National The Company Law Tribunal (NCLT) rejected the insolvency petition filed by Empire Transport Services Limited against Noida Metro Rail Corporation (NMRC). NCLT observed that there is already an ongoing dispute between the two parties regarding service quality, contractual obligations and payment deductions. The Allahabad bench of NCLT rejected the plea to initiate corporate insolvency resolution process (CIRP) against Noida Metro under Section 9 of the Insolvency and Bankruptcy Code (IBC).
Claim of operational dues of Rs 7.09 crore on Noida Metro
Empire Transport Services Limited (ETSL) had moved the law tribunal claiming operational dues of around Rs 7.09 crore relating to the ‘bus operator’ agreement it entered into with Noida Metro Rail Corporation on January 15, 2016. As per the agreement, ETSL was to operate 100 low-floor AC CNG buses between Noida and Greater Noida. But, the company had put into service only 50 buses instead of 100. ETSL approached Noida Metro to run the remaining 50 buses, but did not receive any response.
What were the provisions in the agreement between NMRC and ETSL?
As per the agreement, Noida Metro was to make 50 per cent payment within a week of receiving the bill and the remaining payment in the next 15 days. There was also a provision in the agreement that in case of delay in payment, Noida Metro would have to pay compound interest rate of 9 percent per day. ETSL alleged that it raised several ‘bills’ between April 25, 2019, and March 16, 2020, but did not receive any payment from Noida Metro. Thereafter it issued a notice under Section 8 of the IBC and filed a petition as an operational creditor claiming default.
What did Noida Metro say in its favor?
Senior lawyers Sunil Fernandes, Abhishek Prasad and Kaushalendra Nath Singh, appearing for Noida Metro, argued that there was no payment default under the IBC. He said Empire Transport had repeatedly failed to deliver services as per the contract and committed several violations, in respect of which several show cause notices were also issued. These notices were also submitted in the writ petition filed by Empire Transport in the Allahabad High Court, which was dismissed on July 14, 2021, following which arbitration proceedings were initiated in the dispute.
What did NCLT say in its hearing
After hearing the side of Noida Metro, a two-member bench of NCLT said that the dispute is not just about non-payment but about serious differences regarding the quality of service and violations committed under the contract. The law tribunal said Noida Metro had issued several show cause notices over various deficiencies in service, including malfunctioning GPS and passenger information systems, broken windshields, poor condition of ramps for the disabled, non-functioning of stop buttons, inadequate bus deployment, air conditioning problems and lack of statutory compliances like EPF and ESI.
Why was ETSL’s petition rejected?
Citing the Supreme Court judgment in ‘Mobilox Innovations Pvt Ltd vs Kirusa Software Pvt Ltd’, the NCLT reiterated that the insolvency application cannot be accepted if genuine disputes exist before the demand notice is issued. The NCLT said that differences relating to service standards, contractual performance, penal deductions and reconciliation of accounts clearly fall in the category of “pre-existing disputes” under the IBC. The bench comprising Ashish Verma and Praveen Gupta said, “Therefore, in view of the existence of genuine and pre-controversy under Section 5(6), the present application filed under Section 9 is not maintainable and is dismissed.”
With PTI inputs
SK Sharma is a content writer who writes on news, entertainment, and lifestyle topics. She has over four years of experience and is known for conveying information in simple and clear language.
