Unresolved Account Reconciliation Constitutes Pre-Existing Dispute: NCLAT Delhi Sets Aside CIRP Admission

Case Overview

Case Name: Amit Wadhwani Vs Global Advertisers (NCLAT Delhi)
Appeal Number: Company Appeal (AT)(Insolvency) No. 616/2021
Date of Order: 05/07/2022
Forum: National Company Law Appellate Tribunal, New Delhi

Background and Parties Involved

The National Company Law Appellate Tribunal, Delhi (NCLAT) was called upon to adjudicate an appeal preferred by a suspended director and shareholder of M/s Sai Estate Consultants Chembur Pvt. Ltd. (Corporate Debtor) against an order dated 02.08.2021 passed by the National Company Law Tribunal, Mumbai Bench IV in CP(IB)No.1393/MB-IV/2020. Through the said impugned order, the Adjudicating Authority had admitted a petition filed by M/s Global Advertisers (a sole proprietary firm acting as the Operational Creditor) under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC), and consequently initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, also appointing Mr. UVG Nayak as the Interim Resolution Professional (IRP).

The Operational Creditor was engaged in the business of displaying advertisements on hoardings across Mumbai, Thane, and other parts of Maharashtra. It claimed outstanding dues from the Corporate Debtor in relation to these advertisement and hoarding services.

Nature of the Commercial Relationship

The "Payable When Able" Arrangement

According to the Appellant's case, the commercial relationship between the parties was characterised from the very outset by an informal understanding — rooted in a close personal association between the respective representatives — that payments for services rendered would be made only on a "payable when able" basis. This meant that liability to pay would crystallise only after completion of a formal reconciliation of accounts and verification of supporting documents evidencing actual provision of services.

Vagueness of Invoices and Supporting Documents

The Corporate Debtor raised the following specific objections regarding the invoices raised by the Operational Creditor:

  • The 30 invoices aggregating to Rs. 4,74,55,683/- were vague and lacked essential particulars such as period of service, specifications, locations, and applicable rates.
  • Several invoices bore endorsements indicating they had been "received for verification" and had "not been checked" — suggesting the Corporate Debtor had not accepted them unconditionally.
  • Certain invoices were raised approximately 1.5 years after the alleged provision of services.
  • Tabulated statements relied upon by the Operational Creditor were not co-relatable to the corresponding invoices and written confirmation letters.
  • Some tabulated statements did not even carry the Corporate Debtor's acknowledgment of receipt and may not have been furnished to the Corporate Debtor prior to filing of the petition.
  • Supporting documents such as prior email confirmations, proof of actual display on hoardings as per agreed specifications and locations, and payment receipts to publishers were never furnished.

Pre-Existing Dispute: The Correspondence Trail

Corporate Debtor's Letter Dated 20.02.2020

The Corporate Debtor, in response to the Operational Creditor's letters dated 02.08.2019 and 08.02.2020, issued a detailed reply on 20.02.2020 asserting that:

  • No supporting documents had been provided for the bills raised.
  • Supporting documents were pending even in respect of the on-account payment of Rs. 1.25 Crores already made.
  • The understanding between the parties had always been that payment would be made on a "payable when able" basis, making it integral to the arrangement that reconciliation of records and accounts would precede any further payment obligation.

Operational Creditor's Letter Dated 11.03.2020

In a pivotal development, the Operational Creditor itself — by its letter dated 11.03.2020 — fixed 14.03.2020 as the date for a reconciliation of accounts. The text of the relevant portion of this letter reads as follows: