NCLT Chandigarh Rejects Insolvency Plea Against ZTE Telecom India, Cites Pre-Existing Dispute
Pranav B Prem
The National Company Law Tribunal (NCLT), Chandigarh Bench (Court-II) has dismissed an insolvency petition filed by TVS Supply Chain Solutions Limited against ZTE Telecom India Private Limited, observing that a clear pre-existing dispute existed between the parties prior to the issuance of the statutory demand notice. The Bench comprising Judicial Member Khetrabasi Biswal and Technical Member Kaushalendra Kumar Singh held that the petition was not maintainable under Section 9 of the Insolvency and Bankruptcy Code, 2016, in light of established communication showing ongoing reconciliation and objections raised well before the initiation of proceedings.
Background
The petitioner, TVS Supply Chain Solutions Limited (formerly TVS Logistics Services Ltd.), had entered into two Master Service Agreements (MSAs) with ZTE Telecom India Pvt. Ltd., dated 25 July 2012 (MSA-I) and 1 July 2017 (MSA-II), for providing logistics, infrastructure, and support services in telecom projects involving major clients such as Reliance, TATA, BSNL, and Aircel. TVS alleged that despite repeated reconciliations and part payments, ZTE failed to pay for services rendered. It claimed a principal sum of ₹4.27 crore and interest of ₹75.77 lakh at 12% per annum, issuing a demand notice on 9 July 2018 and filing an insolvency petition in May 2019 under Section 9 of the IBC.
Respondent’s Defence
ZTE, represented by Senior Advocate Munisha Gandhi, opposed the petition, submitting that there had been longstanding disputes regarding billing discrepancies and quality of work—first raised in September 2017, well before the demand notice. The company cited an internal audit of the BSNL Phase-VII project which revealed inflated or duplicate claims by TVS for uninstalled or cancelled sites and overcharged workloads. Correspondence, including emails dated 18, 20, 28, and 29 September 2017, showed that ZTE repeatedly sought justifications from TVS and warned of debit note deductions.
When TVS failed to provide clarification, the parties met between 3 and 9 November 2017 to reconcile accounts, but the dispute persisted. ZTE subsequently issued a formal letter dated 29 January 2018, rejecting the claims and denying liability, followed by a debit note for ₹5.64 crore in July 2018.
Tribunal’s Findings
The Bench noted that the email trail and correspondence clearly established the existence of a genuine and substantial dispute prior to the demand notice. Quoting directly, the Tribunal observed: “Based on the internal audit of ZTE, certain discrepancies were conveyed to the Applicant vide email dated 18.09.2017 requiring justification, failing which ZTE would issue a debit note. The issues remained unresolved, and the conduct of the Applicant further substantiates that the alleged debt was disputed and under reconciliation.”
The Tribunal also remarked on the voluminous nature of the filing, spanning 66 volumes and over 19,000 pages, stating that the petitioner had “struggled to bring the issue under the provisions of the Code.” Applying the Supreme Court’s ruling in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. [(2018) 1 SCC 353], the Bench reiterated that where there is an existence of a pre-existing dispute, the Adjudicating Authority must reject the application under Section 9. The Tribunal also relied on recent rulings in Innovoprism Trading LLC v. Allgovision Technologies Pvt. Ltd. (NCLT Bengaluru, 2024) and Ivalua Inc. v. Wipro Ltd. (NCLT Bengaluru, 2024), emphasizing that the existence of prior correspondence indicating plausible dispute precludes admission of insolvency petitions.
Holding that TVS’s claims were subject to reconciliation and dispute well before the Section 8 notice, the NCLT ruled: “In view of these facts, we hold that this being a case of pre-existing dispute, the application under Section 9 is not at all maintainable.” The Tribunal accordingly rejected the petition and clarified that the order would not preclude the petitioner from pursuing other remedies under applicable law.
By refusing to admit the insolvency petition, the NCLT Chandigarh reaffirmed that the Insolvency and Bankruptcy Code cannot be invoked as a debt recovery tool in the presence of genuine disputes. The ruling underscores the limited, summary jurisdiction of the Adjudicating Authority under Section 9 and reinforces that detailed commercial disagreements must be resolved through appropriate civil or arbitral proceedings.
Appearance
For the Applicant: Mr. Anand Chhibbar, Senior Advocate with Mr. Vaibhav Sahni, Advocate
For the Respondent: Ms. Munisha Gandhi, Senior Advocate with Ms. Daizy Chawla, Mr. Jatin Kapoor, Ms. Salina Chalana & Mr. Rahul K. Kanojia, Advocates
Cause Title: TVS Supply Chain Solutions Limited v ZTE Telecom India Private Limited
Case No: CP (IB) No. 168/Chd/Hry/2019
Coram: Judicial Member Khetrabasi Biswal, Technical Member Kaushalendra Kumar Singh
