Madan Gopal Jindal (RP) Vs. V.I.R. Foods Ltd. and Ors. - It can be seen that once the admission of CIRP itself is set aside and the dispute is settled between the initiating Financial creditor and the CD, the liability to bear CIRP costs must follow the party who invoked and pursued the insolvency proceedings, particularly when the CIRP process did not culminate in resolution or liquidation and a settlement was reached between them.

  NCLT Chd.(2026.04.09) in Madan Gopal Jindal (RP) Vs. V.I.R. Foods Ltd. and Ors.  [(2026) ibclaw.in 1021 NCLT, I.A. No. 2162/2023 in CP (IB) No. 90/Chd/Chd/2018] held that;-

• It can be seen that once the admission of CIRP itself is set aside and the dispute is settled between the initiating Financial creditor and the CD, the liability to bear CIRP costs must follow the party who invoked and pursued the insolvency proceedings, particularly when the CIRP process did not culminate in resolution or liquidation and a settlement was reached between them.

Excerpts of the Order;

The present Application is filed on behalf of the Resolution Professional (hereinafter referred to as the Applicant) of M/s White Water Hospitality Private Limited (hereinafter referred to as the CD) under Rule 11 of the National Company Law Tribunal Rules, 2016 (hereinafter referred to as NCLT Rules) for seeking directions regarding payment of CIRP costs (including IRP/RP fees). The Applicant has claimed the following reliefs:

• (a) to direct the Respondents / Financial Creditors / COC members to pay the outstanding CIRP Cost (including the Fees of RP as well as Security expenses);

• (b) Or/And issue such necessary orders/ directions as may be deemed fit in the matter.

# 2. The facts of the case, as stated in the Application and the short notes, are as under:

(a) M/s V.I.R. Foods Limited(hereinafter referred to as the Respondent No.1), a Financial Creditor, initiated CIRP under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the Code) against the CD which was admitted by this Tribunal, vide Order dated 21.11.2019. Mr. Madan Gopal Jindal was appointed as the Interim Resolution Professional (hereinafter referred to as the IRP). Pursuant thereto, the IRP issued a public announcement in Form-A on 23.11.2019 inviting claims from stakeholders.

(b) The CoC was constituted pursuant to receipt of claims from following Financial Creditors till the stipulated date:

Name of the COC member	VOTING SHARE (in percentage)
V.I.R Foods Limited	10.28%
Bharat Food And Agro Products	80.48%
Kamal Kant Dewan	9.24%
Total	100%

(c) The 1st CoC meeting was held on 20.12.2019 wherein amongst others, a resolution related to the appointment of Madan Gopal Jindal as RP was passed. In the said 1st meeting of CoC dt. 20.12.2019 unanimous resolutions were passed regarding the fees of IRP and RP, which are as follows:

• (i) The CoC in Agenda item no. 7 discussed the Fees of IRP and expenses incurred by IRP, total of which was Rs. 1,59,257/-. The same was unanimously approved and ratified by the CoC.

• (ii) Further, the CoC in Agenda item no. 8 discussed the Fees of RP and expenses incurred by RP, and it was unanimously approved that RP is appointed for a Professional Fee of Rs.1,25,000/- per month plus actual expenses and GST, if any, till the period he continues to act as RP.

(d) In the 8th CoC meeting held on 02.09.2021, the CoC deliberated upon the fees of the RP and other CIRP expenses under Agenda Item No. 4. The RP placed before the CoC a statement of CIRP costs incurred and to be incurred up to 01.09.2021, amounting to Rs. 37,83,382/-, out of which Rs. 24,25,738/- was outstanding as on that date. Accordingly, the COC unanimously approved and ratified the amount of Rs. 37,83,382/- incurred by RP as CIRP cost. Under Agenda Item No. 6(a) of the 8th CoC meeting, it was unanimously resolved that w.e.f. 02.09.2021, the RP shall be paid a fee of Rs. 70,000 per month plus GST and actual expenses for the next twelve months.

(e) The fees payable to RP which has been duly approved and ratified by CoC as aforesaid is as follows:

S.No.	Purpose	Amount	CoC Approval
1.	Fees payable to IRP	1,59,257	1st CoC
2.	Fees payable to RP (calculated at Rs. 1,25,000 рer month from 21.12.2019 to 01.09.2021) Plus GST Travelling Expenses	27,97,500 69,840	1st and 8th CoC
3.	Fees payable to RP (calculated at Rs. 70,000 per month from 02.09.2021 to 01.09.2022) Plus GST Travel expenses	9,91,200 77,280	8th CoC
	Total	40,95,077

Out of the Total payable fees of Rs. 40,95,077, an amount of Rs, 10,03,857 has already been received by the RP, therefore an amount of Rs. 30,91,220 is still outstanding to be paid towards the fees of Applicant RP.

(f) Regarding Appeal against CIRP order before Hon’ble NCLAT: An appeal being Company Appeal (AT) (Ins.) No. 1489 of 2019 was filed by the suspended Directors before the Hon’ble NCLAT against the CIRP admission order dated 21.11.2019. Vide Order dated 18.12.2019, the NCLAT issued notice and restrained the IRP from selling the assets of the Corporate Debtor without its prior approval, and by Order dated 02.03.2020 directed that all further CIRP proceedings would remain subject to the outcome of the appeal. Thereafter, vide Order dated 05.04.2021, the Hon’ble NCLAT directed the Financial Creditor, M/s V.I.R. Foods Ltd., to pay the dues of the RP for the CIRP period. Ultimately, the appeal was allowed and the CIRP admission Order dated 21.11.2019 was set aside by the Hon’ble NCLAT on 17.08.2023.

(g) Consequent upon the CIRP admission order dated 21.11.2019 being set aside, the management of the CD was handed back to its Directors on 25.08.2023. The present application has therefore been filed seeking directions to the Respondents to pay the outstanding CIRP costs,etc.

(h) The Applicant further submitted in the short note that the CIRP costs including RP fees were unanimously approved by all CoC members with 100% voting share in the 1st and 8th CoC meetings. The Respondents are absolutely bound by their own resolutions and cannot now resile from their obligations. Respondent Nos. 1, 2 & 3 have categorically admitted in their replies that: they do not contest the facts relating to CIRP expenses demanded by the Applicant and the CIRP expenses as sought by the Applicant were already approved and acknowledged by them at all times. The Hon’ble NCLAT vide Order dated 05.04.2021 also directed to pay dues of RP for the CIRP period. The Respondents, having approved the CIRP costs and RP fees in multiple CoC meetings, are estopped from denying their liability to pay the same. The Applicant further contented the fact that CD has settled its debt with Respondent No.1 does not absolve the COC members from their obligation to pay CIRP costs which were approved by them during the CIRP process. In any case, until the NCLAT Order dated 17.08.2023 setting aside the CIRP admission, admittedly the COC members were liable to pay entire CIRP dues, as approved by them.

# 3. The Respondent No. 2 and 3 in its Reply, has made the following submissions:

(a) It is stated that Respondent No. 3, in his individual capacity, and Respondent No. 2, being a partnership firm, who were Financial Creditors of the CD and had duly submitted their claims pursuant to the public announcement issued by the RP in terms of the admission Order dated 21.11.2019 passed in the Company Petition filed at the instance of VIR Foods Ltd. Both were accordingly admitted as members of the CoC constituted during the CIRP. However, the said admission Order dated 21.11.2019 was subsequently set aside by the Hon’ble NCLAT vide Order dated 17.08.2023 passed in Company Appeal (AT) (Insolvency) No. 1489 of 2019. Against the said Order dated 17.08.2023, passed by the Hon’ble NCLAT the Respondent No.2 and 3 filed a Civil Appeal before the Hon’ble Supreme Court of India. Similarly, another Civil Appeal also stood filed by M/s VIR Foods Ltd.

(b) The Hon’ble Supreme Court, set aside the Order of Hon’ble NCLAT and NCLT by order dated 12.12.2023 and recorded the admission of the CD to pay the financial debt of M/s VIR Foods Ltd. amounting to ₹52,64,161.64 along with interest from 01.01.2018 till payment, and remitted the matter to this Tribunal for consideration of the issues specified therein. It is further stated by the Respondent No. 2 and 3 that the IRP/RP has claimed total CIRP costs of ₹40,95,077, out of which ₹10,03,857 has been received and ₹30,91,220 is claimed as payable towards RP’s fees, whereas security expenses of ₹17,24,350 stand already paid and settled by the Financial Creditor.

(c) It is stated by Respondent No. 2 and 3 that once the CD has admitted its liability to pay the financial debt of Respondent No.1 in order to avoid continuation of the CIRP, the entire CIRP costs are liable to be borne by the CD. It is further stated that the CIRP was triggered only due to the failure of the CD to discharge its admitted dues at the initial stage, which led to prolonged proceedings and accrual of CIRP costs. Since the CD ultimately admitted the debt before the Hon’ble Supreme Court, the CIRP costs, including the security expenses and other costs incurred by the RP, are attributable solely to the CD.

(d) The Respondents have prayed that the CD be directed to pay the entire CIRP costs amounting to ₹40,95,077 along with security expenses of ₹17,24,350 and any other CIRP-related expenses to the RP, with a further direction to refund the amounts already paid by the Financial Creditors. It is stated that Respondent No. 3 has already paid ₹25,21,118 towards CIRP costs. They have further sought dismissal of the RP’s application seeking recovery of CIRP costs from the Financial Creditors and have requested the RP to place on record a detailed statement of all CIRP expenses for proper adjudication.

# 4. The Respondent No.1 in its Reply has made the following submissions:

(a) The Reply was filed by the RP of Respondent No.1 stating that pursuant to settlement between the CD and Respondent No.1, the just outcome is that the CD, being the beneficiary of the termination of the CIRP, must bear the expenses related to that process. The Respondent No.1 further states that the CIRP of Respondent No. 1 has already been initiated, it cannot directly pay off the CIRP cost rather RP of CD has to file a claim with the RP of Respondent No.1.

# 5. The Corporate Debtor, not a party to the case gave its Reply and written submissions, which are as follows:

(a) The CD submitted that although it is not a party against whom any relief has been sought in the present application for CIRP costs, it has filed the reply pursuant to the directions of this Tribunal dated 11.03.2024 in order to place the correct factual background before this Bench. The application for recovery of CIRP costs has been filed by the erstwhile Resolution Professional against Respondent No.1 to 3 who were the members of the erstwhile CoC.

(b) It is the case of the CD that the CIRP was set aside by the Hon’ble NCLAT as having been wrongfully initiated. It is further stated that Respondent Nos. 1 to 3 have failed to comply with repeated directions of the Appellate Authority to pay the interim CIRP costs, which remain unpaid till date. The Respondent relies upon settled law, including the judgment of the Hon’ble Supreme Court in Rajkumar Brothers and Production Pvt. Ltd. v. Harish Amilineni, to contend that where CIRP is wrongly initiated, the liability to pay the fees and costs of the Resolution Professional lies upon the financial creditor who invoked the proceedings.

(c) It is submitted by CD that the alleged RP fees were ratified by the FC and COC and CD never ratified the same and he is not a party to I.A. No. 2162 of 2023 and that no relief has been sought against it therein. The obligation to bear and pay the CIRP costs squarely lies upon the members of the CoC and/or FC. Moreover, the CIRP was wrongfully initiated against the CD and was subsequently set aside by the Hon’ble Appellate Tribunal.

# 6. The Applicant filed a Rejoinder to the Reply filed by Respondent Nos.1, 2 and 3 which substantially reiterates the facts and submissions already stated in the main Application.

Analysis and Findings:

# 7. We have Heard the Ld. Counsels for all parties and considered the arguments presented on behalf of the parties and also their respective petitions, replies, and written submissions and have also gone through the legal position in this regard.

# 8. The main issue for determination is ‘who shall bear the CIRP cost/ RP fees incurred during the CIRP period, when the CIRP has finally been set aside?

# 9. The facts of the case clearly show that the Petition was filed under section 7 by the Respondent No.1 i.e V.I.R Foods Ltd., being the Financial Creditor. The petition was admitted by this bench vide Order dated 21.11.2019. The said Order was set aside by Hon’ble NCLAT vide Order dated 17.08.2023 in appeal filed by the respondent CD, in Company Appeal(AT)(INSOLVENCY) No. 1489 of 2019, holding the admission Order to be patently illegal. The NCLAT in the same Appeal, vide its Order dated 05.04.2021, directed the V.I.R Foods Ltd to pay the dues of RP for the CIRP period accrued till that date.

# 10. The Respondent No.2 and 3 filed a Civil Appeal before the Hon’ble Supreme Court of India against the order of NCLAT dated 17.08.2023. Another Civil Appeal also stood filed by M/s VIR Foods Ltd (Respondent No.1). The Hon’ble Supreme Court in the Civil Appeal vide its Order dated 12.12.2023 set aside both the judgements of NCLAT and NCLT. The setting aside was done pursuant to the settlement being done by the CD and the Respondent No.1 wherein the CD agreed to pay the amount of Rs. 52,64,161.64 as claimed due by the Respondent No. 1 and further held that the pleas and contentions of Respondent No.2 and Respondent No. 3 regarding their claims will be dealt by this Tribunal. The Hon’ble Supreme Court remitted the matter to this Tribunal to examine the question of fees/cost of the RP.

# 11. In terms of Section 5(13) of the Code, the fees payable to any person acting as a Resolution Professional and the expenses incurred for running the CIRP comes within the definition of the CIRP cost. The RP renders services during the process of CIRP and the work undertaken during the subsistence of the CIRP cannot be rendered unpaid merely because the proceedings were subsequently set aside. CIRP costs, including RP fees, are accorded priority and must be discharged for the period during which the process remained in force.

# 12. It can be seen that once the admission of CIRP itself is set aside and the dispute is settled between the initiating Financial creditor and the CD, the liability to bear CIRP costs must follow the party who invoked and pursued the insolvency proceedings, particularly when the CIRP process did not culminate in resolution or liquidation and a settlement was reached between them.

# 13. The other CoC members i.e Respondent Nos. 2 and 3 neither triggered the CIRP nor benefited from the CIRP. Their participation was incidental to the statutory process that followed admission. Therefore, once the admission order stands set aside and the matter has been resolved between the initiating Financial Creditor and the Corporate Debtor, the liability to bear the outstanding CIRP costs, including the approved fees of the IRP/RP and other expenses, must rest upon the Applicant who set the insolvency process in motion, and the same cannot be thrust upon the other CoC members merely by virtue of their participation in the process pursuant to the now set aside CIRP.

# 14. The contention of the Respondents that the CD should bear the CIRP costs on the ground that it later admitted its liability before the Hon’ble Supreme Court is legally untenable. Since the very initiation of CIRP was declared illegal by the NCLAT vide order dated 17.08.2023, the Corporate Debtor cannot be held liable for any CIRP costs arising from that vitiated process.

# 15. The Respondent No. 1 herein, who initiated the CIRP cannot now escape the liability of CIRP costs after having initiated the CIRP mechanism which was held unsustainable in law. This is even more so in the light of the settlement amount having been received by them from the CD, outside the CIRP. Non-payment of CIRP cost to RP would be contrary to the scheme and objectives of the Code and would undermine the independence and functioning of insolvency professionals. In the case of Rajkumar Brothers And Production Private Limited Vs Harish Amilineni Shareholder and erstwhile Director of Amilionn Technologies Private Limited & Anr, Civil Appeal No. 4044 of 2020, decided on 22.01.2021, the Hon’ble Supreme Court upheld the order of Appellate Tribunal in which it has directed the Financial Creditor to pay the due fee to the RP –

• “4. …..The Appellant has challenged the impugned order only to the extent of the direction in paragraph 8(C) thereof, which reads as follows:

• “The IRP/RP will place particulars regarding CIRP costs and fees before the Adjudicating Authority and the Adjudicating Authority after examining the correctness of the same will direct the Operational Creditor to pay the same in time to be specified by the Adjudicating Authority.”

• 5. The direction is in the nature of costs of the proceedings under Section 7 of the IBC, which have been found to be unsustainable in law. The Respondent having succeeded, cannot be saddled with the costs of the Corporate Insolvency Resolution Process (CIRP) initiated at the behest of the Appellant or with the fees of the Interim Resolution Professional (IRP). The direction does not warrant interference in appeal.

• 6. We find no grounds to interfere with the order dated 10th August, 2020 passed by the National Company Law Appellate Tribunal in Company Appeal (AT) (Insolvency) No.212 of 2020.”

# 16. In view of above discussions, the Respondent No. 1 i.e V.I.R Foods Ltd, being the Applicant in CP(IB) No. 90/chd/chd/2018 is directed to bear and expeditiously pay the CIRP cost/fees of RP amounting to Rs. 30,91,220.

# 17. Accordingly, I.A. (I.B.C) No. 2162 of 2023 is allowed in the above terms and disposed of.

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Prism Johnson Ltd. Vs. Doosan Power Systems India Pvt. Ltd. - In the present proceedings what we are required to see is whether dispute existed prior to issuance of Demand Notice and we have recorded our satisfaction only limited to this extent i.e., the existence of dispute.

NCLT New Delhi-II (03.03.2023) In Prism Johnson Ltd. Vs. Doosan Power Systems India Pvt. Ltd.[(IB)-474(ND)2022] held that;

• In the present proceedings what we are required to see is whether dispute existed prior to issuance of Demand Notice and we have recorded our satisfaction only limited to this extent i.e., the existence of dispute.

• The object of the IBC is to ensure that the insolvent company is put back on its feet and not to disarray a solvent and financially sound company.

• Hon’ble Apex Court clearly delineated the legal position and declared that the Adjudicating Authority should examine the expediency of initiating the CIRP after taking into account all relevant facts and circumstances, including the overall financial health and viability of the Corporate Debtor.

Excerpts of the order; 

The case of the Petitioner captioned in Company Petition (IB)- 474/ND/2022 is that the Corporate Debtor/Respondent approached RMC Ready-mix (India), a division of the Operational Creditor/Petitioner for procuring ready-mix concrete qua a project namely ‘Obra C Extension Thermal Power Station’ situated in Uttar Pradesh. Resultantly, the OC and the CD entered into a Sub-Contract dated 08.07.2017 in terms of which OC agreed to carry out the terms of contract for consideration. The CD placed an order dated 25.07.2017 on OC for purchase of ready-mix concrete. The order contained the detailed terms and conditions for supply of the goods as also the description thereof. According to the OC, it discharged all the obligations in terms of the sub contract dated 08.07.2017 and purchase order dated 25.07.2017 and raised the invoice upon the CD during the period from November, 2017 to August, 2021. It is the case of the OC that it had also issued tax invoices cum delivery challans under Section 31 of the Central Goods & Service Tax Act, 2017 and the material was duly supplied to the CD, which is acknowledged without any demur and protest. As per the stand taken by the OC in the petition, it was required to supply 2,68,798 cum of the captioned material to the CD by December, 2020 but the CD made additional demand which was de hors the terms of the order and the contract (ibid). Nevertheless, the OC supplied the additional material to the CD by the month of March, 2020 i.e., much before the agreed/due date. When the CD neglected to honour the invoices raised by the OC and neglected to make the payment, the OC sent letters dated 12.07.2021, 16.07.2021, 20.07.2021, 18.08.2021, 28.08.2021 and 15.09.2021 calling upon the CD to release the outstanding amount under the invoices. The OC raised the demand under the following heads inter alia:

a. Loss in interest on account of delayed payments by the Corporate Debtor.

b. Loss in interest on account of not releasing material advance;

c. Extra Cement content in M-30 Chimney and pile concrete;

d. Cost reimbursement of sand stocking for monsoon period;

e. Extra Cement content in M-15 Grade;

f. Cost impact due to deployment of additional resources and impact of wages;

g. Fixed Cost impact due to low volume by client;

h. Building and Other Construction Workers- Deductions; and

i. Rs. 500/Cum discount.

# 2. Though the CD responded to the letters written to it by the OC, in terms of its missives dated 06.07.2021, 13.07.2021, 17.07.2021, 24.07.2021, 17.08.2021, 23.08.2021, 04.09.2021 and 15.09.2021, it never disputed its liability to make the payment towards the outstanding invoices of the OC.

# 3. The CD has acknowledged its liability vide Balance Confirmation letters inter alia dated 29.04.2020, 14.06.2021 and 02.09.2021 bearing the common seal of the CD and signature of its representative. According to the OC, the balance confirmation letter dated 28.02.2022 being issued late, in terms of the same it could be categorically admitted that an amount of Rs. 9,23,99,780.71 is payable by CD to the OC and a further sum of Rs. 81,25,299/- is payable towards retention monies by the CD. 

# 4. The further plea espoused by the OC is that despite issuance of the letter of balance confirmation as late as on 2nd September 2021, when the OC insisted for payment of the outstanding amounts, the CD for the first time, vide its letter dated 16.09.2021 made bogus claims in order to evade its admitted liability under the balance confirmation letters. The said letter dated 16.09.2021 was duly replied to by the OC, vide letter dated 17.09.2021. The CD also issued a balance confirmation in respect of monies payable by it to the OC as late as on 28.02.2022. As per the books of the OC, as on 08.03.2022, an amount of Rs.13,26,14,929.67/- comprising the principal outstanding amount of Rs.11,22,88,896.76/- and the interest amount of Rs. 2,03,26,032.91/- charged at the rate of 18% per annum as per the Contract/Order and the invoices issued thereunder has become due and payable by the CD which can also be evidenced from the ledger account of the CD in the books of OC. The CD after utilizing the Material and after acknowledging its liability, did not honor the invoices as well as its obligations stated under the said Contract and the Order, and has defaulted in making payment of the outstanding amount of Rs. 13,26,14,929.67/- under the invoices issued.

# 5. The particulars of the Operational Debt claimed including the total amount of default and date of default are mentioned in column II of Part IV of the application.

# 6. From the perusal of the Part IV of the Application, it can be seen that the OC has claimed the total outstanding amount of Rs.13,26,14,929.67/-. (Page no. 4 of Vol I) and the date of default is 30.06.2021.

# 7. It is stated by the OC that it sent a Demand Notice dated 30.12.2021 under Section 8 of IBC, 2016 at the registered office of the Respondent vide speed post as well as email, which was delivered to the Respondent on 03.01.2022. According to the Petitioner it received reply

to the demand notice on 13.01.2022.

# 9. Having heard the Counsels for the parties and perused the records, we proceed to examine the issue sans irrelevant details. As far as the plea espoused on behalf of the Respondent regarding non-filing of the affidavit, as required under Section 9 (3) (b) of the IBC, 2016 is concerned, the same is baseless and vexatious and is rejected outrightly. The required affidavit was duly filed by the Petitioner and is at page 835- 836 of the petition (paper book). The plea regarding the contract being entered into by the Respondent, not with the Petitioner but with ‘RMC Readymix (India)’ (‘RMC India’) for supply of RMC is concerned stands falsified by the Respondent itself, in terms of the pleadings canvassed in its reply. The Respondent has pleaded extensively that the Petitioner committed breach of contract and caused enormous loss to it. It is also the case of the Respondent that the Petitioner received a colossal amount of Rs.1,54,87,51,901/- under the contract. Once the Respondent has alleged enormous loss caused to it on account of breach of contract by the Petitioner as also payment of colossal amount to Petitioner under the contract, it does not lie in its mouth to plead that there being no contract with the Petitioner, the petition filed by it is not maintainable. Besides, while examining an application under Section 9 of IBC, 2016, what we need to judge is, “whether there had been any operational relationship between the Operational Creditor and Corporate Debtor. As has been defined in Section 5 (20) of the IBC, 2016, Operational Creditor means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred. Thus, nothing turns on the fact that with whom the contract was entered into by the Respondent and what is material to be seen is, “whether any operational debt is owed or not”. Ergo, the plea raised on behalf of the Respondent qua the maintainability of the petition on the ground that there was no contract executed between the Petitioner and the Respondent is rejected.

# 10. In any case, as is borne out of the record, the notice of demand was issued by the Petitioner to the Respondent, only on 30.12.2021 and much before that, the Respondent had been sending missives to it (Petitioner) pointing out the infirmity in the quality of service given by the Petitioner to the Respondent. As can be seen from the letters dated 20.02.2018 (page no. 61-62), the Respondent categorically brought it to the notice of the Petitioner that with the existing status of the stock made available by it at the site the targeted work could not be completed. The Respondent also cautioned the petition regarding its liability to suffer penalty on account of non-availability of raw material as per STC Clause 16.2 between the DPSI and RMC. Such letters, pointing out deficiency in service/supply by the Petitioner were also written by the Respondent to Petitioner also on 07.01.2019, 09.03.2020 inter alia. The letters are closed at page nos. 63-65 of the reply. Even the Petitioner also accepted the deficiency in quality, in terms of its letter dated 26.07.2018 (annexure R-6). The relevant excerpts of the letter read thus: 

• “Subject- Reply against your letter OBRAC-DPSI-SITE-RNC-00024 failure in quality checks of non-approved aggregates

• Referring your letter on the above subject, we also share your concern regarding the poor quality material delivered at plant and want to assure you that RMC India will not spare any effort to maintain the quality of concrete including thorough checking of raw material delivered at plant.

• However, we wonder how we will check the quality of aggregate at the entry gate of the plant when determined supplier hides the poor quality of material inside the truck with good material spread on top of the truck. This is the breach of trust form the sole reputed vendor of aggregate to our site. We also would like to bring your notice that the quality of coarse aggregates delivered at plant mostly fail in fulfilling the IS requirement and we are forced to accept those material to complete our production volumes. Hence, we propose to have a joint visit with you to the aggregate crusher and check the quality of boulders used and understand his process to suggest him the suitable quality improvement measures. Going forward, we also suggest you as the supplier of aggregates to us to hand out a severe warning to the vendor to desist from indulging in this kind of malpractices.

• This is for your information and records.”

# 11. As could be viewed by Jaipur Bench of this Tribunal in CP No. (IB)-217/9/JPR/2020, the dispute between the parties can be inferred, even from the correspondence between the parties. Para 12-14 of the order reads thus:

• “12. We have a number of judgments showing light on the aspect of pre-existing dispute under Section 9 of the Code. Conjoint reading of Section 8 and Section 9 of the Code shows that an Operational Creditor can trigger the CIRP, when there is an undisputed debt and a default in payment thereof. In the present case, the Corporate Debtor had raised dispute with respect to deficiency in service vide the e-mails dated 10.05.2018 to 15.08.2018 to the extent of stating that if the goods are not delivered till 14.05.2018 the Corporate Debtor will not be paying for the services, which was prior to issuance of Demand Notice under Section 8 of the Code. The Applicant had knowledge of the said dispute as well which is visible from its e-mail replies. 13. In Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd., para 34, the Hon’ble Supreme Court laid down what the Adjudicating Authority has to examine in an application under Section 9. Para 34 is as follows: -

• “34. Therefore, the Adjudicating Authority, when examining an application under Section 9 of the Code will have to determine: 

• (i) Whether there is an “Operational debt” as defined exceeding Rs. 1 lakh? (See Section 4 of the Code)

• (ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? And

• (iii) Whether there is existence of a dispute between the parties or the record of the 15 Company Appeal (AT) (Insolvency) No. 256 of 2021 pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute?

• If any one of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act.”

• However, the defence has to be plausible and while not examining it on merits, it must not appear as a moonshine defence.

• 14. The correspondence between the parties herein clearly shows that a dispute had already risen between the parties after the alleged services were rendered by the Applicant, which were not upto mark as mentioned by the Corporate Debtor. The exchange of e-mails between the parties is enough to show that there was pre-existing dispute with respect to the services rendered by the Applicant. Further, in view of the order of the Hon’ble Supreme Court in M/s S.S. Engineers vs. Hindustan Petroleum Corporation Ltd. & Ors. we are not inclined to commence CIRP of the Corporate Debtor.

# 12. Also, in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd. (Civil Appeal No. 9405/2017), it could be ruled by Hon’ble Supreme Court that, “what this Adjudicating Authority needs to see is, whether a dispute truly exists in fact and is not spurious, hypothetical or illusory”. In the said judgment, the Hon’ble Apex Court amplified, “what is important is that the existence of dispute must be pre-existing i.e., it must exist before the receipt of the Demand Notice or invoice as the case may be. While examining the proposition regarding pre-existing dispute, we may usefully espouse that after the judgement of Hon’ble Supreme Court Mobilox Innovations Pvt. Ltd. (ibid), the definition of dispute has

become inclusive and would mean not only the pending suit or arbitration proceedings, but also the controversy espoused in the letters written by Corporate Debtor to Operational Creditor regarding the quality of Goods or Service. Therefore, as the Corporate Debtor had espoused the dispute by sending missives to the Operational Creditor, much before issuance of Demand Notice by Operational Creditor, in terms of Section 8 (1) of the IBC, 2016, and had also brought the existence of dispute to the notice of Operational Creditor by way of its reply under Section 8 (2) of the IBC, 2016, to the Operational Creditor, we are satisfied that preexisting dispute between the parties was there. We are also satisfied that the dispute is not spurious or hypothetical, as the Respondent had to assign the work of contract required to be performed by the Petitioner to a different contractor namely JS Mining and Constructions to whom it issued the letter of intent dated 02.02.2021. As it may, we have not commented upon the nature of dispute or the fault of the parties qua the same. In the present proceedings what we are required to see is whether dispute existed prior to issuance of Demand Notice and we have recorded our satisfaction only limited to this extent i.e., the existence of dispute. 

# 13. While examining an application under Section 9 of IBC, 2016, we may not be oblivious about the financial health of the Corporate Debtor. The object of the IBC is to ensure that the insolvent company is put back on its feet and not to disarray a solvent and financially sound company. As can be seen from the reply filed by the Respondent (Corporate Debtor), its financial health is quite commendable. The relevant excerpt of the reply reads thus:

XIII. The Respondent has approximately 1343 (One Thousand Three Hundred and Forty Three) employees, as on 31.03.2022, at various levels. Additionally, the Respondent directly/ indirectly oversees approximately 10,000 (Ten Thousand) workers at the construction sites of various current projects. Pertinently, the Respondent has been paying the remuneration of all the concerned persons, without any failures. In this regard, it is relevant to note the details of amount deposited by the Respondent owing to the provident fund requirements for the past three years (given below):

Sl. No.	Particulars	FY 2018-19 (In Rupees)	FY 2019-20 (In Rupees)	FY 2020-21 (In Rupees)
1.	Provident Fund	15,40,48,483	14,84,94,662	14,03,66,376

XIV. Further, some of the biggest financial institutions of India (namely Axis Bank, Standard Chartered Bank and Yes Bank) have shown faith in the credit rating of the Respondent, by providing it with various credit/loan facilities. The Respondent has always obliged the aforesaid institutions by timely repayment. The said is evident from the overall reducing debt for the past three years (highlighted below):

Sl.No.	Particulars	FY 2018-19 (In Millions)	FY 2019-20 (In Millions)	FY 2020-21 (In Millions)
1	. Outstanding Loan (Current Bank Over Draft & Working Capital Loans)	10732.3	8257	2468.09
2.	Outstanding Loan of Financial Institution (Non-Current-Long Term Loans)	1,250	Nil	Nil

Pertinently, the turnover of the Respondent for last three years (2020-2021) is as under:

Sr.No.	Particular	FY 2018-19 (In Millions)	FY 2019-20 (In Millions)	FY 2020-21 (In Millions)
1.	Total Turnover	30,396.53	34,119.32	29,405.39

XV. The Respondent has majorly contributed to the state exchequer, the same is evident from a cursory look at the details (Below) of Goods and Service tax deposited by the Respondent for the state of Uttar Pradesh, where the Respondent is undertaking majority of its current projects:

Sr. No	Particular	FY 2019-20 (In Rupees)	FY 2020-21 (In Rupees)	FY 2021-22 (In Rupees)	FY 2022-23 (till July 2022)
1.	GST Deposited	5,25,78,58,956	4,45,41,42,653	4,01,23,25,791	59,74,78,533

XVI. Further to all the aforementioned, the Respondent most humbly submits that the Respondent is a solvent company which is smoothly undertaking its functions and timely discharging its liabilities and debts; and it is not the objective of the Code that Corporate Insolvency Resolution Process be initiated to penalize a solvent company for certain alleged non-payment of dues. It is submitted that the scope and objective of Code is to bring about ‘resolution’ of an insolvent debtor. The present proceedings are a misconceived attempt of the Applicant to use insolvency as a substitute for the appropriate proceedings for recovery of the alleged debt.

XVII. It is pertinent to mention that as admitted in the Application itself, the Applicant has received a colossal amount of Rs. 154,87,51,909/- under the contract (Ref. Page 829 of the

Application). The Respondent has always been very cooperative with the Applicant right from the beginning, however, Applicant’s persistent defaults and breaches have caused enormous loss and hardship to the Respondent, for which the Applicant is liable as per the express provisions of the contract. The Respondent has always acted within the four corners of the contractual provisions and all its actions have been in conformity with the contract as brought out above. The Applicant on the other hand, has acted in complete disregard of its contractual obligations as well as the express provisions of the contract & has filled the present application with an ulterior motive.”

# 14. In Vidarbha Industries Power Ltd. Vs. Axis Bank 2022 SCC Online SC page 841, the Hon’ble Apex Court clearly delineated the legal position and declared that the Adjudicating Authority should examine the expediency of initiating the CIRP after taking into account all relevant facts and circumstances, including the overall financial health and viability of the Corporate Debtor. The relevant excerpt of the judgment containing the discussions regarding the procedure for considering the application filed by the Financial Creditor under Section 7 of IBC is extracted hereunder for convenient reference;

• “59. There can be no doubt that the Corporate Debtor who is in the red should be resolved expeditiously, following the timelines in the IBC. No extraneous matter should come in the way. However, the viability and overall financial health of the Corporate Debtor are not extraneous matters.

• XXXXX

• 62. As pointed out by Mr. Gupta the legislature has, in its wisdom, chosen to use the expression “may” in Section 7 (5)(a) of the IBC. When an Adjudicating Authority is satisfied that a default has occurred and the application of a financial creditor is complete and there are no disciplinary proceedings against the proposed resolution professional, it may by order admit the application. Legislative intent is construed in accordance with the language used in the statute.

• 63. The meaning and intention of Section 7 (5)(a) of the IBC is to be ascertained from the phraseology of the provision in the context of the nature and design of the IBC. This Court would have to consider the effect of the provision being construed as directory or discretionary. 

• 64. Ordinarily, the word “may” is directory. The expression may admit’ confers discretion to admit. In contrast, the use of  the word “shall” postulates a mandatory requirement. The use of the word “shall” raises a presumption that a provision is imperative. However, it is well settled that the prima facie presumption about the provision being imperative may be rebutted by other considerations such as the scope of the enactment and the consequences flowing from the construction.

• 65. XXXXX

• 79. As observed above, the financial strength and nature of business of Financial Creditors and Operational Creditors being different, as also the tenor and terms of agreements/contracts with financial creditors and operational creditors, the provisions in the IBC, relating to commencement of CIRP at the behest of an Operational Creditor, whose dues are undisputed, are rigid and inflexible. If dues are admitted as against the Operational Creditor, the Corporate Debtor must pay the same. If does not, CIRP must be commenced. In the case of a financial debt, there is a little more flexibility. The Adjudicating Authority (NCLT) has been conferred the discretion to admit the application of the Financial Creditor. If facts and circumstances so warrant, the Adjudicating Authority can keep the admission in abeyance or even reject the application. Of course, in case of rejection of an application, the Financial Creditor is not denuded of the right to apply fresh for initiation of CIRP, if its dues continue to remain unpaid.”

# 15. In the wake of the discussion and finding as above, we are of the considered view that the Petition is misconceived and devoid of merits thus deserves to be rejected. Ordered accordingly. It goes without saying that nothing observed or recorded hereinabove will be construed as expression of opinion on merit of the claim of the Petitioner against the Respondent and the Petitioner would be entitled to avail appropriate remedies against the Respondent to espouse the same in accordance with law. It is also made clear that the Petitioner will not be denuded of his right to initiate fresh proceedings against the Respondent, under Section 9 of IBC, 2016 if its claim is determined and found substantiated against the Respondent in appropriate proceedings, in accordance with law. The Petition stands disposed of. No order as to cost. 

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