Ahmedabad NCLT Rejects Suwarna Buildcon's CIRP Plea Against Sadbhav Engineering

On 11 May, the Ahmedabad Bench of the National Company Law Tribunal (NCLT) dismissed a Section 9 insolvency petition filed by Suwarna Buildcon Pvt. Ltd. against Sadbhav Engineering Ltd., holding that the claim arose from a substituted contract and fell within the Section 10A embargo under the Insolvency and Bankruptcy Code, 2016 (IBC).

Judicial Member Shammi Khan and Technical Member Sanjeev Sharma. It also dismissed the connected amendment application. The Bench observed:

“..this Adjudicating Authority is of the considered opinion that the operative default sought to be enforced in the present proceedings falls within the statutory embargo contemplated under Section 10A of the Insolvency and Bankruptcy Code, 2016 and the present petition is therefore not maintainable.”

Suwarna Buildcon filed the petition in February 2023. It sought initiation of the Corporate Insolvency Resolution Process (CIRP) over alleged unpaid dues of Rs 30.12 crore with interest at 12% per annum. The dispute arose from subcontracted works under the Chitradurga Branch Canal Project awarded by Visvesvaraya Jala Nigam Ltd.

The operational creditor stated that Sadbhav Engineering verified and acknowledged Running Account Bills. It relied on a letter dated 27 January 2020 and an agreement dated 8 July 2020. It argued that the agreement only structured payment of admitted dues and did not change the operational nature of the debt. It also said that despite reminders, Sadbhav did not release payments, leading to a demand notice under Section 8 IBC in December 2022.

Sadbhav Engineering opposed the petition. It argued that the 8 July 2020 agreement created a substituted contract under Section 62 of the Contract Act, 1872. It said the claim no longer qualified as “operational debt” under Section 5(21) of the IBC.

It also said the pleaded default date of 8 August 2020 fell within the Section 10A suspension period and made the petition barred. Further, the company also pointed to commercial suits, police complaints, and arbitration proceedings between the parties. It said these showed genuine pre-existing disputes.

Suwarna Buildcon responded that the original work order of 2019 created the liability. It said the 2020 agreement only structured repayment of admitted dues. It also claimed the default began in August 2019 and continued through the COVID-19 period, so Section 10A did not apply.

The creditor also filed IA No. 500 of 2026. It sought to amend the default date from 8 August 2020 to 27 January 2020. It said the earlier date was a clerical error.

The Tribunal held that the 8 July 2020 agreement changed the contractual relationship. It introduced new obligations, payment schedules, and supersession clauses. The Bench observed:

“However, where parties consciously introduce fresh obligations, structured schedules, supersession clauses and substituted contractual terms, the arrangement travels beyond a mere acknowledgment and assumes the character of a substituted arrangement within the meaning of Section 62 of the Indian Contract Act, 1872.”

The Bench noted that Suwarna Buildcon consistently pleaded 8 August 2020 as the default date in the demand notice, petition, and pleadings. It rejected the claim that it was a clerical error. It held:

“The repeated and conscious pleading of the said date across multiple proceedings and documents materially weakens the contention that the same was a mere typographical or clerical error.”

The Tribunal also noted ongoing disputes between the parties across multiple projects. It held that the petition reflected a recovery attempt rather than a genuine insolvency action.

Accordingly, the NCLT dismissed the Section 9 petition and the amendment application.

For Applicants: Advocate Ankit Pitti

For Respondents: Advocates Ravi Pahwa and Gunjan Aggarwal