NCLT initiates insolvency proceedings against Ahluwalia Contracts

The National Company Law Tribunal (NCLT) has initiated insolvency proceedings against construction firm Ahluwalia Contracts India Ltd for defaulting on payments to an operational creditor.

The New Delhi-based NCLT bench allowed the insolvency plea filed by A2 Interiors Products Pvt Ltd against Ahluwalia Contracts, claiming default of Rs 14.10 crore, and appointed an interim resolution professional.

Ahluwalia Contracts had engaged A2 Interiors Products for interior, furnishing and allied civil and electrical works at various project sites. It had supplied materials to Ahluwalia Contracts as part of various work orders issued for six projects at different locations in the country, according to the NCLT order.

It had raised invoices against each work order, which were duly received by Ahluwalia Contracts, however, it failed to release the full payment.

Later, in May 2019, A2 Interiors had issued a notice to Ahluwalia Contracts under the Insolvency & Bankruptcy Code (IBC) demanding Rs 12.54 crore along with an interest of 18 per cent per annum, which was rejected by Ahluwalia Contracts in its reply and raised disputes.

Following this, A2 Interiors approached the NCLT under section 9 of IBC, which allows operational creditors to file an insolvency plea, claiming a total outstanding debt of Rs 14.10 crore against Ahluwalia Contracts.

This was opposed by Ahluwalia Contracts, contending it as not maintainable, on the grounds that it is arising out of different work orders, which cannot be claimed under one single application and of different service in nature and each contract gives rise to separate alleged debt.

It also alleged that the applicant has concealed certain facts and documents and not disclosed all work orders executed between the parties.

However, the operational creditor said that though it was for work order for six different projects but the corporate debtor is a Principal Contractor. It also submitted that no notice of dispute was raised by Ahluwalia Contracts prior to the notice of demand issued by it.

An NCLT bench comprising members Sumitapurkayastha and Deepti Mukesh said: "Considering the documents on records and submissions made, it is observed that there exists an operational debt which is due and payable by the corporate debtor."

It further observed that once the work is complete and the final bill is raised, the retention money becomes due and payable.

Though the corporate debtor has raised dispute prior to the issue of the demand notice with regards to non-completion of work on time, defective work and invoices raised but has itself admitted that retention money is payable.

While admitting A2 Interiors' plea, the NCLT observed that the corporate debtor had admitted to the debt and the said has become due as per their own statement in their email, leaving no scope for any further adjudication.