M/s SRJ Peety Steels Private Limited vs Roadway Solutions India Infra Limited

Per: Anil Raj Chellan, Member (Technical)

This Application bearing C.P.(IB)347(MB)2024 was filed by M/s SRJ Peety Steels Private Limited, an Operational Creditor on 25.12.2023 under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘ the Code ’ ) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 through Mr. Sunil Patil, Chief Executive Officer and authorised person of the Applicant authorised vide board resolution dated 31.08.2023 for initiating Corporate Insolvency Resolution Process (hereinafter referred to as ‘CIRP’) in respect of Roadway Solutions India Infra Limited (hereinafter referred to as ‘Corporate Debtor’).

The Applicant is a company with its registered office in Maharashtra, engaged in the business of providing materials. The Corporate Debtor is in the business of constructing and maintaining national highway projects across the country.

As per Part IV of the application, the Corporate Debtor and the Operational Creditor/ Applicant have regular business dealings for the supply of various materials as per the requirements of the Corporate Debtor. The Corporate Debtor issued the following Purchase Orders (POs).

RSIIL / Rev. PO / 2022-23 / NMSRP / 0524 / 10617A dated 30.05.2022

RSIIL/PO/2022-23/NMSRP/1196/11288 dated 30.08.2022 and

RSIIL / Rev. PO / 2022-23 / VME-101749 / 11841A dated 03.12.2022. As per the POs, the Operational Creditor supplied materials to the Corporate Debtor and raised invoices between 30.08.2022 and 04.12.2022. The Applicant states that an amount of Rs. 4,26,43,445/- is due and pending from the Corporate Debtor. The Applicant claims this amount together with interest at 18% per annum, calculated from the date of respective invoice/s till 31.08.2023. This brings the total to Rs. 5,04,96,222.53/- with further interest till actual realisation thereof. The date of default mentioned in the application is 30.05.2022.

Since the Corporate Debtor failed to pay the amount, a demand notice dated 27.09.2023 was issued under Section 8 of the Code. However, the Corporate Debtor has failed to give any reply to the said notice, which led to the filing of the present application for initiating CIRP in respect of the Corporate Debtor.

The Operational Creditor has been supplying goods to the Corporate Debtor since 11.03.2020. As part of their business arrangement, the Corporate Debtor issued POs dated 30.05.2022, 30.08.2022, and 03.12.2022, for the supply of cut and bend steel, as specified in terms of description, quantity, and pricing. As per the POs, 100% advance payment is required to be made at the time of dispatch of material, and the supplier should also provide all necessary supporting documents, including quality certificate, materials testing certificate, weighbridge slip, and tax invoice. Payment will be based on the actual quantity of goods received at the Corporate Debtor’s site.

After supplying the requisite materials as per the specifications mentioned in the POs, the Operational Creditor raised the following invoices:

The invoices state that interest at the rate of 24% per annum will be charged if the invoice is not paid on the due date, and no complaints in respect of material supplied vide this invoice will be entertained unless the same is lodged in writing within 7 days of dispatch.

The Operational Creditor states that an amount of Rs.4,26,43,445/- is due and pending as per the ledger statements annexed with the application.

The Operational Creditor asserts that the director of the Corporate Debtor, Mr. Amit Harjinder Gadhoke, acknowledged their liability and promised to make the payment by 15.05.2023. However, this commitment was not complied with by the Corporate Debtor. The said director again assured to pay the amount by 17.09.2023, but this promise was also not honoured.

As a result of these defaults by the Corporate Debtor, the Operational Creditor issued a demand notice on 27.09.2023 under Section 8 of the Code demanding the payment of Rs. 4,26,46,445/-and interest of Rs. 78,52,777.53/- on delayed payment at the rate of 18% per annum calculated from the date of respective invoices till 31.08.2023 total amounting to Rs. 5,04,96,222.53/-. However, the Corporate Debtor has failed to respond to this notice.

The Operational Creditor submits that he has performed his part and the debt and default are remaining unpaid and this is the fit case for initiating CIRP against the Corporate Debtor.

The Operational Creditor vide his additional affidavit dated 21.04.2025 stated that he relied upon three POs dated 30.05.2022, 30.08.2022, and 03.12.2022. However, due to an inadvertent error in uploading the documents, the PO dated 30.05.2022 was uploaded twice, and therefore, the PO dated 03.12.2022 was filed.

The Corporate Debtor filed its affidavit in reply on 12.10.2024 through Mr. Navjeet Gadhoke, the director, who was authorised vide board resolutions dated 25.11.2023. The Corporate Debtor denied the averments made in the application and stated that the application is liable to be dismissed.

The Corporate Debtor is a prominent player in India’s road and highway construction and maintenance sector. Thus, the Corporate Debtor is engaged in the business of constructing and maintaining national highways across the country. It employs approximately 2000 permanent staff members and an additional 5000 contract workers. Further, the Corporate Debtor enjoys a strong reputation in the market and is highly regarded by its vendors for its seamless service and prompt payment practices.

The Operational Creditor and the Corporate Debtor have had a long-standing relationship, with cumulative orders aggregating to Rs.100-150 Crore. The purchase orders annexed to the application form a fraction of the total payments made by the Corporate Debtor to the Operational Creditor. Additionally, there are genuine disputes between the parties.

The Corporate Debtor is the EPC Contractor of M/s Vadodara Mumbai Expressway Pkg-10 Pvt. Ltd. for the construction of Eight lane access of Vadodara Mumbai Expressway in the state of Gujrat. In the construction of the said project, various materials, including steel was to be used by the Corporate Debtor, and in pursuance of the same, the Corporate Debtor had placed Purchase Orders upon the Operational Creditor. Pursuant to these Purchase Orders, the Operational Creditor had supplied steel to the Corporate Debtor. However, there were various deficiencies in the steel supplied by the Operational Creditor and various lapses in the performance of the obligations as the Purchase Orders. Further, the Corporate Debtor has also made certain payments to the Operational Creditor. As a result, the Corporate Debtor is not liable to make payment of Rs.5,04,96,222.53/- as claimed by the Operational Creditor.

It is contended that the Operational Creditor has miserably failed to provide the details pertaining to the date of default in Part-IV of the application in order to substantiate its position. The ledger sheet (Exhibit-H) is a mere calculation sheet. Further, as regards the interest of Rs. 78,52,777.53/- claimed in the application, it is asserted that the Operational Creditor is inflating the amount of debt by including the interest.

It is further contended that as per the Purchase Orders, the Corporate Debtor was required to submit certain supporting documents at the time of dispatching the goods. However, the Operational Creditor miserably failed to supply the same to the Corporate Debtor when the goods were invoiced as per the Purchase Orders. Without the material quality test certificate and the manufacturing test certificate, there is no assurance regarding the quality of goods supplied to the Corporate Debtor. Since these documents were never submitted by the Operational Creditor, they cannot claim entitlement to receive the payments.

The Corporate Debtor also submits that the goods that were supplied by the Operational Creditor to the Corporate Debtor were defective and did not meet the specifications set forth by the Ministry of Road Transport and Highways (MoRTH) and NHAI. The POs also clearly stated that the quality of goods must conform to the specifications of MoRTH and NHAI. In the event of any deviation from these quality standards, the Corporate Debtor has the full authority to reject the goods, and the Operational Creditor would not be entitled to receive any payments for the supplied goods.

Towards the end of December 2022, the NHAI had conducted an investigation on the site of the said Project. Thereafter, NHAI vide letter dated 17.12.2022 informed the Corporate Debtor that the inspection engineer in the said Project had issued a non-compliance report for using steel in the said Project from an unapproved source, the source being the Operational Creditor. Furthermore, the Corporate Debtor was informed that the inspection engineer has already rejected the source of the steel as the material used in the same had failed in the chemical test as per IS-1786, and it is not in conformity with Clause 1009.3.1 of the MoRTH guidelines. The Corporate Debtor was immediately asked to remove the steel supplied by the Operational Creditor lying at the site.

Following this, the NHAI decided to conduct an external quality check of the steel supplied by the Operational Creditor. The Shreeram Institute for Industrial Research (SIFIR) issued a test report dated 25.01.2023 which concluded that the steel manufactured by the Operational Creditor did not comply with the MoRTH circular. Consequently, the Corporate Debtor was directed to remove all unused steel from the site of the said Project. Further, wherever the reinforcement binding and casting of the steel bars was done, then the same was instructed to be dismantled and re-cast with proper approved material. As a result, the Corporate Debtor had to incur significant costs in order to carry out the rectification of the works due to the default of the Operational Creditor.

Although the deficiencies were communicated to the Operational Creditor, they refused to take cognizance of the same and proceeded to raise invoices demanding payment. The Corporate Debtor contends that it has the full authority to reject the goods and that the Operational Creditor is not entitled to receive any payments for the goods supplied.

The ledger statement produced by the Operational Creditor shows that the Corporate Debtor had made a payment of Rs. 4,85,67,384/ on 30.05.2022. This amount was paid as an advance against the POs, and it was agreed that in case of any mismatch in the payments and in the goods delivered the same was to be reconciled between the parties. As per the records of the Corporate Debtor the Operational Creditor supplied goods worth Rs. 4,63,56,229/-. Therefore, the Operational Creditor was overpaid Rs. 22,59,771/-. However, the Operational Creditor failed to issue credit notes to the Corporate Debtor. Further, the Operational Creditor has, for the advance received on 30.05.2022, delivered the goods as late as September 2022.

With reference to the PO dated 30.08.2022, the Corporate Debtor made an advance payment of Rs. 99,90,000/- one day prior to the issuance of the PO. As per the records of the Corporate Debtor, against a total order value of Rs. 2,44,49,600/-, the Operational Creditor has supplied products worth Rs. 1,86,60,331/-. Therefore, there is a deficit in the quantity of goods delivered.

As per the arrangement between the parties, the Operational Creditor would pick up the scraped steel lying at the sites of the Corporate Debtor from time to time against which the Operational Creditor used to pay the Corporate Debtor in cash. Due to deficit quantity of goods delivered by the Operational Creditor, it was agreed that credit notes would be issued to the Corporate Debtor for the amount of scrapped steel collected. However, neither did the Operational Creditor issue any credit notes, nor did it pay to the Corporate Debtor in cash. Additionally, the Operational Creditor never reconciled the accounts with the Corporate Debtor.

Despite identifying the disputes arising with respect to the goods supplied by the Operational Creditor, this application has been filed. Multiple meetings have been held between the representatives of both the parties in relation to the quality of the goods supplied and those are deliberately concealed and suppressed in the application. Thus, the Operational Creditor is guilty of suppresio very and suggesio falsi.

The Operational Creditor vide his rejoinder affidavit dated 03.02.2025 stated that they have been supplying goods to the Corporate Debtor since 11.03.2020. As per the PO dated 30.05.2022, the Corporate Debtor was required to make full payment on or before the same date. However, the Corporate Debtor failed to fulfil this obligation, making 30.05.2022 the first date of default. Subsequently, the Corporate Debtor placed additional POs on 30.08.2022 and on 03.12.2022. The entire outstanding amount was due for payment on or before 03.12.2022 resulting in the final default occurring on 04.12.2022. The record of Financial Information Form-C annexed with the application shows the date start date as 30.05.2022 and the date of default as 04.12.2022. Further, the record of default is mentioned as 04.12.2022. Therefore, it was prayed that the last occurrence of default i.e. 04.12.2022 shall be considered as the date of default.

As per the liberty granted by this Tribunal vide order dated 25.02.2025 the Corporate Debtor filed its affidavit in sur-rejoinder dated 27.03.2025. It is contended that the claim of the Operational Creditor is based on the alleged three separate POs, and hence the date of default for the purpose of the present application cannot be the alleged date on which payments under only one single Purchase Order were due. The amount due under each PO is a separate debt that was to be due within a specified period of time. Thus, the inherent defect of not mentioning the date of default in the application cannot be cured by the averments in the rejoinder. The Corporate Debtor, therefore, sought dismissal of the application.

We have heard the Ld. Counsel for the parties and perused the documents, including the written submissions on record.

It is evident from the pleadings that the Corporate Debtor is engaged in the business of construction and maintenance of National Highways. It has issued POs to the Operational Creditor for the procurement of steel for the construction of the eight-lane access-controlled expressway from km 103.400 to km 128.00 of Vadodara Mumbai Expressway. The application pertains to three POs dated 30.05.2022, 30.08.2022, and 03.12.2022 issued in favour of the Operational Creditor, who is in the business of supplying materials, for the purchase of steel products.

The Operational Creditor states that the materials were supplied as per the specific requirements, instructions, and drawings provided by the authorised representatives of the Corporate Debtor from time to time, with appropriate supporting documents such as invoices, delivery challans, test certificates, and transport receipts. As per the ledger statement maintained by the Operational Creditor and the Chartered Accountant’s Certificate dated 27.01.2025, there is an outstanding amount of Rs.4,26,43,445/- owed by the Corporate Debtor along with interest applicable thereon.

In contrast, the Corporate Debtor contends that there were various deficiencies in the steel supplied by the Operational Creditor, as well as various lapses in fulfilling the obligations as per the POs. Furthermore, the Corporate Debtor has made certain payments, which disentitle the Operational Creditor from now seeking the same by way of this application.

The issue of POs and supply of materials as per the documents annexed with the application is not in dispute. However, we notice that the Operational Creditor has relied on a running account since 11.03.2020, and the Certificate dated 27.01.2025 issued by a Chartered Accountant. The Chartered Accountant confirms that the Operational Creditor maintains two ledger accounts based on the State of material supply and transactions: Roadway Solutions India Infra Ltd, Maharashtra, and Roadway Solutions India Infra Ltd, Gujarat. The payments made by the Corporate Debtor were applied against outstanding invoice/s amounts on a First-In-First-Out (FIFO) basis, that is, from oldest to newest date/s. As of 31.12.2024, the outstanding is Rs. 4,26,43,445/-.

The Corporate Debtor contends that with respect to the PO dated 30.05.2022, it paid an advance of Rs.4,85,67,384/-. However, the Operational Creditor supplied materials only worth Rs.4,63,56,229/-, resulting in an excess amount of Rs.22,59,771/-For the PO dated 30.08.2022, which had a total value of Rs.2,44,49,600/-, an advance of R.99,90,000/- was made, but the goods supplied were only worth Rs.1,86,60,331/-. As per the arrangement between the parties, the Operational Creditor was required to issue certain credit notes to the Corporate Debtor for the scrapped steel collected from the Corporate Debtor's site. As regards the PO dated 03.12.2022, it is contended that this PO specified that the steel supplied was to have a minimum ratio of ultimate tensile strength to yield strength of 1.15. However, the steel supplied by the Operational Creditor did not comply with the 2021 MoRTH circular dated 28.01.2023. As a result, the Corporate Debtor had called upon the Operational Creditor to reconcile the books of accounts accordingly.

We have closely examined the opposing arguments presented. The contentions of the Corporate Debtor are twofold: one, that the credit notes for the scrapped steel picked up from the Corporate Debtor's site were not accounted for, and the other that the goods do not conform to the specifications mentioned in the PO dated 03.12.2022. It is noted that the contention with respect to credit notes is very vague as no specific amounts related to these credits have been mentioned. As regards the contention that the goods do not meet the specifications of PO, the Corporate Debtor cites letters from NHAI dated 17.12.2022 and 28.01.2023 which state the reasons for rejection as use of unauthorised source i.e., Operational Creditor and non-conformity with MoRTH specifications. Furthermore, the Ld. Counsel for the Corporate Debtor went on to argue that there were pre-existing disputes between the parties and even if no reply to the demand notice was issued by the Corporate Debtor, they can still demonstrate the existence of dispute between the parties as per the ratio laid down by the Hon’ble NCLAT in Brand Realty Services Ltd. v. Sir John Bakeries India Ltd; 2022 SCC OnLine NCLAT 290.

The Ld. Counsel for the Corporate Debtor also relied on the decision in Mobilix Innovations (P) Ltd. v. Kirusa Software (P) Ltd (2018) 1 SCC 353 wherein the Hon’ble Supreme Court held as under:

In this case, the communications submitted by the Applicant did not indicate any dispute regarding the quality or quantity of the goods supplied. The Corporate Debtor raised issue of existence of dispute in the reply to the application; however, they failed to produce any evidence that the rejection letters were ever shared with the Operational Creditor or raised a dispute in any of the notices or filed a suit. Therefore, we are of the view that the existence of a dispute has not been substantiated, and hence the decision in Mobilix Innovations (supra) does not assist the contention of the Corporate Debtor.

From the above discussions, it is clear that there is proof of both existence of debt and default by the Corporate Debtor concerning the payment of operational debt to the Operational Creditor, which exceeds Rs.1,00,00,000/- (One Crore Rupees), being the threshold monetary limit prescribed under Section 4 of the Code prevailing on the date of filing of the present application. The claim that non-compliance of quality specifications justifies the non-payment of the outstanding debt lacks supporting evidence. Therefore, the application under Section 9 of the Code preferred by the Applicant is found to be maintainable. The application is complete and has been filed in the prescribed form. In view of the above, we find that requisite conditions necessary to trigger CIRP in respect of the Corporate Debtor are fulfilled and therefore, the application filed by the Applicant in respect of the Corporate Debtor needs to be admitted under Section 9(5) of the Code.

In view of the foregoing, this C.P.(IB) No.347/MB/2024 filed under Section 9 of the IBC by M/s SRJ Peety Steels Private Limited, the Operational Creditor, for initiating CIRP in respect of Roadway Solutions India Infra Limited, the Corporate Debtor, is hereby admitted.

We further declare moratorium under Section 14 of the IBC with consequential directions as mentioned below:

I. We prohibit:

II. That the supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated, suspended, or interrupted during the moratorium period.

III. That the order of moratorium shall have effect from the date of this order till the completion of the CIRP or until this Tribunal approves the resolution plan under Section 31(1) of the IBC or passes an order for the liquidation of the Corporate Debtor under Section 33 thereof, as the case may be.

IV. That the public announcement of the CIRP shall be made immediately as specified under Section 13 of the IBC read with Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

V. The Operational Creditor had proposed Mr. Shailesh Bhalchandran Desai, having Registration No. IBBI/IPA-001/IP-P00183/2017-2018/10362, as the IRP, e-mail ID [email protected], having valid Authorisation for Assignment up to 31.12.2025 as the IRP to carry out the functions under the IBC.

VI. That the fee payable to IRP/RP shall be in accordance with such Regulations/Circulars/ Directions as may be issued by the IBBI.

VII. That during the CIRP Period, the management of the Corporate Debtor shall vest in the IRP or, as the case may be, the RP in terms of Section 17 or Section 25, as the case may be, of IBC. The officers and managers of the Corporate Debtor are directed to provide effective assistance to the IRP as and when he takes charge of the assets and management of the Corporate Debtor. The officers and managers of the Corporate Debtor shall provide all documents in their possession and furnish all information within their knowledge to the IRP/RP within a period of one week from the date of receipt of this Order and shall not commit any offence punishable under Chapter VII of Part II of the IBC. Coercive steps will follow against them under the provisions of the IBC, read with Rule 11 of the NCLT Rules, for any violation of law.

VIII. That the IRP/IP shall submit to this Tribunal periodical reports with regard to the progress of the CIRP in respect of the Corporate Debtor.

IX. In exercise of the powers under Rule 11 of the NCLT Rules, 2016, the Operational Creditor is directed to deposit a sum of Rs.5,00,000/- (Five Lakh Rupees) with the IRP to meet the initial CIRP cost arising out of issuing public notice and inviting claims, etc. The amount so deposited shall be interim finance and paid back to the Operational Creditor on priority upon the funds becoming available with IRP/RP from the Committee of Creditors (CoC). The expenses incurred by IRP out of this fund are subject to approval by the CoC.

X. A copy of this Order be sent to the Registrar of Companies, Maharashtra, Mumbai for updating the Master Data of the Corporate Debtor.

XI. A copy of the Order shall also be forwarded to the IBBI for record; dissemination on their website; and for maintaining data.

XII. The Registry is directed to immediately communicate this Order to the Operational Creditor, the Corporate Debtor, and the IRP by way of Speed Post, e-mail, and WhatsApp.

XIII. The compliance report of the order by the Designated Registrar is to be submitted today.