TaxTMI 
TaxTMI 
2026 (5) TMI 443
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....fter referred to as 'Code') came to be dismissed on the ground of existence of an alleged "pre-existing dispute" between the parties. 2. The Appellant, Rattan Singh Builders Private Limited (RSB), has approached this Hon'ble Appellate Tribunal contending that despite crystallised and duly certified operational debt amounting to Rs. 4,88,42,350/- (including contractual interest @ 18% per annum) payable by the Respondent, Indorama Ventures Yarns Private Limited, the Learned Adjudicating Authority erroneously declined admission of the petition by treating belated and unsubstantiated disputes as pre-existing disputes under the Code. FACTS OF THE CASE 3. The facts relevant for deciding this matter are as given below: i. The Appellant, a construction company was awarded a contract by the Respondent through a Letter of Intent dated 25.06.2022 for execution of civil, structural and construction work for the DTY Project at its Nagpur facility, for a total contract value of Rs. 43,25,00,000/- plus GST, with payments to be made on the basis of unit-rate RA Bills. ii. The contractual relationship was formalised by execution of a detailed Agreement / Work Order dated ....
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....Appellant on account of various delays and quality issues vide the same letter dated 12.06.2024. viii. Thereafter, the Appellant issued a statutory demand notice dated 10.08.2024 under Section 8 of the IBC, calling upon the Respondent to discharge the total operational debt of Rs. 4,88,42,350/- along with interest @ 18% per annum, failing which insolvency proceedings would be initiated. ix. The Respondent, in reply through a notice dated 20.08.2024, raised allegations relating to delay, defective workmanship, Building and Other Construction Workers (BOCW) cess liability and levy of liquidated damages, asserting existence of disputes, which according to the Appellant were post facto and not contemporaneous with certification of RA Bills. x. Upon failure of payment, the Appellant filed a Section 9 application in September 2024 before the Adjudicating Authority, seeking initiation of CIRP for the operational debt of Rs. 4,88,42,350/- along with interest @ 18% per annum. xi. The Respondent filed its reply before the Adjudicating Authority, alleging pre-existing disputes concerning delay, quality issues, losses allegedly exceeding Rs. 9,38,00,000/-, a....
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....e Corporate Debtor does not dispute the outstanding amount of Rs. 4,10,24,676/-, but instead seeks to reduce the liability by raising unilateral and self-serving claims of set-off, namely: • Liquidated Damages (LD): Rs. 2,16,25,000/- • Labour Cess (under BOCW Rules): Rs. 49,46,754/- • Alleged mismatch in payments: Rs. 53,29,543/- After such deductions, the Corporate Debtor offered to pay a meagre sum of Rs. 15,32,184/-. It is submitted that this clearly amounts to an admission of debt, with only artificial deductions being introduced to evade liability. 8. He submits that the Adjudicating Authority failed to appreciate that there is a clear admission on the part of the Corporate Debtor regarding certified bills amounting to Rs. 3,34,33,481/-, and even after claiming set-off of Rs. 3,19,01,297/-, the Corporate Debtor itself acknowledges a balance payable amount of Rs. 15,32,184/-. This admission itself establishes existence of debt and default. It is further submitted that once the Corporate Debtor has admitted the certified bills, the burden shifts upon it to justify the alleged set-offs from the record. However, the Corporate Debtor has....
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....ts that it is entirely unsubstantiated and devoid of merit. The Corporate Debtor has failed to produce any evidence of incorrect invoicing, uncredited payments, or discrepancies in the certified Running Account Bills. On the contrary, the Summary Sheet and bank statements clearly demonstrate that all payments have been duly accounted for and credited. 15. He submits that this allegation is merely a smokescreen raised as an afterthought to evade liability. The invoices were accepted post inspection and verification, and the payments reflected in the bank records are undisputed. Therefore, the plea of mismatch is nothing but lip service, bereft of any substance, and liable to be rejected in limine. 16. Summing up his arguments learned counsel submits that the defence raised by the Corporate Debtor is illusory and untenable in law, and there exists a clear, admitted operational debt and default. Accordingly, the impugned order deserves to be set aside and the application under Section 9 ought to be admitted. Submissions of the Respondent 17. Shri Abhijeet Sinha, Ld. Sr. Counsel for Corporate Debtor submits that it had issued a Work Order dated 13.07.2022 which subsequently....
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....Running Account (RA) Bills by the Project Management Consultant (PMC) creates an automatic liability upon the Respondent to make payments. This contention is wholly misplaced and contrary to the contractual framework. It is submitted that as per the Agreement, the PMC was only responsible for certifying the quantity of work executed, whereas the quality of work remained subject to the satisfaction of the Respondent. Thus, certification of RA Bills was merely interim in nature and subject to final reconciliation upon completion of the project. 22. Ld. Counsel further submits that there is extensive correspondence which clearly shows that the Respondent had consistently raised serious issues regarding poor workmanship, defective execution, and discrepancies in quantities. These communications date back to as early as 14.06.2023 and continued till termination of the contract. It is his submission that the existence of such disputes, supported by documentary evidence, clearly negates the Appellant's claim of undisputed operational debt. The law is well settled that certification of RA Bills cannot be treated as admission of liability in cases, where disputes are evident from record.....
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....encies, thereby unequivocally acknowledging the existence of defects and incomplete performance. Such clear and repeated admissions leave no manner of doubt that disputes existed between the parties well before issuance of the demand notice. 27. Ld. Counsel submits that the Appellant has sought to rely upon the meeting held on 26.04.2024 to suggest that a settlement or understanding had been reached between the parties. However, this assertion is wholly incorrect and misleading. The Minutes of Meeting were merely draft documents, which were never finalized or signed by the parties. No consensus or binding agreement was ever arrived at during the said meeting. The termination notice dated 12.06.2024 refers only to the understandings of the earlier meeting dated 03.02.2024 and makes no reference whatsoever to any settlement arising from the meeting of 26.04.2024. This clearly establishes that no agreement was reached in the said meeting. 28. Ld. Counsel submitted that the Appellant has also raised false claims regarding an amount of Rs. 53,29,543/-, which had already been paid and was agreed to be adjusted through issuance of a credit note. The Appellant's subsequent claim is a....
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....summary sheet and the Respondent's own communication dated 12.06.2024 to argue that even as per the Respondent's calculation, a substantial amount remained payable. It is also the case of the Appellant that during the meeting held on 26.04.2024, the parties had arrived at a "final closure" of the contract with certain descoping of works, and no dispute was recorded regarding the certified dues. According to the Appellant, the subsequent allegations of delay, poor quality, liquidated damages, BOCW cess, and mismatch in payments are afterthoughts, raised only after the issuance of the demand notice dated 10.08.2024. 34. Per contra, the Respondent has placed extensive reliance on the contractual terms and contemporaneous correspondence to demonstrate that disputes existed throughout the execution of the project. It is submitted that the Letter of Intent dated 25.06.2022 and the Agreement dated 13.07.2022 required the Appellant to complete the civil construction works within a stipulated period of 8 months, making time the essence of the contract. However, the Appellant failed to adhere to the timeline and repeatedly sought extensions, including requests extending completion up to O....
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....of pre-existing dispute. 36. Upon a detailed consideration of the material on record, we find that the dispute between the parties is does not appear to be superficial or belated assertion, but is deeply rooted in the entire course of contractual performance and is clearly evidenced through a continuous chain of contemporaneous communications exchanged between the parties. The record reflects that as early as 14.06.2023, the Respondent had raised concerns regarding the Appellant's performance, including delay in execution, inadequate progress, and deficiencies in work, which were acknowledged by the Appellant itself in its reply. Thereafter, a series of emails and communications continued between the parties, including communication dated 20.09.2023, wherein the Respondent specifically highlighted issues relating to poor quality of work, defects in execution, and discrepancies in quantity. These were not isolated observations, but formed part of repeated follow-ups and reminders issued by the Respondent over time. These emails have been noted in the impugned order. 37. The Appellant's own conduct, as reflected in its emails dated 13.07.2023, 18.11.2023, and subsequent communi....
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.... PMC/IVYPL Engineer. 40. We now take a look at Clause 4(E) of the same workorder, which is extracted below: 4. Conditions of Work ......... E) All work covered under this contract must be done to the complete satisfaction of the COMPANY. In case work carried out/ or if any work/ portion of the work is delayed appropriate deductions shall be made by COMPANY. It is clear from this clause that all work had to be completed to the full satisfaction of the Company. Secondly, if the work was delayed or found unsatisfactory, appropriate deductions could be made by the Company. Thus, final satisfaction regarding quality and completion remained with the Company/Corporate Debtor and not with the PMC. It should be noted that the Respondent has insisted in correspondence that its Engineer has not certified the final quality and quantity of work due to defects so the question of balance payment beyond 85% does not arise. 41. The clause in the Work Order relating to compliance with and statutory dues, including labour cess, is the Clause 3(F) which is extracted below: 3. Workforce ......... F) The RSB shall ensure the compliance of al....
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....mance. The termination notice has also referred to prior communications and meetings, particularly the understandings reached during the meeting dated 03.02.2024, while notably making no reference to any alleged final settlement of 26.04.2024. The Appellant, in its response dated 04.07.2024, did not dispute the absence of any concluded agreement arising out of the said meeting, further reinforcing that the disputes remained unresolved. The Termination notice dated 12.06.2024 is reproduced below: Termination notice dated 12.06.2024 46. Even after the termination, the Appellant, by its communication dated 12.08.2024, expressed willingness to complete the remaining works and cure discrepancies, which is a clear admission that the work was not completed to satisfaction of the corporate debtor and issues were still subsisting. This communication, coming after receipt of termination notice and even after the issuance of demand notice dated 10.08.2024 under Section 8 of the Code issued by the Appellant, clearly indicates that disputes regarding performance and completion were ongoing and had not been resolved at any stage. The communication dated 12.08.2024 has been extracted below:....
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.... first referred to the Architect being the originator of drawings & BOQ and to further act upon as in GCC clause 14(B) and in tandem with GCC clause 8, to give his detailed report in writing for us to rectify the reported defects in time. (b) That on the discrepancies and incomplete works with respect to RA Bill-32 as informed vide your letter dt.08.08.2024, from srl. 1 to 16, 'RSB Repair Team' specifically stationed at site with materials, if available and ready to repair such 'Snags/Defects' (being part of DLP). Please share complete details on priority. In the interim you are requested to give all approvals, permissions to 'RSB Repair Team' without any hindrance, restrains to commence necessary task/work as in contract terms. 6. We shall be obliged. Thanking you, Yours faithfully Sanjay Khanna (CFO) (Rattan Singh Builders Pvt. Ltd.) 47. When the above sequence of events is read as a whole, it becomes evident that the disputes between the parties were continuous, well-documented, and existed much prior to the issuance of the demand notice dated 10.08.2024. The record reflects a consistent pattern of disagreement relating to delay; i....
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....he factual matrix and the legal position and in view of the same dismissed the Section 9 application. The Impugned Order dated 14.01.2026 does not suffer from any infirmity or perversity and warrants no interference at our end. 52. In view of the findings above, the Appeal is dismissed. Pending IAs, if any, are closed. No order as to costs. ============= Document 1 . ... Shikhar Gupta (1) "from: Manoj Rewalkar 20 September 2023 11:04 Sent: Arun Garg: RSB INDORAMA Ravikcican Maske: Vijay Surt [email protected] PMSC - SSP Project: Vivek To: CE Karwatkar FW: NCR- amenity building part 1 st floor de be konnted) Subject: Image.jpeg Image.jpeg: Image/jpeg (H) Attachments: Work quality shall not be compromised at any cost. This type of finishing is not be accepted. Warm Regards, Manoj Rewatkar Sr. Manager-Civil INDO RAMA INDO RAMA SYNTHETICS (I) LTD. A-31, MIOC Industrial Area, Butiborl, Nagour- 441122, Maharashtra, India Mobile : +91-7767002265 Office : +91-7104-663337 Email : [email protected] Web : www.indoramaindia.com (G) From: PMSC - SP Project [email protected]> Sent: Wednesday, September 20, 2....
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.... RSD team to do needful to ensure compliance. L. As regards balance amount of Rs 42.0 Lakh against FBG In hand, payment wil be released on priority after getting email request from RS3 to consider desired validity til Feti'25 In view of claim perlod available with PSG.As regards balance retention money with IVYPL same wil be released as per contract terms on submission of PBG post project completion. Hope you wil find the same in order & provide your confirmation for the meeting discussion and specific timeline confirmation as per point 1. Unquots Best Regards/Njay Document 3 C)shikhar Gupta From: - Debesish Ganguly Sent: 01 March 2024 12:52 Tet MNS Rao; Umesh Agrawal: Rakesh Bagrodia: Sukhdev Singh Sarandeep Singhc Arun Sanjay Khanna Ce RE: URGENT RELEASE OF RSS 'Outstanding Payments of Rs. 3.92 cz. up to 30th R.A. Gary Subject: Bill & Meeting at your Head Office on GÃ¥rd Feb. 2024. Attachments :. RE: Remaining Works Completed" (Detalls Attached) Dear Mr Khanna, This is in furtherance to our email dated 29.02.2024. We have released all your past payment well aligned with contractual terns and as regards current o....
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....: - 12.06.2024 RATTAN SINGH BUILDERS PVT. LTD. PLOT NO. 340/2 CRC ROAD, METRO PILLER NO. 288, M.G ROAD NEAR SULTANPUR METRO STATION, SULTANPUR, NEW DELHI - 110030. Kind Attn: Mr. Åžanjay Khanna Sub: Notice for final settlement and issuance of Credit Note against Contractual Obligation for Work Order No: 1001600013 dated 13th July 2022. Dear Sir, This is in reference to Work Order No: 1001600013 dated 13th July 2022 issued to you for DTY Project Civil Works. We once again express our dissatisfaction with your failure to execute the assigned work on time. We have already informed you on various occasions that there is a significant delay on your part in Execution & Completion of Civil Works and final handover as per the contractual terms. You are well aware that the deadline for the completion of the said work has already expired long back. however, the said work has not been completed till date. Please note that despite our multiple reminders via emails, telephonic discussion and meeting held at our Gurgaon office, dated 3-Feb-2024 and 26-April-2024 respectively, regarding the urgency in completion of the pending work, still some of the works are pending due to t....
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....re no such claim was raised. This is just an afterthought devised by you to entangle the issues. You will appreciate that only on your request and considering our long-term business relationship, we had released RA bill payment on-time-to-time basis including PBG retention amount of Rs 175 Lakh, which was actually due post completion of work and further we have released payment due against RA 27 & RA 28 which was not payable as per our understanding arrived in our meeting of February 03. 2024 Please note that delivery of your contractual works is of very substandard and not meeting desired quality specification as per contract terms and therefore, are being redone time and again extending the tenure at your cost and expense. You are well aware that time is the essence of this contract, but you have failed miserably to carry out the sald work within time and have not provided any response / reasons whatsoever regarding the indefinite delay being caused at your end. Hence, we have left with no alternative than to levy Liquidated damages upto May 31, 2024 as per our contractual terms. Furthermore, you have also till date did not settle your liability to pay labour cess under ....