NCLAT Affirms Dismissal of ₹4.65 Cr Insolvency Plea Against DLF, Citing Documentary Evidence of Pre-Existing Dispute
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench at New Delhi, comprising Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra and Mr. Arun Baroka (Technical Members), has upheld the dismissal of a Section 9 IBC application filed by M/s Drilltech Engineers Pvt. Ltd. against M/s DLF Limited. The Tribunal ruled that the materials on record, including detailed correspondence and show cause notices exchanged between the parties prior to the issuance of the demand notice, clearly established a pre-existing dispute, making the application not maintainable under Section 9(5)(ii)(d) of the Insolvency and Bankruptcy Code, 2016.
Background
DLF Limited had floated a tender dated 08.10.2021 for piling works at its commercial project located at 35, Patto Plaza, Panaji, Goa. Drilltech Engineers was selected as the successful bidder, and a Letter of Intent (LOI) was issued on 18.11.2021. A formal agreement incorporating the LOI terms was signed on 25.11.2021 for execution of 335 piles. Subsequently, 100 additional piles were sanctioned by way of an amendment dated 05.03.2022, and work was said to be completed by 26.05.2022.
Drilltech alleged that the work had been duly completed and approved by both parties' engineers, as per Clause 69.2 of the agreement, which provides that such approval constitutes conclusive acceptance of the work. It also contended that additional work involving 16 more piles was offered by DLF in June 2022, signifying satisfaction with the work performed.
However, due to alleged delays in payments, Drilltech refused to proceed with the additional work. On 02.07.2022, it issued a demand notice under Section 8 of the IBC, and subsequently filed a Section 9 application on 30.07.2022 before the NCLT, Chandigarh Bench, seeking initiation of CIRP for a claimed debt of ₹4.65 crores.
Proceedings Before the NCLT
The Adjudicating Authority dismissed the Section 9 application on 10.01.2025, holding that there was a pre-existing dispute concerning the quality and performance of work. DLF’s multiple letters and emails raised issues related to slow mobilization, delays in execution, substandard piling, safety violations, and non-removal of muck from the site. The NCLT found that these communications were well-documented and issued prior to the Section 8 demand notice, and therefore, the debt was disputed.
Contentions Before the NCLAT
In appeal before the NCLAT, the operational creditor argued that:
The work was completed and approved by engineers on-site.
No contemporaneous objections were raised at the time of execution.
The Corporate Debtor’s reply to the demand notice contained vague and afterthought allegations.
Partial payments were made on the approved invoices and additional work was assigned after completion, which amounted to acknowledgment of debt.
The appellant relied heavily on the Supreme Court’s judgment in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. [(2018) 1 SCC 353], to contend that only genuine, pre-existing disputes supported by evidence can lead to rejection under Section 9.
Findings of the NCLAT
The Appellate Tribunal, after a detailed examination of the record, found that DLF had consistently expressed concerns over the contractor’s performance even before the issuance of the demand notice. The following communications were noted:
Letter dated 15.12.2021: Raised issues regarding delayed mobilization of rigs, pending documentation, and slow pace of work. DLF pointed out that only 21 piles had been completed by 13.12.2021 against the expected 100 piles by 17.12.2021.
Emails dated 29.12.2021 and 07.01.2022: Reiterated concerns regarding muck removal, hindrance in excavation, and threat to overall project timelines. DLF cautioned that it would engage other contractors at Drilltech’s risk and cost.
Letter dated 12.03.2022: Highlighted disputes over under-cast piles and demanded a method statement from Drilltech to rectify the same. DLF stated that the poor performance was affecting the entire project.
Letter dated 02.05.2022: Rejected Drilltech’s request for incentives and asserted that continued losses were being incurred due to defective performance.
Letter dated 23.05.2022: Indicated Drilltech’s inability to perform further work and reserved DLF’s right to appoint another contractor.
Show Cause Notice dated 21.06.2022: Specifically mentioned defective piling, delay-related losses of around ₹10 crores, and invoked the risk-and-cost clause. The SCN was issued ten days before the demand notice.
The NCLAT observed: “From the materials on record and in the above facts and circumstances, we find that there is a lot of communication exchanged between the two parties indicating pre-existing dispute, which cannot be ignored and which cannot be said to be moonshine or spurious.”
The Tribunal concluded that these communications, particularly the SCN dated 21.06.2022, were sufficient to demonstrate that a plausible dispute existed. As per the Mobilox ruling, once such a dispute exists, the NCLT is bound to reject the application under Section 9(5)(ii)(d).
It further stated: “These are pre-existing disputes which cannot be adjudicated by NCLT and this need to be settled at appropriate forum.”
Dismissing the appeal, the NCLAT held that the Adjudicating Authority had rightly rejected the Section 9 application. The existence of a real and substantial dispute, backed by contemporaneous documentary evidence, disqualified the claim from being adjudicated under the summary mechanism of the IBC. The appellant was granted liberty to pursue remedies available under applicable civil or contractual laws.
Appearance
For Appellant: Mr. P. Nagesh, Sr. Advocate with Mr. Rishabh Singh and Mr. S. Shiva, Advocates
For Respondent: Ms. Meghna Mishra, Mr. Ankit Rajgarhia and Ms. Palak Sharma, Advocates
Cause Title: M/s Drilltech Engineers Pvt. Ltd. V. M/s DLF Limited
Case No: Company Appeal (AT) (Insolvency) No. 394 of 2025
Coram: Justice Ashok Bhushan [Chairperson] , Mr. Arun Baroka [Member (Technical)], Mr. Barun Mitra [Member (Technical)]
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