Span Engineers vs Pragati Infra And Engineering Llp

[Arising out of the Impugned Order dated 09.05.2025 passed by the Adjudicating Authority, National Company Law Tribunal, Chandigarh Bench in CP(IB)/291/CHD/HRY/2023]

IN THE MATTER OF:

SPAN ENGINEERS (Sole Proprietorship) rep. by its Proprietor Cbandrahasan Senthilkumar Flat No.1, Ground Floor, Sundar Enclave 30/1, Valmiki Street, Thiruvanmiyur, Chennai - 600041. Ph: +91 72000 56478 PAN: ABGPS4588J E-Mail: spanengineers@yahoo.co.in ...Appellant(s)

Versus

PRAGATI INFRA AND ENGINEERING LLP Plot No. 31P Sector-38, NA GURGAON Gurgaon Haryana 122001 LLPJN: AAJ6083 E-Mail: compliance@paragti.group ...Respondent(s) Present: For Appellant : Mr. S. Vedhavel, Advocate. For Respondents : None

ORDER

(Hybrid Mode) Per: Barun Mitra, Member (Technical) The present Appeal, preferred under Section 61 of the Insolvency and

Bankruptcy Code, 2016 ('IBC' in short) arises from the Impugned Order dated

09.05.2025 (hereinafter referred to as the 'Impugned Order') passed by the

Adjudicating Authority (National Company Law Tribunal, Chandigarh Bench)

in CP(IB)/291/CHD/HRY/2023. By the said impugned order, the

Adjudicating Authority dismissed the Section 9 application filed by the

Appellant/Operational Creditor-Span Engineers, seeking initiation of the

Company Appeal (AT) (Insolvency) No. 1320 of 2025 Corporate Insolvency Resolution Process ('CIRP' in short) against the

Respondent/Corporate Debtor-Pragati Infra and Engineering LLP. Being

aggrieved by the dismissal of its Section 9 application, the Appellant has come

up in appeal.

2. Coming to the brief factual matrix of the present case from the material

placed on record, we notice that the Appellant-Operational Creditor was

engaged by the Respondent-Corporate Debtor for execution of certain civil

works including supply of goods and services pursuant to a work order dated

01.05.2020. The Appellant claimed to have satisfactorily executed the

assigned works and raised three invoices dated 07.06.2020, 05.01.2021 and

09.02.2021 aggregating to Rs. 1,26,89,529.34/- against which the Corporate

Debtor made partial payments against the first and second invoices. However,

the Appellant claiming that in accordance with the payment terms under the

work order, the entire payment should have been made within six months

from the date of the last invoice i.e. 09.02.2021, which not having been done,

this led to unpaid operational debt which had become due and payable

following which the Appellant issued a demand notice on 01.04.2023 under

Section 8 of the IBC seeking payment of the operational debt. The Corporate

Debtor replied to the demand notice on 12.04.2023 raising certain disputes.

Also, another communication dated 05.05.2023 was issued by the Appellant

regarding reporting of default by the Corporate Debtor with the National E-

Governance Services Limited ('NeSL' in short) which the Corporate Debtor

claimed to have been disputed. The Appellant not having received any further

payment, filed an application under Section 9 of the IBC claiming an

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Company Appeal (AT) (Ins) No. 1320 of 2025 operational debt of Rs. 1.26 Cr.. The Corporate Debtor filed its reply thereto

on 14.02.2024 objecting to the Section 9 application by submitting that the

claim was not due and payable for the operational debt required reconciliation

of accounts; that invoices submitted by the Appellant were unsigned and

fabricated; that there were statutory compliance issues relating to Provident

Fund and GST; that the alleged default was barred under Section 10A; that

the claim did not satisfy the minimum threshold under Section 4 and that the

NeSL status also reflected the claim as disputed. The Adjudicating Authority

passed the impugned order on 09.05.2025 dismissing the Section 9

application on grounds of pre-existing dispute; non-fulfilment of the threshold

requirement and applicability of Section 10A of the IBC. Aggrieved with the

findings of the Adjudicating Authority, the present appeal has been preferred

by the Appellant.

3. Making submissions on behalf of the Appellant, Shri S. Vedhavel,

Learned Counsel contended that the Adjudicating Authority committed a

grave error in rejecting the application under Section 9 of the IBC, 2016

though the existence of operational debt and default had been conclusively

established by the Appellant supported by cogent documentary evidence like

work order, invoices, delivery challans, transport records and email

acknowledgments which all evidenced the supply and acceptance of goods

and services by the Corporate Debtor. Submission was pressed that the

operational debt arose from a continuous running account maintained

between the two parties and the liability of the Corporate Debtor had

crystallised upon non-payment of the third invoice, resulting in a cumulative

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Company Appeal (AT) (Ins) No. 1320 of 2025 outstanding operational debt of Rs. 1.26 Cr which clearly met the threshold

limits prescribed under Section 4 of the IBC. It was further contended that

the date of default had been correctly determined in terms of the payment

conditions stipulated in the work order. The unpaid dues under all invoices

formed part of a continuing operational liability which had to be considered

cumulatively for the purpose of determining quantum of default and

maintainability of the Section 9 application from the threshold perspective. It

was vehemently contended that the Adjudicating Authority had erred in

placing undue reliance on the contention of the Corporate Debtor with respect

to discrepancies in the record submitted before the Information Utility while

overlooking the fact that the requirement of filing of such record is directory

in nature and not mandatory. Even if there were any errors in the reporting

made to NeSL, the same could not have defeated the substantive claim of the

Appellant, especially when the operational debt and default stood well

substantiated. Moreover, partial payments were made by the Corporate

Debtor without raising any specific and substantiated dispute prior to the

Section 8 demand notice which clearly shows that the liability was

acknowledged by the Corporate Debtor and there was no genuine pre-existing

dispute surrounding the operational debt. It was erroneous on the part of the

Adjudicating Authority to only consider one invoice while excluding the

previous two invoices while applying provisions of Section 10A of the IBC at a

time when supplies had been made in respect of those invoices during the

period which fell outside the Section 10A period. It was submitted that under

the settled legal position governing proceedings under Section 9 of the IBC,

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Company Appeal (AT) (Ins) No. 1320 of 2025 only a real and bona fide dispute existing prior to the issuance of the demand

notice can defeat the claim of an Operational Creditor. The Appellant further

argued that there was no genuine or pre-existing dispute raised by the

Corporate Debtor prior to issuance of the statutory demand notice on

01.04.2023 and the alleged dispute raised by the Respondent was a mere

afterthought devised solely to defeat the insolvency proceedings. When all the

statutory requirements under Section 9 stood fully satisfied, including

substantiation of the existence of operational debt and occurrence of default,

which debt default amount surpassed the prescribed monetary threshold

issuance; their having been proper issuance and delivery of a valid demand

notice and absence of any pre-existing dispute, the Adjudicating Authority

could not have dismissed the Section 9 application by adopting an unduly

technical approach which was contrary to the object and scheme of the IBC.

Assailing the impugned order, it was contended that the same was legally

unsustainable and therefore liable to be set aside.

4. We have heard at length the Ld. Counsel for the Appellant and perused

the records carefully.

5. We have already captured in details the submissions of the Appellant.

It is the case of the Appellant that the operational debt which was due and

payable by the Corporate Debtor was the cumulative aggregate of running

account invoices dated 07.06.2020, 05.01.2021 and 09.02.2021 amounting

Rs. 1.26 Cr. It was also held that these invoices pertained to a period beyond

the Section 10A of the IBC and therefore met the threshold prescription. It

was also contended that existence of these invoices was never challenged prior Page 5 of 12

Company Appeal (AT) (Ins) No. 1320 of 2025 to issue of Section 8 demand notice and there was sufficient material placed

on record by the Appellant by way of work orders, delivery challan and

transport receipt etc. which clearly established the supply of goods and the

acknowledgment of debt by the Corporate Debtor which had been received

without any demur or protest. Hence the dismissal of the Section 9 application

on grounds of pre-existing dispute; non-fulfilment of the threshold

requirement and applicability of Section 10A of the IBC was erroneous.

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

Authority has interalia dwelled on the question as to whether the operational

debt was disputed by the Corporate Debtor and also whether the Section 9

application was barred in terms of Section 10A and failed to meet the

threshold restrictions.

7. Coming to the issue of pre-existing dispute between the parties, we find

that in the impugned order, the Adjudicating Authority has taken notice at

para 13.3 that payment terms at clause 1 clearly provided that 90% against

the RA bills were to be paid from the date of approval of the bill and that these

payments were to be made when both parties had mutually agreed to the bills.

The Adjudicating Authority further noticed that in the present case there is

nothing to show that the amounts claimed against these bills had been

reconciled or that the amounts were mutually agreed upon by both the

parties. Furthermore, objections which had been raised by the Corporate

Debtor on the bills raised by the Appellant have been extracted in details in

the same para of the impugned order by the Adjudicating Authority. Thus,

when the veracity and tenability of the invoices itself remained under dispute, Page 6 of 12

Company Appeal (AT) (Ins) No. 1320 of 2025 which dispute has also been clearly raised by the Respondent in their reply

to the Section 8 demand notice, the Adjudicating Authority did not falter in

holding that these bills cannot be relied upon to establish the debt

outstanding between the parties.

8. At this stage, we may draw our attention to the Reply of the Corporate

Debtor to the Section 8 Demand Notice. Para 12 of the said reply contains a

summary of the objections raised by the Corporate Debtor which is as

extracted hereinunder:

"12. Alternatively, without prejudice to the facts set forth hereinabove, we dispute your claim and the tenability of your notice on the following grounds:

i. The services supplied by you were defective/inferior/substandard and did not conform to the specifications agreed upon between us.

ii. You have failed to duly perform your obligations under the Work Order and have breached the terms and conditions thereof.

iii. You have charged us excess amounts over and above the legitimate amounts and have levied unjustified interest thereon.

iv. You have not provided us with proper invoices/bills/supporting documents for your claim.

v. You have not accounted for the legitimate payments/adjustments/set-offs made by us against your claim."

Each of the above contentions have also been separately and elaborately dealt

by the Corporate Debtor.

9. From the above reply, it is amply clear that the invoices raised by the

Appellant had been clearly disputed by the Corporate Debtor including breach

of the terms of the work order and failure to comply with statutory obligations.

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Company Appeal (AT) (Ins) No. 1320 of 2025 When we look at paras 5 and 8 of the said reply, we find that the Respondent

also pointed out that the Operational Creditor had failed to deposit GST dues.

At para 9 therein, the Corporate Debtor also submitted that the Appellant had

defaulted in discharging statutory payments under labour laws. Para 10 also

refers to deductions made towards retention money by them in accordance

with the work order and that the same was repayable only after ascertainment

of full and final settlement amount. There is no evidence placed on record by

the Corporate Debtor to show that the bills had been accepted by the

Respondent. Clearly there existed a serious pre-existing dispute between the

parties regarding reconciliation of accounts. Given this backdrop, the

Adjudicating Authority committed no error in holding that as the account

between the parties had not been finally settled in accordance with the

payment terms, no operational debt had crystallised or come into existence.

10. This brings us to the information submitted by the Appellant in the

Information Utility, namely NeSL, regarding their claim against the Corporate

Debtor. The Appellant while making submissions before us contended that

the Corporate Debtor had falsely alleged that the default recorded with the

Information Utility was disputed, whereas in fact NeSL had merely followed

the statutory procedure under Regulation 21 of the IBBI (Information Utilities)

Regulations, 2017 by issuing notice to the debtor for authentication of the

default and the Corporate Debtor was deliberately mischaracterising the same

to create a false impression of dispute. An opportunity was therefore given by

us to the Appellant to file the NeSL report by means of an additional affidavit,

which has now been placed on record which is as reproduced below:

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Company Appeal (AT) (Ins) No. 1320 of 2025

11. It is the case of the Appellant that the Respondent has relied upon an

automated intimation generated by the National E-Governance Services

Limited (NeSL) reporting the default before the information utility. However,

when we look at the above NeSL Report, the default amount stands clearly

disputed by the Corporate Debtor thereby establishing the existence of a

genuine dispute prior to the filing of the Section 9 petition. We therefore do

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Company Appeal (AT) (Ins) No. 1320 of 2025 not find any merit in the contention of the Appellant that the Section 9

application could not have been dismissed on technical grounds by the

Adjudicating Authority with respect to Information Utility reporting.

12. When we look at the statutory scheme as outlined in Sections 8 and 9,

we notice that Section 8(1) provides for delivery of a demand notice by the

Operational Creditor on the occurrence of default by the Corporate Debtor.

The Corporate Debtor is obligated to bring to the notice of the Operational

Creditor the existence of any dispute in respect of the unpaid operational debt

within a period of 10 days of the receipt of the demand notice. If, however,

after the expiry of the period of 10 days from the date of delivery of the Section

8 notice or invoice demanding the payment, the Operational Creditor fails to

receive payment from the Corporate Debtor or does not receive any notice of

the dispute under Section 8(2), the Operational Creditor can proceed to file

an application under Section 9(1) of the IBC before the Adjudicating Authority.

Conversely seen, Section 9(1) does not envisage any scope for filing of an

application under Section 9 once a notice of dispute is received or there is a

record of dispute in the Information Utility for in such circumstances, Section

9(5)(ii)(d) comes into play warranting rejection of the Section 9 application.

The statutory scheme contemplates rejection of Section 9 application when

notice of dispute has been received by the Operational Creditor or there is a

record of default in the Information Utility. Present is a case where not only a

notice of dispute was sent by the Corporate Debtor on 12.04.2023 after receipt

of demand notice dated 01.04.2023 but we also find that even the NeSL record

has been disputed by the Corporate Debtor. We are also guided by the

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Company Appeal (AT) (Ins) No. 1320 of 2025 precedent laid down by the Hon'ble Supreme Court in Mobilox Innovations

(P) Ltd. v. Kirusa Software (P) Ltd. (2018) 1 SCC 353 that all that the

Adjudicating Authority is required to see once a dispute is raised is whether

there is a plausible contention which requires further investigation and that

the dispute raised is not a patently feeble legal argument or an assertion of

fact unsupported by evidence without having to go into the merits of the

dispute. The relevant extracts of the said judgement is as reproduced below:

"51. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(i)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the "existence" of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application."

So long as a dispute truly exists in fact and is not spurious, hypothetical or

illusory, the Adjudicating Authority has to reject the Section 9 application. In

this backdrop, we find no good reasons to disagree with the impugned order

rejecting the Section 9 application. Furthermore, as we are convinced of the

presence of genuine pre-existing disputes in the present factual matrix, we

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Company Appeal (AT) (Ins) No. 1320 of 2025 do not find that it would be of much relevance to dwell upon other

jurisdictional issues of threshold and applicability of Section 10A of IBC.

13. In fine, we do not find any merit in the Appeal. We find no good ground

to interfere with the impugned order. The Appeal is dismissed with no costs

with liberty to the Appellant to pursue other civil remedies available in

accordance with law. No costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical) Place: New Delhi Date : 28.04.2026 Sheetal

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Company Appeal (AT) (Ins) No. 1320 of 2025