NCLT Delhi Rejects Redpro's ₹1.40 Cr. Insolvency Plea, Says Invoices Must Prove Contractual Liability

The National Company Law Tribunal (NCLT), New Delhi, on 1 October held that invoices cannot independently establish an operational debt due and payable under the Insolvency and Bankruptcy Code, 2016 (IBC), unless a clear contractual nexus establishes the corporate debtor's liability.

A Bench comprising Judicial Member Manni Sankariah Shanmuga Sundaram and Technical Member Reena Sinha Puri dismissed a Section 9 application filed by Redpro Construction Pvt. Ltd. against Skyline Infratech Pvt. Ltd., seeking initiation of the corporate insolvency resolution process (CIRP) over an alleged outstanding debt of Rs. 1.40 crore. The Tribunal observed:

“Moreover, the Agreement does not disclose any independent contractual obligation on the part of the Respondent to pay the amounts claimed under the invoices relied upon by the Applicant and raised in relation to the JAL works. No contractual basis has been demonstrated to show how, or under what term, the amounts reflected in those invoices became payable by the Respondent to the Applicant. In the absence of such a contractual nexus, the invoices, by themselves, cannot establish a debt due and payable by the Respondent. The material on record, at best, indicates a common commercial arrangement between the parties for execution of the works awarded by JAL; it does not establish a crystallised and enforceable payment obligation owed by the Respondent to the Applicant. Consequently, the essential requirement of an operational debt due and payable by the Respondent remains unproved.”

Redpro contended that Skyline Infratech had issued three work orders dated 25 August 2017 for civil and structural works, internal electrical works, and plumbing and firefighting works for Jaiprakash Associates Limited's (JAL) Kensington Boulevard Project in Noida. Redpro claimed that it had executed the works and raised invoices but had not received payment despite repeated requests.

The Tribunal found that the invoices referred to agreements with JAL dated 29 September 2017 and 11 November 2017, which Redpro had not placed on record. The work orders, however, referred to separate agreements dated 17 July 2017. Redpro failed to establish a contractual link between the invoices and the work orders.

It also noted that the work orders required Redpro to submit bills to JAL on behalf of Skyline Infratech, whereas Redpro had raised the invoices forming the basis of the insolvency application directly against Skyline Infratech. This inconsistency raised questions about the contractual arrangement and the identity of the entity liable to make payment.

Further, the Bench examined a handwritten stipulation in the work orders that contemplated transferring the works to a proposed company with equal shareholding by the directors of both entities. The stipulation, read alongside contemporaneous correspondence with JAL, supported the existence of a common commercial arrangement for sharing the work rather than an independently established payment obligation owed by Skyline Infratech to Redpro.

It also found discrepancies between the invoices, ledgers and claim schedule. Contemporaneous correspondence revealed disputes over bill certification, deductions, work quality and reconciliation of accounts.

Accordingly, the NCLT dismissed the Section 9 application, finding that Redpro had failed to establish an operational debt due and payable under Section 5(21) of the IBC.