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NCLAT Chennai, Division Bench pronounces dissenting verdict in an application under section 9 of IBC against Gati Infrastructure Pvt. Ltd.

NCLAT Chennai, Division Bench pronounces dissenting verdict in an application under section 9 of IBC against Gati Infrastructure Pvt. Ltd.

A Division Bench of the National Company Law Appellate Tribunal, Chennai (NCLAT) comprising Justice Venugopal M. (Judicial Member) and Shri V. P. Singh (Technical Member) gave a dissenting verdict in the matter of Yogesh Kundra v. Sew & Prasad Joint Venture and Another, REED 2021 NCLAT Chen 06566, wherein on one hand, Shri V. P. Singh held that the Petition filed by SEW and Prasad JV under section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) was not maintainable and consequently, allowed the Appeal preferred by Corporate Debtor, on the contrary Justice Venugopal M dismissed the said Appeal.

Therefore, in view of the divergent opinion arrived at by the Hon’ble Members of the NCLAT, the Office of the Registry of the NCLAT, Chennai Bench was directed to transmit the copies of the judgment to the Registrar of the Principal Bench of NCLAT, New Delhi, requiring him to place the same before the Hon’ble Officiating Chairperson, New Delhi for nominating a Hon’ble Third Member to render his opinion/decision in the subject matter in issue.


SEW and Prasad JV (SPJV/Respondent No. 1) and Gati Infrastructure Private Limited (Corporate Debtor) agreed and executed an Agreement to perform various civil and hydro-mechanical works of 99 MW power project in Sikkim. The project was to be completed by March 2009, but it was delayed and finally commissioned in 2013. On account of delay in completion of the project, Corporate Debtor, Amrit Jal Venture Private Limited (AJVPL) which is the holding company of Corporate Debtor, SPJV and other parties entered into a Settlement Agreement dated 14 December 2013, by which Corporate Debtor agreed to pay Rs. 10 Crore to SPJV as full and final settlement of its liabilities towards it. Further, SPJV also agreed not to initiate any legal proceedings against the Corporate Debtor. In terms of the said Agreement, AJVPL decided to pay the remaining settlement amount to SPJV. However, AJVPL paid only Rs. 4,38,62,120/- to SPJV and failed to pay the balance amount.

On 20 May 2016, a MOU was entered between SPJV, AJVPL, Sew Infrastructure Ltd and Intercontinental Infrastructure Ltd, by which it was agreed that AJVPL would clear all the outstanding dues of SPJV. On 3 August 2017, SPJV issued the demand notice under section 8 of the IBC against the Corporate Debtor, claiming default towards the payment of installment as per the Settlement Agreement (the MOU) by AJVPL. The Corporate Debtor, on 10 August 2017 addressed notice to the SPJV which raised claims on account of inferior quality work carried on by the SPJV. The Corporate Debtor on September 12 2017 also sent a reply to the Section 8 ‘Demand Notice’ denying the existence of Operational dues and termed the ‘claim(s)’ as “a false, wrongful and mala fide one”.

Subsequently, SPJV filed an application on 21 September 2017 under section 9 of IBC which was admitted by the National Company Law Tribunal (NCLT), Hyderabad thereby initiating Corporate Insolvency Resolution Process against the Corporate Debtor. Aggrieved thereof, the Corporate Debtor preferred the present Appeal against the impugned order of NCLT.


Justice Venugopal M noted that as per Clause 2.6 of the Settlement Agreement dated 14 December  2013, the Corporate Debtor was not released of its liability for the whole amount due. However, the Corporate Debtor was only obligated to pay to its promoter group AJVPL, after AJVPL paid the same to SPJV. He stated that the Corporate Debtor could be absolved from its liability to SPJV only on account of the execution of Guarantee Deeds and the matching payment of amounts due to be paid by the AJVPL.

Further, in an email dated 21 January 2015, Mr. Sunil Gupta (Finance Director) of the Corporate Debtor have stated to SPJV that “….regarding payments, please note that we shall be making one crore payment every month starting with this month and, further we are signing long term PPA expected in April and thereafter lenders have agreed to release funds. We have already signed minutes with PTC in this regard. Thereafter we shall make full payment.” Justice Venugopal M. concluded that this email constituted a valid and legal acknowledgement of debt in the eye of Law and accordingly, upheld the impugned order of NCLT.


Shri V. P. Singh opined that the email dated 21 January 2015 sent by Mr. Sunil Gupta (Finance Director) of the Corporate Debtor was addressed to Mr. CL Rajaram, who was Arbitrator under terms of Settlement Agreement on behalf of AJVPL and hence, this email cannot be treated as an acknowledgement of the debt by the Corporate Debtor. He further added that although AJVPL failed to make the payment as per the terms of MOU dated 20 May 2016 but the consequences of the breach of the terms in the MOU cannot be determined in a summary jurisdiction given to the NCLT under the IBC.

Shri V. P. Singh also noted that several correspondences between the parties showed pre-existing disputes prior to issuance of the demand notice under Section 8 of the IBC. For instance, in response to the letter of the SPJV dated 12 July 2014 for releasing the amount of Rs. 2.03 Crore, the Corporate Debtor had intimated that the payment against the withhold amount could be made after the completion of work and Corporate Debtor suggested to SPJV to complete their pending assignments at the site.

Finally, adverting to Mobilox Innovations Private Limited v. Kirusa Software Private Limited, REED 2017 SC 09545, Shri V. P. Singh observed that at the stage of admitting/ rejecting the Application, NCLT is just required to see if there is a plausible contention that requires further investigation and that the dispute is not a patently feeble legal argument or an assertion of fact unsupported by evidence. Therefore, so long as a dispute truly exists in fact and is not spurious, hypothetical or imaginary, the Adjudicating Authority has to reject the Application. In the instant case, since the claim under the Settlement Agreement, fell within the ambit of the term ‘dispute’ about ‘the existence of debt’, he allowed the appeal, and the impugned order of admission of Petition filed under Section 9 of the IBC was set aside.

As both the members of the Division bench gave dissenting judgments, the case was referred to the Hon’ble Officiating Chairperson, New Delhi for nominating a Hon’ble Third Member to render his opinion/decision in this matter.


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