The National Company Law Tribunal (NCLT) has turned down an insolvency petition filed by Empire Transport Services Limited against the Noida Metro Rail Corporation (NMRC). The tribunal found that a dispute over service quality, contractual obligations and deductions in payment was already running between the two parties. The Allahabad bench of the NCLT rejected the plea seeking to begin the Corporate Insolvency Resolution Process (CIRP) against Noida Metro under Section 9 of the Insolvency and Bankruptcy Code (IBC).
Empire Transport Services Limited (ETSL) had approached the law tribunal claiming around Rs 7.09 crore in operational dues linked to a 'bus operator' agreement it signed with the Noida Metro Rail Corporation on January 15, 2016. Under the agreement, ETSL was to operate 100 low-floor AC CNG buses between Noida and Greater Noida, but the company put only 50 buses into service instead of 100. ETSL approached Noida Metro to run the remaining 50 buses, but it received no response.
What the NMRC-ETSL Agreement Provided
As per the terms of the deal, Noida Metro was to pay 50 percent of the amount within a week of receiving the bill and the remaining payment within the next 15 days. The agreement also provided that in case of any delay in payment, Noida Metro would have to pay at a compound interest rate of 9 percent per day. ETSL alleged that it submitted several bills between April 25, 2019 and March 16, 2020, but received no payment from Noida Metro. It then issued a notice under Section 8 of the IBC and, claiming default, filed the petition as an operational creditor.
What Noida Metro Said in Its Defence
Appearing for Noida Metro, senior advocates Sunil Fernandes, Abhishek Prasad and Kaushlendra Nath Singh argued that there had been no payment default under the IBC. They said Empire Transport had repeatedly failed to deliver services in line with the contract and committed several breaches, for which multiple show-cause notices had been issued. These notices were also placed before the Allahabad High Court in a writ petition filed by Empire Transport, which was dismissed on July 14, 2021, after which arbitration proceedings were initiated in the dispute.
What the NCLT Said During the Hearing
After hearing Noida Metro's arguments, the two-member NCLT bench observed that the dispute was not merely about non-payment, but involved serious differences over service quality and the breaches committed under the contract. The law tribunal noted that Noida Metro had issued several show-cause notices over various deficiencies in service, including malfunctioning of the GPS and passenger information system, broken windshields, the poor condition of ramps for the disabled, non-functioning stop buttons, inadequate bus deployment, air conditioning problems and lapses in statutory compliance such as EPF and ESI.
Why ETSL's Petition Was Rejected
Citing the Supreme Court's judgment in 'Mobilox Innovations Private Limited vs Kirusa Software Private Limited', the NCLT reiterated that an insolvency application cannot be admitted if genuine disputes exist before the demand notice is issued. The NCLT said the differences relating to service standards, contractual performance, penal deductions and reconciliation of accounts clearly fall within the category of a "pre-existing dispute" under the IBC. The bench of Ashish Verma and Praveen Gupta said, "Therefore, in view of the existence of a genuine and pre-existing dispute under Section 5(6), the present application filed under Section 9 is not maintainable and is hereby rejected."
