Appeal dismissed as no pre-existing disputes found before demand notice under Section 9 CIRP initiation

NCLAT Principal Bench dismissed appeal challenging Section 9 application for CIRP initiation. Tribunal found no pre-existing disputes between parties prior to demand notice dated 16.08.2019, noting corporate debtor raised only mobilization and progress concerns, not quality/quantity disputes. Termination letter was withdrawn and contract restored. Pending arbitration case had no impact on Section 9 proceedings. Work completion certificate dated 09.05.2019 was validly relied upon by Adjudicating Authority as it was issued without reservations confirming satisfactory completion. Appeal dismissed with no error found in original order.

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Issues Involved:

1. Pre-existing disputes between the parties.
2. Impact of arbitration case pending before the Hon'ble High Court of Delhi on Section 9 application.
3. Reliance on the work completion certificate dated 09.05.2019.

Summary:

Pre-existing Disputes:

The Appellant argued that there were pre-existing disputes between the parties, citing various communications and minutes of meetings regarding the slow progress of work and non-mobilization of adequate manpower. However, the Respondent No. 1 contended that these disputes were not substantial and were raised only in response to the demand notice. The Adjudicating Authority found that the Corporate Debtor had not raised any substantial objection or dispute pertaining to the work performed by the Operational Creditor prior to the issuance of the demand notice dated 16.08.2019. The Tribunal concluded that mere allegations regarding less mobilization of manpower or delay during the contract, which was ultimately completed to the satisfaction of the Corporate Debtor, do not constitute a pre-existing dispute under Section 5(6) of the Code.

Impact of Arbitration Case:

The Appellant argued that the arbitration award, which was challenged under Section 34 of the Arbitration Act, should impact the Section 9 application under the Code. However, the Respondent No. 1 clarified that the demand notice and Section 9 application were based on unpaid invoices, not the arbitral award. The Tribunal noted that the arbitration proceedings initiated after the demand notice cannot be considered as evidence of a pre-existing dispute. The Tribunal referred to the judgment in K. Kishan v. Vijay Nirman Co. (P) Ltd., which emphasized that a pre-existing dispute must be substantial and genuine, not speculative or illusory.

Work Completion Certificate:

The Appellant challenged the admissibility of the work completion certificate dated 09.05.2019, arguing that it was not part of the original pleadings and was issued with a caveat. The Respondent No. 1 maintained that the certificate was unqualified and issued to the full satisfaction of the Corporate Debtor. The Tribunal found that the completion certificate was rightly relied upon by the Adjudicating Authority, as it indicated that the work was completed satisfactorily and without any grievances. The Tribunal dismissed the Appellant's argument that the certificate should not be relied upon due to its issuance at the request of the Respondent No. 1.

Conclusion:

The Tribunal dismissed the appeal, finding no error in the Adjudicating Authority's order. The Tribunal concluded that there were no substantial pre-existing disputes, the arbitration proceedings did not impact the Section 9 application, and the work completion certificate was rightly considered. The appeal was dismissed with no costs, and any interlocutory applications were closed.

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