The National Company Law Tribunal (NCLT), Kolkata Bench-II, has formally dismissed a corporate insolvency resolution petition filed against the public sector undertaking Bridge & Roof Company (India) Limited. In an order delivered by the bench of Judicial Member Labh Singh and Technical Member Rekha K. Shah, the tribunal determined that the application initiated by the proprietor of Garg Infratech was not maintainable due to the presence of a legitimate, pre-existing dispute concerning the underlying operational debt.

The proceedings were initiated under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, with the operational creditor, Rohit Garg, claiming an outstanding principal amount of ₹1,43,37,562.14, alongside accrued interest totaling ₹46,95,367.96. These claims were purportedly tied to various civil infrastructure services provided by Garg Infratech—including excavation, reinforced cement concrete (RCC) work, and shuttering—conducted for the corporate debtor’s diverse project sites. The applicant argued that despite these services being rendered to the satisfaction of the respondent, payments had significantly stalled since March 2024.

However, the legal threshold for triggering the Corporate Insolvency Resolution Process (CIRP) requires, among other factors, that there be no existing dispute between the parties regarding the operational debt. During the adjudication process, the tribunal found clear evidence that Bridge & Roof Company had contested the quality and pace of work performed by the applicant long before the demand notice was served.

Documentary Evidence of Pre-existing Conflict

The tribunal’s findings heavily leaned on internal correspondence produced by the respondent, which demonstrated a history of grievances. Records indicated that as early as February 2022, the corporate debtor had formally communicated concerns regarding the sluggish progress of contracted works, explicitly warning the applicant that continued non-performance would result in the imposition of liquidated damages or the completion of the remaining tasks at the applicant’s own risk and cost.

Crucially, the NCLT highlighted that even the applicant had acknowledged these deficiencies in a subsequent email dated March 31, 2022, where the slow pace of work was admitted. The tribunal noted that this exchange constituted a substantive conflict regarding the contractual obligations of the parties. Under the framework of the IBC, particularly as interpreted by established judicial precedents, an application for insolvency cannot survive if the debt is subject to a bona fide dispute. As noted in the judgment, the tribunal is mandated to reject such pleas if a " notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility ."

The respondent also successfully pointed out that the demand notice issued on July 19, 2024, through the National E-Governance Services Limited (NeSL) portal, was met with an immediate and firm rejection. By marking the claim as "disputed" within the information utility’s framework, the corporate debtor ensured that the existence of the debt remained a matter of contention rather than an admitted liability.

Judicial Interpretation of IBC Scope

In its reasoning, the tribunal reinforced the principle that Section 9 proceedings are intended for the resolution of genuine insolvency rather than acting as a mechanism for the recovery of disputed debts. Relying on the principles established by the Supreme Court in Mobilox Innovations Private Limited v. Kirusa Software Private Limited and the more recent Saraswati Wire and Cable Industries v. Mohammad Moinuddin Khan , the bench emphasized that adjudicating authorities are not equipped to conduct full-scale trials into complex contractual disputes.

The tribunal reiterated that if a dispute is not merely "spurious, hypothetical or illusory," the petition must be dismissed to protect the corporate debtor from unnecessary insolvency proceedings. The bench further cited the National Company Law Appellate Tribunal’s (NCLAT) observation that "IBC cannot be used to penalise solvent companies." The judgment underscored that "The fundamental intent of IBC is ‘maximising the value of assets’ in the process of ‘Resolution’." By characterizing the corporate debtor as a solvent public sector enterprise and a going concern, the NCLT affirmed that the primary purpose of the Code would be undermined if it were treated as a substitute for ordinary debt recovery procedures.

Procedural Outcome and Future Status

The tribunal expressed concern that the applicant had failed to address or disprove the validity of the disputes registered with the information utility. Although the applicant argued that the claims of dispute were "moonshine," they failed to provide evidence demonstrating that these objections were groundless. Consequently, the bench concluded that there was no basis for a summary adjudication of the financial default as claimed.

The tribunal ultimately ruled that because a genuine, pre-existing dispute was well-documented, the requirements for the initiation of CIRP under Section 9 of the IBC were not satisfied. The petition was dismissed as devoid of merit. With the dismissal, the status of the corporate debtor remains unaffected, and the parties are left to resolve their outstanding contractual disagreements through appropriate civil forums. No orders as to costs were issued in the final judgment, and the case file now stands closed at the Kolkata Bench.

This ruling serves as a notable reminder to operational creditors that the IBC's summary proceedings provide a limited window for intervention, and that existence of active contractual disagreements will likely lead to the rejection of insolvency petitions regardless of the outstanding debt's scale.