The National Company Law Appellate Tribunal (“NCLAT”) on August 22, 2022 in the matter of Navkar Urban structure Ltd v. Niyojit Infratech Pvt. Ltd. held that the non-issuance of the completion certificate amounts to a pre-existing dispute between the parties.

In the instant matter an appeal was filed by the Appellant (“Operational Creditor”) against the order of NCLT rejecting its application filed under Section 9 the Insolvency & Bankruptcy Code, 2016 (“IBC”). In the present case, the Respondent (“Corporate Debtor”) issued a notice invoking Arbitration clause under the agreement between the parties before the Operational Creditor issued a notice under Section 8 of IBC, demanding amount due and payable on account of its service provided to the Corporate Debtor. The Corporate Debtor in the reply notice denied the claim of the Operational Creditor on the ground that no money could be claimed before obtaining the Completion Certificate for the work stated in Letter of Intent (“LOI”) and referred to the notice by which Operational Creditor was informed about the Arbitration clause in LOI.

NCLAT held that the Corporate Debtor in reply to Section 8 notice as well as in reply to Section 9 application has categorically pleaded that there is Arbitration clause in the contract between the parties. It was observed by the NCLAT that:

“The Corporate Debtor in its reply has clearly stated that no amount can be claimed by the Appellant to be due on the Corporate Debtor since no Completion Certificate regarding the work of the Appellant was ever issued. When Completion Certificate regarding Work Order was never issued, the amount claimed by the Appellant is disputed and the Adjudicating Authority has rightly taken the view that in view of the pre-existing dispute between the parties the application u/s 9 cannot be admitted.”

Thus, NCLAT held that there being an Arbitration clause in the agreement between the parties, the Operational Creditor is always at liberty to pursue his claim in the Arbitration and hence, the appeal was dismissed.