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

TVS Supply Chain Solutions has moved the National Company Law Appellate Tribunal (NCLAT) challenging an order of the National Company Law Tribunal (NCLT) that rejected its plea to initiate insolvency proceedings against ZTE Telecom India, as per reports.

The registrar of the NCLAT has accepted TVS Supply Chain’s request for additional time to cure defects in the appeal. The appellate tribunal also directed that the matter be listed before a bench for hearing.

The appeal arises from an October order of the Chandigarh bench of the NCLT, which dismissed the insolvency petition filed by TVS Supply Chain Solutions after holding that there was a pre-existing dispute between the parties. The NCLT observed that the debt claimed by TVS Supply Chain was disputed and subject to reconciliation dating back to 2017.

TVS Supply Chain Solutions, earlier known as TVS Logistics Services, had approached the insolvency tribunal under Section 9 of the Insolvency and Bankruptcy Code, claiming a default of ₹4.27 crore by ZTE Telecom India. The claim related to services provided during the period from June 2012 to February 2019.

ZTE, a telecom equipment supplier that has worked with companies such as Reliance, Tata, Aircel and BSNL, had entered into two Master Service Agreements with TVS Supply Chain. Under the agreements, invoices raised by TVS were payable within 30 days.

However, TVS alleged that ZTE routinely made partial payments or delayed payments on the grounds that the invoices were unsatisfactory, resulting in outstanding dues since 2012. According to TVS, an amount of ₹7.04 crore was outstanding as of September 2015 across various projects.

ZTE later raised audit queries and pointed to alleged discrepancies in earlier invoices, leading to exchanges of emails between the two sides. In a letter dated January 29, 2018, ZTE claimed discrepancies in TVS invoices amounting to ₹5.60 crore, though no supporting documents were provided.

On July 9, 2018, TVS issued a demand notice under Section 8 of the IBC seeking payment of ₹4.27 crore along with interest at 12 percent per annum. ZTE, in its reply, cited a pre-existing dispute and alleged that excess payments had already been made to TVS.

TVS subsequently filed an insolvency petition before the NCLT on May 7, 2019. Dismissing the plea, the NCLT held that the dispute involved multiple reconciliation and audit objections that pre-dated the statutory demand notice, and that the debt had never been admitted by ZTE.