TVS Supply Chain moves NCLAT against NCLT order rejecting ZTE insolvency plea

TVS Supply Chain Solutions has moved to the appellate tribunal NCLAT, challenging an NCLT order which had rejected its plea to initiate insolvency against the Indian unit of telecom gear manufacturer ZTE.

The NCLAT registrar has accepted the request of TVS Supply Chain for more time to cure defects in the plea, which was accepted by it on Thursday. It also directed that the plea be listed before a bench for hearing.

In October this year, a Chandigarh-based bench of the National Company Law Tribunal (NCLT), had dismissed the insolvency plea filed by TVS Supply Chain Solutions after observing a pre-existing dispute between the parties.

The NCLT in its order had said that the debt claimed by TVS Supply Chain Solutions was disputed and under reconciliation dating back to 2017.

TVS Supply Chain Solutions, earlier known as TVS Logistics Services, had moved the insolvency tribunal claiming a default of ₹4.27 crore from ZTE Telecom India by filing a plea under Section 9 of the Insolvency & Bankruptcy Code. The dispute is for the period June 2012 to February 2019.

ZTE, a telecom equipment supplier for companies like Reliance, Tata, Aircel, and BSNL, had entered into two Master Service Agreements (MSAs) with TVS Supply Chain.

As per MSAs, TVS Supply Chain Solutions raised invoices at a regular interval, which were payable within 30 days of raising the invoice.

However, TVS Supply Chain alleged that ZTE has generally made either part payments against the invoices raised or delayed the payment on the pretext that the invoices are not satisfactory, and certain amounts have remained due and payable at all times since 2012.

Till September 2015, an amount of ₹

7.04 crore was outstanding for payment by ZTE for various projects.

However, ZTE had sent an audit query over the bills, and was contending discrepancies in earlier invoices. Later, some emails were exchanged between the parties.

Finally, on January 29, 2018, ZTE addressed a letter to TVS wherein it stated that there are purported discrepancies in invoices of TVS to the tune of ₹5.60 crore.

However, ZTE had not shared any supporting documents.

On July 9, 2018, TVS issued a demand notice under Section 8 of IBC, demanding payment of ₹4.27 crore as principal and interest at the rate of 12 per cent per annum. In its reply, ZTE contended a pre-existing dispute alleging an excess amount being paid to TVS.

Later, on May 7, 2019, TVS moved the NCLT by filing an insolvency petition against ZTE.

The NCLT observed that the matter involved multiple reconciliation and audit objections before the statutory demand notice. The debt was never admitted by ZTE, observed the NCLT while dismissing TVS' plea.