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The National Company Law Tribunal (NCLT) has dismissed an insolvency petition filed by Empire Transport Services Ltd (ETSL) against Noida Metro Rail Corporation (NMRC), ruling that the matter involved genuine pre-existing disputes rather than a simple payment default. ETSL had claimed operational dues of around INR 7.09 crore under a bus operations agreement signed in 2016. However, NMRC argued that the company failed to meet contractual obligations and service standards. The tribunal found that multiple disputes over service quality, penalty deductions and contract performance existed before the insolvency notice was issued, making the case unsuitable for insolvency proceedings under the Insolvency and Bankruptcy Code.
The Allahabad Bench of the National Company Law Tribunal (NCLT) has dismissed a petition filed by Empire Transport Services Ltd (ETSL) seeking insolvency proceedings against Noida Metro Rail Corporation (NMRC), holding that the dispute between the two parties was contractual in nature and involved long-standing disagreements over service delivery and payments.
ETSL had approached the tribunal under Section 9 of the Insolvency and Bankruptcy Code (IBC), seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against NMRC. The company claimed operational dues of approximately INR 7.09 crore arising from a bus operators agreement executed in January 2016.
Under the agreement, ETSL was responsible for the day-to-day operation of 100 low-floor air-conditioned CNG buses across Noida, Greater Noida and connectivity routes between the two cities. However, only 50 buses were eventually deployed instead of the agreed fleet of 100. ETSL contended that despite repeatedly approaching NMRC regarding the deployment of the remaining buses, it did not receive a response.
The transport company also argued that the agreement required NMRC to clear 50 per cent of invoice payments within one week of receipt and the remaining amount within the following 15 days. It further stated that delayed payments attracted compound interest at the rate specified in the contract.
According to ETSL, invoices raised between April 2019 and March 2020 remained unpaid. Following this, the company issued a demand notice under the IBC alleging payment default and later filed an insolvency petition as an operational creditor.
NMRC opposed the petition and argued that there was no payment default that would justify insolvency proceedings under the IBC. The corporation's legal team submitted that ETSL had repeatedly failed to provide services in accordance with contractual requirements and had committed several breaches of the agreement. These concerns, NMRC said, were communicated through multiple show-cause notices issued to the operator over the course of the contract.
The corporation also pointed out that these disputes had already been examined in earlier legal proceedings. The show-cause notices were placed before the Allahabad High Court in a writ petition filed by ETSL, which was dismissed in 2021. Following the dismissal, arbitration proceedings were initiated between the parties.
After reviewing the submissions, the two-member NCLT bench observed that the dispute extended beyond the issue of unpaid dues and involved significant disagreements regarding contractual performance, service quality and deductions imposed by NMRC.
The tribunal noted that NMRC had raised several concerns relating to ETSL's operations, including malfunctioning GPS systems, passenger information display issues, cracked windshields, defective ramps for differently-abled passengers, non-functional stop buttons, route deviations, inadequate fleet deployment, air-conditioning problems and lapses in statutory compliance requirements such as EPF and ESI obligations.
Referring to the Supreme Court's ruling in the Mobilox Innovations Pvt Ltd versus Kirusa Software Pvt Ltd case, the tribunal reiterated that insolvency proceedings cannot be used as a recovery mechanism where a genuine dispute existed before the issuance of a demand notice.
The NCLT concluded that the disagreements over service standards, contractual obligations, penalty deductions and reconciliation of accounts clearly amounted to a pre-existing dispute under the IBC. As a result, the tribunal held that ETSL's application did not qualify for admission and dismissed the insolvency plea against NMRC.
Source PTI
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