Case Note & Summary
The appeal was filed by Royal Construction (Operational Creditor) against the order of the National Company Law Tribunal, Mumbai Bench, which dismissed its Section 9 application under the Insolvency and Bankruptcy Code, 2016 (IBC) seeking initiation of Corporate Insolvency Resolution Process (CIRP) against Gannon Dunkerley & Company Limited (Corporate Debtor). The Operational Creditor claimed an outstanding debt of ₹10.18 crore arising from multiple work orders issued between 2009 and 2018. It had sent three demand notices under Section 8 of IBC on 17.08.2020, 15.09.2020, and 27.01.2022. The Corporate Debtor disputed the claims on grounds of poor work quality, project delays, abandonment of projects, and also contended that the invoices were time-barred. The Adjudicating Authority dismissed the Section 9 petition on two grounds: first, that there was a pre-existing dispute between the parties, and second, that the dates of default (03.05.2020, 15.08.2020, and 25.11.2020) fell within the period prohibited under Section 10A of IBC (25.03.2020 to 24.03.2021), rendering the petition non-maintainable. Aggrieved, the Operational Creditor appealed to the NCLAT. The Appellant argued that the dates of default were inadvertently and erroneously mentioned in Part IV of Form 5 and that the Adjudicating Authority should have examined the actual date of default from the documents. The NCLAT, after considering the submissions and records, held that the date of default as stated in the demand notice and Form 5 is determinative for the applicability of Section 10A. Since the defaults occurred during the prohibited period, the Section 9 application was correctly dismissed. Additionally, the NCLAT noted that the Corporate Debtor had raised disputes regarding the quality and completion of work, which constituted a pre-existing dispute under Section 8(2)(a) of IBC, further barring the admission of the petition. The NCLAT found no merit in the appeal and dismissed it, upholding the impugned order.
Headnote
A) Insolvency and Bankruptcy Code - Section 10A - Prohibition on Initiation of CIRP - Default During Prohibited Period - The Adjudicating Authority dismissed the Section 9 petition on the ground that the dates of default (03.05.2020, 15.08.2020, 25.11.2020) fell within the Section 10A period (25.03.2020 to 24.03.2021), rendering the petition non-maintainable. The Appellant argued that the dates were erroneously mentioned, but the NCLAT held that the date of default as stated in Part IV of Form 5 is determinative and cannot be ignored. Held that the Section 9 application was correctly dismissed as barred by Section 10A (Paras 6-8). B) Insolvency and Bankruptcy Code - Section 8(2)(a) - Pre-existing Dispute - Dismissal of Section 9 Petition - The Corporate Debtor raised disputes regarding poor work quality, project delays, and abandonment of projects, which constituted a pre-existing dispute. The Adjudicating Authority also dismissed the petition on this ground. The NCLAT upheld the finding, noting that the existence of a pre-existing dispute bars the admission of a Section 9 application. Held that the petition was rightly dismissed on both grounds (Paras 2, 8).
Issue of Consideration
Whether the Section 9 application filed by the Operational Creditor is maintainable in light of the Section 10A bar and the existence of a pre-existing dispute.
Final Decision
The appeal is dismissed. The impugned order dated 13.01.2025 passed by the Adjudicating Authority (NCLT, Mumbai Bench) in C.P.(IB) No. 787(MB)/C-II/2022 is upheld.
Law Points
- Section 10A IBC prohibits initiation of CIRP for defaults occurring during the period from 25.03.2020 to 24.03.2021
- Pre-existing dispute under Section 8(2)(a) IBC bars Section 9 application
- Date of default in Part IV of Form 5 is determinative for Section 10A applicability
