NCLT Mumbai Dismisses JV's Plea Over ₹4.27 Crore Claim Against ITNL, Cites Novation Of Contract

The National Company Law Tribunal (NCLT) in Mumbai has upheld the reduction of a Rs 4.27 crore claim filed by a joint venture between Amritanshu Infrastructure & Management Pvt Ltd (AIMPL) and Beigh Construction Company Pvt Ltd (BCC) against IL&FS Transport Network Ltd (ITNL), holding that the claim could not survive after the underlying contract was novated in favour of BCC.

A bench of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar ruled that once the contract was novated, the joint venture ceased to be a party to the agreement and was no longer entitled to retention money arising thereafter.

“The Novation Agreement as well as letter dated 1.8.2015 makes it abundantly clear that the applicant ceases to be party to the agreement, in relation to which the CMA had admitted claim of the applicant. Upon cessation of the Applicant as a party to the agreement, the retention money, becoming refundable after expiry of 12 months from issuance of final completion certificate, which would be issued only after BCC completes the contract under Novation Agreement, shall be refunded to the party to the agreement (in absence of any saving clause in the Novation Agreement), which in any case the applicant has ceased to be,” the tribunal said.

The tribunal also found that the Claim Management Agency (CMA) was justified in revising the admitted claim after the novation agreement dated August 1, 2015 was brought on record.

The agreement substituted BCC in place of the joint venture for execution of the remaining work under the contract with IL&FS Transport Network Ltd (ITNL).

The dispute arose during the IL&FS group resolution process, where the joint venture comprising AIMPL (51%) and BCC (49%), had filed claims in July 2019 for retention money and other dues relating to a tunnel excavation project in Jammu & Kashmir. While the CMA initially admitted part of the claim, it later reduced the admitted amount after concluding that the right to claim retention money vested with BCC following the novation.

The tribunal noted that retention money under the contract was payable only after completion of the project and expiry of the defect liability period. Since BCC had stepped into the contract and was responsible for completing the remaining work, the entitlement to such amounts would vest with it.

Rejecting the joint venture's challenge, the tribunal held that the CMA was duty-bound to update the claim based on material subsequently brought to its notice and that setting aside the revision would serve no purpose as the issue had now been examined on merits.

“In view of aforesaid, we do not find any merit in the claim of the Applicant. However, we clarify that the right of the applicant to claim the retention money, if any becoming refundable by ITNL, shall not be prejudiced by our findings and shall not be effected by our observation in relation to right of the applicant, if any, to claim from BCC.” the tribunal said.