NCLT Hyderabad Refuses To Direct VNR Infrastructure Liquidator To Process Subcontractor's Bills

The National Company Law Tribunal (NCLT) at Hyderabad has refused to direct the liquidator of VNR Infrastructure Ltd. to process a subcontractor's bills and secure payment from North East Frontier Railway authorities.

A coram of Judicial Member Rajeev Bhardwaj and Technical Member Sanjay Puri dismissed an application filed by SS Rail Works Pvt. Ltd. The tribunal clarified that the dismissal would not prevent the company from pursuing remedies before the appropriate forum.

"Such relief would require this Authority to adjudicate disputed questions relating to measurement, certification, entitlement, PVC bills, stock reconciliation, materials, equipment, royalty, alleged set-off, losses caused to the Corporate Debtor, termination of contracts and the effect of pending proceedings before the Hon'ble NCLAT," the Bench observed.

SS Rail Works had approached the tribunal seeking directions to the liquidator under Section 60(5) of the Insolvency and Bankruptcy Code. It sought acceptance of measurements and final bills relating to subcontract works executed in connection with projects awarded to VNR Infrastructure by North East Frontier Railway.

According to the company, amounts corresponding to those works had not been released despite payments allegedly received from the railway authorities. It contended that the liquidator had failed to release the corresponding sums.

The liquidator disputed the claim. It also questioned the maintainability of the application.

The liquidator disputed the claim. It contended that the bills were not backed by proper measurement records or railway approvals. It also raised issues relating to PVC bills, stock reconciliation, materials, equipment, royalty payments, contract termination, bank guarantees and losses allegedly suffered by the corporate debtor.

While examining the dispute, the Bench referred to an earlier order passed in connected proceedings. The tribunal noted that disputes relating to contractual payments, retention monies, security deposits, claims for work executed, release of withheld amounts, termination of contracts and bank guarantee disputes could affect the realisation of receivables and determination of liabilities.

The tribunal further noted that such disputes could materially affect the quantum of assets available for distribution. They could also impact the final closure of liquidation accounts.

The Bench, however, observed that the application sought more than inclusion of a claim in a reconciliation exercise. It also went beyond seeking disclosure of records or transmission of available documents.

"It seeks a mandatory direction to the Liquidator to accept the Applicant's measurements and final bills, submit the same to N.F. Railway Authorities, secure the release of payment and thereafter release the amount to the Applicant," the tribunal observed.

The Bench held that such relief could not be granted merely by directing the liquidator to process the bills. Determination of the claim would require adjudication of multiple disputed factual and contractual issues.

"While the issue raised in the present IA may form part of the broader residual liquidation accounting and reconciliation exercise, the Applicant is not entitled to a mandatory direction in the present proceedings compelling the Liquidator to accept the measurements, certify or process the bills, pursue release of payment from the Railway Authorities or release any amount to the Applicant," the tribunal held.

The tribunal nevertheless directed the liquidator to take note of the subject matter of the application while preparing project-wise and litigation-wise reconciliation reports. It clarified that such consideration would not amount to admission of the claim.

Dismissing the application, the bench clarified that its order would not amount to an adjudication on the merits of the claim. It further held that SS Rail Works would remain free to pursue remedies against the corporate debtor under its present management, the successful going-concern purchaser, or before any other competent forum in accordance with law.