NCLT Delhi Dismisses Insolvency Petition Against NBCC India Ltd., A Navratna Enterprise

Background Facts

NBCC India Pvt. Ltd. is a Navratna Enterprise of the Government of India, founded in 1960, and engaged in the business of project management consultancy; engineering, procurement and construction; and real estate.

In 2014, NBCC India Pvt. Ltd. had awarded a work contract to Era Infra Engineering Ltd. ("Era Infra") for construction and upgradation of National Centre for Disease Control (NCDC), for an amount of 199.02 Crores. Era Infra had appointed Biosafe Lab India Pvt. Ltd. ("Applicant") as a sub-contractor on 07.08.2014 and had issued several purchase orders to the Applicant amounting to Rs. 49.08 Crores. The Applicant in turn had raised invoices in favour of Era Infra, which the latter failed to pay within time and the work was stalled.

NBCC India Pvt. Ltd. ("Respondent") issued a Letter of Comfort/Surety to the Applicant on 03.11.2017, stating that it would stand as a surety on behalf of the ERA Infra to the Applicant. Thereafter, Era Infra went into CIRP and the Applicant had submitted its claim of Rs. 7.87 Crores to the Resolution Professional of ERA Infra on 25.05.2018. However, the Resolution Professional verified the claims only to the extent of Rs. 51.79 Lakhs and rejected the rest. On 28.10.2021, the Applicant filed a Writ Petition bearing No. 12427/2021 before the Delhi High Court against the Respondent, seeking directions in view of the unpaid amount of Rs. 7.87 crores; termination of work contract with Era Infra; release of Performance Bank Guarantee of Rs. 1.80 crores; and payment of remaining amount to the Applicant under a separate claim. The writ petition was pending adjudication.

Subsequently, on 26.11.2021 the Applicant served a Demand Notice to the Respondent under Section 8 of the IBC, claiming an amount of Rs. 10.86 crore. This claim was inclusive of an additional amount of Rs. 3.76 crores, in view of a Letter of Award dated 26.07.2018 which was granted to the Applicant under a separate transaction. Since no amount was received from the Respondent, the Applicant filed an application under Section 9 of IBC before the NCLT Delhi ("Adjudicating Authority"), seeking initiation of CIRP against the Respondent.

Contentions Of The Applicant

The Applicant contended that once the Respondent had given undertaking vide letter dated 03.11.2017, the responsibility was shifted to the Respondent to make the entire payment to the Applicant.

Contentions Of The Respondent

The Respondent argued that the petition was not maintainable as there was no privity of contract between the Applicant and the Respondent. It was submitted that the Applicant is involved in forum shopping as it had already filed a claim before the Resolution Professional of ERA Infra.

Observations Of The Adjudicating Authority

The Adjudicating Authority observed that no privity of contract existed between the Applicant and the Respondent and the dues under Letter of Award were a separate transaction. As Era Infra was under CIRP, any amount lying with Respondent qua the contract with Era Infra cannot be paid to the Applicant due to Moratorium. It was observed that there was a serious dispute qua the due amount, as the balance sheets of Era Infra Engineering reflected a sum of Rs. 51,79,028/- as due, whereas the Applicant had claimed a sum of Rs. 7,10,07,021/-. Moreover, the Applicant has already availed the remedy before the Delhi High Court in Writ Petition No. 12427/2021, which was filed on 28.10.2021 against the Respondent, whereas the Demand Notice was issued on 26.11.2021. Further, the Applicant had also filed its claim before the Resolution Professional of Era Infra which was also rejected. The Bench opined that there is a pre- existing dispute and the Applicant is indulged in forum shopping.

Decision Of The Adjudicating Authority

The Adjudicating Authority dismissed the Section 9 application by observing that a serious dispute existed in relation to the due payment, which cannot be decided in a summary manner.

Case Title: Biosafe Lab India Pvt. Ltd. v NBCC India Ltd., IB 323/ND/2022.

Counsel for Applicant: Adv. Akshay Sharma

Counsel for Respondent: Adv. Mukul Katyal

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