The National Company Law Appellate Tribunal (NCLAT) on Thursday dismissed an appeal filed by Drilltech Engineers challenging the National Company Law Tribunal (NCLT) Chandigarh Bench's rejection of its insolvency plea against real estate major DLF..A coram of Chairperson Justice Ashok Bhushan and comprising Technical Members Barun Mitra and Arun Baroka held that the existence of a “pre-existing dispute” barred the initiation of insolvency proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC).“There is a lot of communication exchanged between the two parties indicating pre-existing dispute, which cannot be ignored and which cannot be said to be moonshine or spurious,” the NCLAT said, adding that such disputes must be settled before an appropriate forum and not under the IBC..Drilltech Engineers had filed its Section 9 petition before the NCLT seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against DLF over alleged non-payment of dues amounting to ₹4,65,96,418, plus interest. The amount was claimed against completed piling works undertaken at DLF’s commercial project site in Panaji, Goa..The NCLT in its detailed judgment dated January 10 found that DLF had raised repeated concerns about quality, delay and site conduct starting as early as December 2021, much before Drilltech issued the statutory demand notice under Section 8 of IBC on July 1, 2022.DLF had also issued a formal show cause notice on June 21, 2022 - 10 days before the demand notice - stating that Drilltech’s work was defective and that the company intended to recover approximately ₹10 crore in revenue losses due to delayed and defective piling.The NCLT had concluded that these facts showed a clear pre-existing dispute. The NCLT, therefore, dismissed the plea noting that insolvency proceedings are barred where there exists a genuine, pre-litigation dispute..Affirming the NCLT’s order, the NCLAT ruled that DLF’s objections were neither fabricated nor afterthoughts. The appellate tribunal emphasised that courts must reject Section 9 applications if a plausible dispute existed before the demand notice was issued.“So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application,” the NCLAT reiterated..Concluding the judgment, the NCLAT ruled,“We do not find any infirmity in the orders of the Adjudicating Authority and we uphold its orders. The appeal is therefore dismissed. The Appellant is at liberty to pursue remedies as available as per law.".Drilltech was represented by Senior Advocate P Nagesh with Advocates Rishabh Singh and S Shiva.DLF was represented by Advocates Meghna Mishra, Ankit Rajgarhia and Palak Sharma from Karanjawala & Co..[Read Judgment]
