Tribunal holds debt assignment valid, but finds one invoice hit by Covid-era suspension and the remaining claim below the Rs. 1 crore insolvency threshold
The Mumbai bench of the National Company Law Tribunal (NCLT) has dismissed a Section 9 insolvency petition filed by Uniton Infra Private Limited against Shapoorji Pallonji and Company Private Limited, holding that while the assignment of debt in favour of the petitioner was legally valid, the claim could not sustain insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.
The petition arose from two invoices linked to subcontract work for resurfacing cement concrete roads in Nellore, Andhra Pradesh. Uniton Infra claimed that it had stepped into the shoes of original subcontractor RKI Builders Private Limited through an assignment deed dated 10 April 2022, and that the corporate debtor had defaulted on payments totaling Rs. 4.31 crore.
Before the Tribunal, Shapoorji Pallonji challenged the maintainability of the petition on several grounds. It argued that there was no direct contractual relationship with Uniton Infra, that the assignment deed was not binding without its consent, that the claim was barred partly by Section 10A of the IBC, and that the payment obligation itself was conditional upon receipt of corresponding payment from the principal employer, the Nellore Municipal Corporation.
The NCLT first dealt with the issue of assignment. It held that debt assignment is recognized in law and does not require prior permission from the debtor. The Tribunal therefore accepted Uniton Infra’s locus to file the petition on the basis of the assignment deed.
However, this did not help the petitioner in the final outcome. The Tribunal found that one of the two invoices, dated 15 September 2020, fell squarely within the Section 10A suspension period, during which no insolvency proceedings can be initiated for defaults arising between 25 March 2020 and 24 March 2021. The remaining invoice amount of Rs. 89.60 lakh was below the minimum default threshold of Rs. 1 crore prescribed under Section 4 of the Code. On this ground alone, the petition could not be sustained.
The Tribunal also examined whether the debt was “due and payable.” It noted that the subcontract agreement provided that payment to the subcontractor would be released only within 10 working days of receipt of corresponding payment from the client. Although the petitioner relied on a departmental memo to suggest that funds had been released to the corporate debtor, the Tribunal held that no convincing proof was produced to show that payment corresponding to the subject work had actually been received from the Municipal Corporation. Since the corporate debtor denied receipt of such payment, the Tribunal concluded that the debt had not been shown to be due and payable in the manner required for insolvency action.
Finding no merit in the application, the NCLT rejected CP(IB) No. 470/MB/2024. At the same time, it clarified that the dismissal would not prevent the operational creditor from pursuing remedies before an appropriate forum.
Bottom Line :
Insolvency and Bankruptcy Code, 2016 - Section 9 petition by assignee of operational debt - Assignment of debt held legally valid and prior consent of corporate debtor not necessary for assignment of debt - However, one invoice fell within barred period under Section 10A and remaining claim was below threshold under Section 4 - Further, payment clause made liability contingent upon receipt of corresponding payment from principal employer and operational creditor failed to prove such receipt for the subject work - Petition rejected.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 4, 9, 10A, 20, 21
