NCLAT Delhi Refuses CIRP Against Indorama Ventures, Holds Pre-Existing Disputes Bar Section 9 Plea

The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) on 6 May held that a Section 9 application under the Insolvency and Bankruptcy Code, 2016 (IBC) cannot be maintained where genuine pre-existing disputes exist between the parties regarding contractual performance, liquidated damages and statutory deductions.

Chairperson Justice Ashok Bhushan and Technical Member Indevar Pandey dismissed the appeal filed by Rattan Singh Builders Pvt. Ltd. (RSB) against Indorama Ventures Yarns Pvt. Ltd. (IVYPL) and upheld the Mumbai NCLT's order dated 14 January 2026 rejecting initiation of Corporate Insolvency Resolution Process (CIRP). They observed:

“The record clearly reflects repeated communications regarding delay in completion, incomplete execution of work, poor quality and workmanship, levy of liquidated damages, and statutory obligations such as BOCW cess, all of which remained unresolved throughout the subsistence of the contract and ultimately culminated in its termination on 12.06.2024”

IVYPL awarded RSB a contract in June 2022 for civil and structural works at its Nagpur facility. The contract value, initially fixed at Rs. 43.25 crore, was later revised to Rs. 49.46 crore. The parties agreed that payments would be released through Running Account (RA) Bills, with 85% payable upon certification by the project management consultant (PMC) and 5% retained.

RSB claimed that it completed the works and raised RA Bills up to RA-32. It sought about Rs. 4.88 crore towards outstanding dues, retention money and contractual interest. IVYPL disputed the claim and alleged delays, defective workmanship, incomplete execution and statutory liabilities.

On 12 June 2024, IVYPL terminated the contract and imposed liquidated damages of Rs. 2.16 crore. It also deducted BOCW cess of Rs. 49.46 lakh and claimed a mismatch amount of Rs. 53.29 lakh, while admitting liability of only Rs. 15.32 lakh.

RSB issued a demand notice under Section 8 IBC in August 2024 and later filed a Section 9 application seeking initiation of CIRP. The NCLT rejected the plea after finding that genuine disputes existed before issuance of the demand notice. RSB challenged that order before the NCLAT.

Before the Appellate Tribunal, RSB argued that the operational debt stood crystallised through certified RA Bills and IVYPL's own communications acknowledging dues. It contended that deductions towards liquidated damages, BOCW cess and mismatch amounts were raised only after issuance of the demand notice. RSB further argued that liability to pay BOCW cess rested with the employer and that PMC certification amounted to admission of liability.

IVYPL argued that disputes persisted throughout the contractual relationship and relied on contemporaneous communications to support its case. It pointed to repeated extensions sought by RSB, emails recording poor quality and incomplete work, and contractual clauses making timely completion essential. IVYPL also argued that PMC certification was only interim in nature and that deductions towards liquidated damages and cess were contractually permissible.

The NCLAT held that the disputes were neither superficial nor belated, but arose from the entire course of contractual performance and were supported by continuous communications exchanged between the parties.

The Tribunal further held that certification of RA Bills did not amount to final admission of liability because completion and quality remained subject to IVYPL's satisfaction. It noted that RSB itself acknowledged incomplete work and sought extensions, while IVYPL consistently recorded objections regarding delay and workmanship. It observed:

“We note from Clause-3(F) of the work order that it makes the Appellant responsible for compliance with Labour Laws and specifically states that any such liability in respect of the work force belonging to the operational creditor shall be solely that of OC/RSB. Therefore, the Respondent's deductions towards defective work, delay, and BOCW cess arise from the contract itself and cannot be treated as an afterthought or a false defence”

The Bench also relied on RSB's communication dated 12 August 2024, issued after termination of the contract and even after the Section 8 demand notice, wherein RSB expressed willingness to complete the remaining work and rectify discrepancies. The Bench held that this communication showed that disputes regarding performance and completion remained unresolved. It noted:

“This communication, coming after receipt of termination notice and even after the issuance of demand notice dated 10.08.2024 under Section 8 of the Code issued by the Appellant, clearly indicates that disputes regarding performance and completion were ongoing and had not been resolved at any stage.”

Accordingly, the NCLAT concluded that the disputes between the parties are clearly barred initiation of CIRP under Section 9 IBC. It dismissed the appeal and upheld the NCLT's order rejecting RSB's insolvency petition.