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The NCLAT affirmed that the principal employer cannot be treated as the debtor under Section 9 of the IBC where there is no privity of contract with the sub-contractor. The tribunal held that payment responsibility rests solely with the contractor, with the employer's payments on behalf of the contractor being conditional and recoverable from the contractor. The appellant failed to establish any contractual relationship with the respondent, and a pre-existing dispute regarding account reconciliation between the sub-contractor and contractor existed. Reliance was placed on precedent affirming that the principal employer is not liable for payment absent direct contractual obligation. Consequently, the appeal challenging the dismissal of the application under Section 9 was rejected, with no interference in the impugned order.
The NCLAT affirmed that the principal employer cannot be treated as the debtor under Section 9 of the IBC where there is no privity of contract with the sub-contractor. The tribunal held that payment responsibility rests solely with the contractor, with the employer's payments on behalf of the contractor being conditional and recoverable from the contractor. The appellant failed to establish any contractual relationship with the respondent, and a pre-existing dispute regarding account reconciliation between the sub-contractor and contractor existed. Reliance was placed on precedent affirming that the principal employer is not liable for payment absent direct contractual obligation. Consequently, the appeal challenging the dismissal of the application under Section 9 was rejected, with no interference in the impugned order.
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