The National Company Law Tribunal (NCLT) has rejected an insolvency petition brought against the Indian arm of telecom equipment manufacturer ZTE by TVS Supply Chain Solutions. The tribunal’s decision was based on the discovery of an existing dispute between the two parties.
A Chandigarh-based NCLT bench found that the debt claimed by TVS Supply Chain Solutions was already under dispute and reconciliation since 2017, predating the formal statutory demand notice.
“Considering these circumstances, we conclude that this clearly represents a pre-existing dispute, rendering the Application under Section 9 entirely non-maintainable,” stated the NCLT Bench, which included members Kaushalendra Kumar Singh and Khetrabasi Biswal.
TVS Supply Chain Solutions, formerly known as TVS Logistics Services, had approached the insolvency tribunal, asserting a default of ₹4.27 crore from ZTE Telecom India. Their petition was filed under Section 9 of the Insolvency and Bankruptcy Code (IBC) and covered a disputed period from June 2012 to February 2019.
ZTE, a prominent supplier of telecom equipment to major Indian companies like Reliance, Tata, Aircel, and BSNL, had previously entered into two Master Service Agreements (MSAs) with TVS Supply Chain. Under these agreements, TVS Supply Chain Solutions issued regular invoices, which were due for payment within 30 days.
However, TVS Supply Chain Solutions alleged that ZTE frequently made only partial payments or delayed payments, often citing dissatisfaction with the invoices. Consequently, significant amounts reportedly remained outstanding since 2012. By September 2015, an alleged ₹7.04 crore was still owed by ZTE for various projects.
In response, ZTE initiated an audit query regarding the bills, challenging the accuracy of earlier invoices. Several email exchanges ensued between the companies to address these discrepancies.
Ultimately, on January 29, 2018, ZTE formally informed TVS in writing that there were perceived discrepancies in TVS’s invoices totaling ₹5.60 crore. Notably, ZTE did not provide any supporting documents for this claim.
On July 9, 2018, TVS sent a demand notice under Section 8 of the IBC, requesting payment of ₹4.27 crore, which included the principal amount and 12% annual interest. In its rebuttal, ZTE asserted a pre-existing dispute, claiming it had overpaid TVS.
Following these exchanges, TVS officially filed an insolvency petition against ZTE with the NCLT on May 7, 2019.
ZTE, represented by S&A Law Offices, presented multiple written communications, including emails and letters, demonstrating their consistent concerns about the disputed invoices and their intent to issue a debit note if the issues with TVS remained unresolved.
The NCLT concluded that the situation involved numerous reconciliation efforts and audit objections that predated the formal demand notice. Crucially, ZTE never acknowledged the debt. The Tribunal emphasized that insolvency proceedings should not be exploited to recover disputed claims and highlighted that its authority is limited to a summary jurisdiction, not an exhaustive inquiry into the validity of the debt.
“Furthermore, it is a well-established legal principle that the Tribunal cannot undertake a sweeping investigation into the fundamental aspects of debt, default, and dispute. Its jurisdiction is strictly summary, not that of a trial court, to scrutinize the truthfulness of debt and dispute through thousands of pages of documents to reach a conclusion,” the NCLT stated as it dismissed TVS’s petition.