance (if any) will be considered at the time of finalisation. Up to Finalization of submitted bills, we negate your exaggerated claim. Any other information/detail required not stated as above will be intimated to you after received receipt of the above information. This mail is without prejudice to all our rights which are hereby expressly reserved. Thanks & Regards, Rahul Rajvanshi, Sr. Manager-Billing & Contracts, Pan Realtors Pvt. Ltd. GH- 01, Sector- 70, Noida, U.P. M- 9560095584. On perusal of the above email, correspondence dated 24th October 2018, it is clear that Corporate Debtor demanded certain documents to settle the claim dated 3rd October 2018 from the Operational Creditor. The details of the documents are mentioned in the email above. It is also stated in the above email that up to finalisation of submitted bills, we negate your exaggerated claim. Any other information/detail required not stated as above will be intimated to you after received receipt of the above information. Admittedly, notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) was issued against the Corporate Debtor on 5th January 2019, i.e. much before the issuance of demand notice. The Corporate Debtor raised an objection regarding alleged bills and stated that in the email dated 24th October 2018, the submitted bills are the exaggerated claim. Thus, it is clear that before the issuance of the demand notice, there was a pre-existing dispute. In 2018 (1) SCC 353 Mobilox Innovation Private Limited Vs. Kirusa Software Private Limited Honble Supreme Court has laid down the test for determination of existing dispute for admitting and rejecting the petition under Section 8 & 9 of the Insolvency and Bankruptcy Code, 2016. Honble Supreme Court has held that the Adjudicating Authority is to see at the stage of admitting/rejecting the application is whether there is plausible contention, which requires further investigation and that the dispute is not patently, feeble, legal arguments or assertion of facts, unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence, which is mere bluster. _______ However, in doing so, the authority does not need to be satisfied that the defence is likely to succeed. ___________ So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application. In the present case, applying the test of existence of a dispute, without going into the merit of the dispute, it is apparent that the Corporate Debtor had raised a plausible contention to require further investigation, which was not a patently, feeble, legal arguments or an assertion of facts, unsupported by evidence. The defence was not spurious, mere bluster, plainly, frivolous or vexatious. It is also apparent from the record that alleged demand of the Operational Creditor is only in respect of the running bills and the final bill has neither been raised nor accepted by the Corporate Debtor. The contract stands concluded only on submission of the final bill duly approved and certified by the Operational Creditor. In this Operational Creditor has not filed any documents to show that the final bill was submitted regarding the alleged contract and the outstanding amount was also acknowledged by the Corporate Debtor. These email/communication submitted by the Corporate Debtor also shows that there was a pre-existing dispute, before issuance of the demand notice. Therefore, we are of the considered opinion that the Adjudicating Authority has rightly rejected the application filed under Section 9 of the I&B Code for initiation of the Corporate Insolvency Process. There is no need for interference in the order passed by the Adjudicating Authority. Thus, the appeal is rejected. No order as to cost. [Justice Venugopal M.] Member (Judicial) [Kanthi Narahari] Member (Technical) [V. P. Singh] Member (Technical) NEW DELHI 03rd JANUARY, 2020 pks/md

Ved Contracts Pvt. Ltd. v. Pan Realtors Pvt. Ltd. .

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant (Operational Creditor)'s Arguments

Respondent (Corporate Debtor)'s Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Ved Contracts Pvt. Ltd. v. Pan Realtors Pvt. Ltd. .

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