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NCLT Mumbai Dismisses Insolvency Plea Against Shapoorji Pallonji Due to Conditional Payment and Section 10A
The has dismissed a ₹4.31 crore insolvency petition filed by against , ruling that the alleged was not under the parties’ express payment terms. The two-member bench further held that one of the invoices fell within the period under the , and the remaining amount was below the of ₹1 crore, rendering the petition unsustainable.
Background of the Dispute
The case arose from a road resurfacing project awarded by the to Shapoorji Pallonji. The corporate debtor subcontracted part of the work to Under the subcontract agreement, RKI raised two invoices: one for ₹3.41 crore dated , and another for ₹89.60 lakh dated . On , RKI assigned these receivables to , which subsequently filed a before the NCLT on , seeking initiation of against Shapoorji Pallonji.
Key Arguments and Tribunal’s Findings
Shapoorji Pallonji opposed the petition on multiple grounds. It contended that the payment terms under Clause 4 of the subcontract agreement made payment to RKI conditional upon Shapoorji first receiving the corresponding payment from the NMC. The corporate debtor denied ever receiving such payment from the municipal corporation. Additionally, Shapoorji argued that the ₹3.41 crore invoice fell within the Section 10A period ( ), during which no applications under could be filed for defaults arising during that period. The remaining ₹89.60 lakh was below the ₹1 crore threshold mandated by Section 4 of the Code.
The tribunal, comprising Judicial Member Ashish Kalia and Technical Member Banwari Lal Meena, examined the subcontract agreement and the invoices. It observed that the ₹3.41 crore invoice was issued on , squarely within the Section 10A window. “Upon perusal of the said invoice, it was found that the outstanding invoice dated for the amount of Rs. 3,41,56,134/- was issued on which is clearly within Section 10A period. So, the default amount arising out of the invoice issued during Section 10A period cannot be considered for the purpose of adjudication by this Tribunal,” the bench stated.
Regarding the second invoice of ₹89.60 lakh, the tribunal noted that it fell short of the . “Furthermore, the remaining default amount of Rs. 89,60,000/- arising out of the Operational Creditor’s invoice dated bearing Invoice No. RKI/SPCPL 2021-22-01 is much below the threshold limit of Rs. 1 Crore as per Section 4 of the Code,” the order said.
Clause Proves Decisive
Even if the Section 10A and threshold issues were set aside, the tribunal found that the debt itself was not “ .” Clause 4 of the subcontract agreement stipulated that payment to the subcontractor would be made within 10 working days of Shapoorji receiving the corresponding payment from the NMC. Since Shapoorji denied having received such payment and Uniton failed to produce evidence to the contrary, the debt could not be considered due.
The bench underscored this point: “Thus, we are of the considered view that, as per Section 9 of the Code, invoices so demanded shall be due for payment, and payment has not been made by the Corporate Debtor. Such payment is not unless the payment has been received from the Municipal Corporation by the Corporate Debtor. The Corporate Debtor denied the same . In view of this, the present issue is also decided against the Petitioner Company. Thus, in our considered view, the Petition under Section 9 of the Code fails on its merits and the Petition is liable to be dismissed.”
Legal Implications for Operational Creditors
This ruling reinforces the importance of carefully examining payment terms before initiating insolvency proceedings. Operational creditors must ensure that the debt is not contingent upon a future event or a condition precedent that remains unsatisfied. The decision also highlights the protective shield of Section 10A, which was introduced during the Covid-19 pandemic to prevent insolvency filings for defaults occurring between March 25, 2020 and March 25, 2021. Any invoice raised during that period cannot form the basis of a default under the IBC, even if the debt assignment occurs later.
Furthermore, the case underscores the strict application of the minimum threshold under Section 4 of the IBC. Where the aggregate default amount falls below ₹1 crore, the NCLT lacks jurisdiction to entertain a petition, irrespective of the merits of the claim.
Impact on Practice and Future Litigation
For legal practitioners, the judgment serves as a reminder to verify the actual “ ” nature of the debt and to gather evidence of any clauses. Subcontractors and assignees must be particularly cautious when relying on . The tribunal’s observation that the corporate debtor’s denial , when , is sufficient to defeat the petition, places a heavy on the operational creditor.
The NCLT clarified that its dismissal does not preclude Uniton from pursuing its claim in other judicial forums, as the observations were made solely for the purpose of the insolvency petition. Nevertheless, the decision adds to the growing body of case law where courts and tribunals have refused to admit petitions based on conditional debts or .
Conclusion
The ’s dismissal of the insolvency plea against Shapoorji Pallonji is a significant reminder of the procedural and substantive hurdles under the IBC. By rejecting a claim that relied on a , a Section 10A-barred invoice, and an amount below the , the tribunal has reinforced the Code’s strict framework. Operational creditors and their counsel would do well to heed these lessons before resorting to the insolvency route.
