NCLT Rejects Insolvency Plea Against T Bhimjyani Realty, Citing Pre-Existing Dispute

Holding that the Insolvency and Bankruptcy Code (IBC) should not be used as a tool for debt recovery when a genuine dispute exists, the National Company Law Tribunal (NCLT) has rejected an application to initiate insolvency proceedings against T Bhimjyani Realty Private Limited. The tribunal maintained that it cannot enter into the adjudication of triable issues requiring further investigation, thus dismissing the proceedings filed by Xanadu Realty against T Bhimjyani Realty for an alleged default on an operational debt.

Advocate Nausher Kohli, along with Prerak Choudhary and Advocate Trisha Ranka, appeared on behalf of T Bhimjyani Realty Private Limited.

Background of the Business Relationship

According to the order, the two firms, Xanadu and T Bhimjyani, had a history of business dealings beginning with a service agreement in 2018. That agreement led to a dispute over unpaid dues, which was settled in September 2022. Following this settlement, a new service agreement (the 2022 Agreement) was signed in October 2022.

Under the 2022 Agreement, Xanadu Realty Limited provided real estate services and raised 13 invoices between November 2022 and December 2023. The first five invoices were paid, but the remaining eight, totaling approximately ₹3.74 crore, remained outstanding.

Corporate Debtor’s Defence

In its petition, Xanadu, the operational creditor, argued that the corporate debtor had failed to pay the outstanding invoices despite numerous reminders. They pointed to clauses in the 2022 Agreement stipulating that payments were due within 30 days and that any disputes or queries about an invoice had to be raised within seven working days. Since no objections were raised within this timeframe, the invoices were deemed accepted. Xanadu alleged that the corporate debtor’s later attempt to raise a dispute was a tactic to avoid payment and that the alleged dispute related to the old 2018 Agreement, which had already been settled.

Meanwhile, the corporate debtor contended that a genuine pre-existing dispute existed before Xanadu issued the demand notice. In an email dated December 11, 2023, they raised concerns about Xanadu’s sales team making unauthorized financial commitments to customers, in violation of company policy and RERA guidelines. “It was communicated that there was a breach of the contract dated 21.10.2022 by the operational creditor, as the sales team of Xanadu made certain financial commitments, including serious commitments of refunds on behalf of the corporate debtor, which were beyond the contract, contradictory to the corporate debtor’s policy, and in violation of RERA guidelines,” the order notes.

The corporate debtor argued that these issues, along with the need for account reconciliation, were being discussed at the CEO level under the dispute resolution clause of the 2022 Agreement. They claimed Xanadu’s petition was premature because it was filed before the 60-day consultation period outlined in the agreement had expired.

NCLT Finds Triable Issues

The NCLT noted that the corporate debtor had explicitly stated in a January 11, 2024, email that a commercial settlement was not appropriate until the dispute was satisfactorily addressed. “The question of whether the dispute related to the 2018 or 2022 Agreement was a complex, factual issue that could not be resolved in the NCLT’s summary proceedings. This issue, along with the reconciliation of accounts, constituted a triable dispute,” the tribunal observed.

Reference to Supreme Court Precedent

The NCLT also cited a Supreme Court judgment, reiterating that its role is to determine whether a “plausible contention which requires further investigation” exists, not to adjudicate the merits of the dispute itself.