Royal Construction vs Gannon Dunkerley And Company Limited

[Arising out of the Impugned Order dated 13.01.2025 passed by the Adjudicating Authority, National Company Law Tribunal, Mumbai Bench in C.P.(IB) No. 787(MB)/C-II/2022] In the matter of: Royal Construction Having its office at: Rohit Villa, 12 Patel Colony, Gandhinagar Main Road, Jamnagar-3610008 ...Appellant Versus Gannon Dunkerley & Company Limited Having its Registered office at: New Excelsior Building, 3rd Floor, A.K. Nayak Marg, Fort, Mumbai, Maharashtra-400001 ...Respondent

Present:

For Appellant : Mr. Yashwardhan, Mr. S. Sukumaran, Mr. Anand Sukumar and Mr. Pranav Das, Advocates.

For Respondent : Mr. Amir Arsiwala and Mr. Rahul Gupta, Advocates.

JUDGMENT

(Hybrid Mode)

Per: Barun Mitra, Member (Technical)

The present appeal filed under Section 61 of Insolvency and Bankruptcy

Code 2016 ('IBC' in short) by the Appellant arises out of the Order dated

13.01.2025 (hereinafter referred to as 'Impugned Order') passed by the

Adjudicating Authority (National Company Law Tribunal, Mumbai Bench) in

C.P.(IB) No. 787(MB)/C-II/2022. By the impugned order, the Adjudicating Authority has dismissed the Section 9 application filed by the Operational

Creditor. Aggrieved by the impugned order, the present appeal has been

preferred by the Appellant-Operational creditor.

2. Coming to the brief factual matrix, a Section 9 petition was filed by Royal

Construction-Operational Creditor seeking initiation of CIRP against Gannon

Dunkerley & Company Ltd.-Corporate Debtor for an alleged outstanding debt of

₹10.18 crore arising out of multiple work orders issued by the Corporate Debtor

between 2009 and 2018. The Operational Creditor had sent three Section 8

demand notices on 17.08.2020, 15.09.2020 and 27.01.2022.The Corporate

Debtor disputed the claims raised by the Operational Creditor on grounds of

poor work quality; project delays; abandonment of projects etc. besides raising

the ground that the invoices basis which the claims were raised are time-barred.

The Adjudicating Authority dismissed the Section 9 petition both on grounds of

pre-existing dispute and on grounds that the date of default fell within the

Section 10A period rendering the petition non-maintainable. Aggrieved by this

impugned order, the Appellant has come up in appeal.

3. Making his submissions, the Ld. Counsel for the Appellant submitted that

the Corporate Debtor had issued multiple work orders in favour of the Appellant

for various projects including BHEL Sikka Site, Package-O and Package-17 of

Madhya Pradesh Major District Roads Upgradation Project. The Appellant had

successfully executed and completed the assigned work. However, the Corporate

Debtor made only partial payments and failed to clear the full dues despite

repeated reminders from the Operational Creditor. As the outstanding amount

stood at ₹10,18,16,863/-, the Appellant issued three demand notices under

Page 2 of 8 Company Appeal (AT) (Insolvency) No. 393 of 2025 Section 8 of IBC, the last one being on 27.01.2022. Since the Corporate Debtor

did not make good the outstanding debt, the Section 9 application was filed by

the Appellant which was erroneously rejected by the Adjudicating Authority.

4. It was vehemently contended that the Adjudicating Authority held the

section 9 petition to be non-maintainable by misapplying Section 10A of the IBC.

It was asserted that the Adjudicating Authority had failed to appreciate that the

dates of default were inadvertently and erroneously shown by the Appellant in

Part IV of Form 5 as 03.05.2020 for BHEL Sikka Site; as 15.08.2020 for Package-

O and 25.11.2020 for Package-17 of the Section 9 application. It was contended

that Adjudicating Authority should have considered their pleadings and

examined the documents on record to determine the actual date of default

instead of relying on the date of default reflected in the demand notice by the

Appellant by mistake.

5. We have duly considered the arguments advanced by the Learned Counsel

for the Appellant and perused the records carefully.

6. The short issue for our consideration is the maintainability of the present

Section 9 application in the backdrop of the statutory provision contained in

section 10A of the IBC.

7. At the very outset, it would be prudent to refer to the details of the

operational debt claimed by the Operational Creditor in Part IV of Form 5 as

placed at page 192- 193 of Appeal Paper Book ('APB' in short). The particulars

are as extracted below:

Page 3 of 8

Company Appeal (AT) (Insolvency) No. 393 of 2025 PART IV

PARTICULARS OF OPERATIONAL DEBT

1. TOTAL AMOUNT OF DEBT, Total Amount Due from Gannon DETAILS OF TRANSACTION Dunkerley & Co. -Ltd. is Rs.

ON ACCOUNT OF WHICH 10,18,16,863/- (Rupees Rupees Ten DEBT FELL DUE, AND THE Crores Eighteen Lakhs Sixteen DATE FROM WHICH SUCH Thousand Eight hundred Sixty three DEBT FEL LDUE Only)

a) Out of which Rs.1,96,04,794/-

stands outstanding for contractual work carried out for Civil Work, Fabrication, Masonry, Mechanical, work at BHEL Site, Sikka which fell due on 03.05.2020. b) Out of which Rs. 3,12,87,916/- stands outstanding for contractual work carried out for Road Widening and Road Reconstruction for Dewas to Newari Road for MPRDC, Package-O which fell due on 15.08.2020 c) Out of which Rs. 5,09,24,153/- stands outstanding for contractual work carried out for Road Widening and Road Reconstruction for Rangwasa- Agra- Girota for MPRDC, Package-17 which fell due on 25.11.2020

2. AMOUNT CLAIMED TO BE 10,18,16,863/-(Rupees Ten Crores IN DEFAULT AND THE Eighteen Lakhs Sixteen Thousand DATE ON WHICH THE Eight Hundred Sixty Three Only) Bhel DEFAULT OCCURRED Sikka Site - 03.05.2020, PKG-O Site - (ATTACH THE WORKING 15.08.2020 FOR DEFAULT TABULAR PKG Site- 01.01.2021 FORM) Separate sheet enclosed stating Computation of Default and interest claimed thereon from the date of initial refusal to pay for the outstanding amount. (Annexed as Exhibit 'C')

Page 4 of 8

Company Appeal (AT) (Insolvency) No. 393 of 2025 When we peruse Part IV of Form 5 as annexed in the Section 9 petition, we find

that the dates of default have been clearly shown as 03.05.2020, 15.08.2020

and 01.01.2021 in respect of the outstanding operational debt claimed by the

Operational Creditor. The same dates of default have also been mentioned in

Form 3 of the Demand Notice dated 27.01.2022 as is seen at page 170 of APB.

8. This brings us next to the question as to whether these three dates of

default mentioned in Section 8 Demand Notice and Section 9 application fall

within the purview of the prohibited period prescribed under Section 10A and

consequentially hit by the bar imposed by Section 10A of the IBC.

9. To appreciate the applicability of the bar imposed by Section 10A in the

present factual matrix, it would be relevant to notice the provisions of Section

10A of the IBC, 2016 which is reproduced as follows:

Section 10A: Suspension of initiation of corporate insolvency resolution process.

10A. Notwithstanding anything contained in sections 7, 9 and 10, no application for initiation of corporate insolvency resolution process of a corporate debtor shall be filed, for any default arising on or after 25th March, 2020 for a period of six months or such further period, not exceeding one year from such date, as may be notified in this behalf:

Provided that no application shall ever be filed for initiation of corporate insolvency resolution process of a corporate debtor for the said default occurring during the said period.

Explanation- For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply to any default committed under the said sections before 25th March, 2020. y

10. The ambit and scope of Section 10A has been well settled in the landmark

judgment of the Hon'ble Supreme Court in Ramesh Kymal Vs Siemens

Page 5 of 8 Company Appeal (AT) (Insolvency) No. 393 of 2025 Gamesha Renewable Power Pvt. Ltd. (2021) 3 SCC 224 wherein it was held

that no application for initiation of CIRP under Section 9 can be initiated for

default which is committed during the Section 10A period. Since the Ramesh

Kymal judgment supra has been relied upon by the Adjudicating Authority and

paragraph 11 of the Ramesh Kymal judgment supra has been reproduced at

para 20 of the impugned order, we do not feel the need of reproducing the same

here. It is well settled in terms of this judgement of the Hon'ble Apex Court that

if any Corporate Debtor suffered default on account of Covid-19, they should be

protected from the filing of any insolvency application in respect of default

committed by them during this prohibited period. Thus, any default committed

after 15.03.2020 till 28.02.2022 (extended period of suo-moto limitation) enjoyed

complete immunity from initiation of CIRP proceedings.

11. In the present case, the dates of default of the claims, basis which the

Section 9 application has been filed, the dates indisputably fall during the

prohibited period of Section 10A of IBC. The dates of default in the present facts

of the case fell between 03.05.2020 and 01.01.2021 which dates were hit by

Section 10A of the IBC. In terms of the statutory provision of Section 10A and as

held by the Hon'ble Supreme Court in Ramesh Kymal judgment supra, no

default falling within this period can form the basis for initiating CIRP since the

default which occur during the Section 10A period cannot be included in the

calculation of debt and default for initiating CIRP.

12. When we look at the impugned order, we find that the Adjudicating

Authority has gone into the Demand Notice and the dates of default to arrive at

Page 6 of 8 Company Appeal (AT) (Insolvency) No. 393 of 2025 the conclusion that the dates of default are hit by Section 10A of IBC. The

relevant excerpts of the impugned order are as reproduced below:

"21. As per Part IV of Form 5 annexed in the Petition, the date of default falls on 03.05.2020, 15.08.2020 and 01.01.2021. Prima facie, these dates fall under the purview of the period covered by Section 10A of the Code. These dates have been mentioned in Part IV of Form 5 as well as in the Demand Notice dated 27.01.2022. Furthermore, the dates of default mentioned in the Demand Notice dated 27.01.2022 were also 03.05.2020, 15.08.2020 and 25.11.2020. We note that, the due date of all the invoices shall be assessed separately and the invoices which fall within the period of 10A shall be excluded. In the present case, all the 3 dates of default mentioned, fall within the period prescribed under Section 10A of the Code, therefore as per the provisions of section 10A of the Code, the present petition cannot be proceeded with on this ground also."

13. No liability can be fastened on the Corporate Debtor for default committed

during Section 10A period. The Adjudicating Authority has therefore not

committed any error in holding the Section 9 application as non-maintainable.

We find no error in the impugned order holding that since the date of default

falls within the Section 10A period, Section 9 proceedings under IBC cannot be

initiated at the instance of Operational Creditor.

14. The contention of the Appellant that the Adjudicating Authority should

have modified the date of default after examining the records is an absurd

proposition. If the date of default required any change or modification, the onus

was on the Appellant to have sought leave of the Adjudicating Authority to file

an amendment application. To expect the Adjudicating Authority to have

amended the date of default without any amendment application or specific

pleading made for such a modification would tantamount to the Adjudicating

Authority exceeding its jurisdiction which cannot be countenanced.

Page 7 of 8 Company Appeal (AT) (Insolvency) No. 393 of 2025

15. In fine, we do not find any merit in the Appeal. The Appeal is dismissed.

The impugned order does not warrant any interference. No costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical)

Place: New Delhi Date: 01.04.2025

Abdul/Harleen

Page 8 of 8 Company Appeal (AT) (Insolvency) No. 393 of 2025