Debt Arising Out Of Different Work Orders Can Be Clubbed To Meet Minimum Thershold Of Rs. 1 Crore: NCLT Mumbai Reiterates

Background Facts

A J Buildcon Private Limited (“Operational Creditor”) executed several work orders in relation to construction work of a residential building, being developed by Patel Engineering Limited (“Corporate Debtor”). The Operational Creditor claimed a sum of Rs. 4,04,43,155.80/- as due from the Corporate Debtor.

The Operational Creditor issued a demand notice to the Corporate Debtor under Section 8 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) on 06.03.2021. The Corporate Debtor responded to the notice and denied its liability to pay.

The Operational Creditor filed a petition under Section 9 of IBC, seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against Corporate Debtor.

The Corporate Debtor opposed the petition and contended that each work order forms a separate contract and cannot be clubbed together to satisfy the minimum threshold limit of Rs. 1 Crore as prescribed under Section 4 of IBC.

NCLT Verdict

The Bench placed reliance on the NCLAT judgment in M/s. A2 Interiors Products Pvt. Ltd. v M/s. Ahluwalia Contracts (India) Ltd., (2021) SCC online NCLT 438, wherein it was held that debts arising from different work order(s) can be clubbed to satisfy the minimum threshold limit under IBC.

The Bench opined that existence of debts and default on the part of Corporate Debtor in repayment of the debts has been proved. Further, the debts exceed the minimum threshold limit of Rs. 1 Crore. Accordingly, the Adjudicating Authority initiated CIRP against the Corporate Debtor and appointed Ms. Neeraja Kartik as the Interim Resolution Professional.

Case Title: A J Buildcon Private Limited v Patel Engineering Limited

Case No.: CP (IB) No.627/MB-IV/2021

Counsel for Applicant: Mr. Vineet Jagtap, Advocates.

Counsel for Respondent: Mr. Karl K Shroff, Advocates.

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