Indraprastha Gas Limited in legal tangle over non-payment of contractor’s dues

New Delhi: The Indraprastha Gas Limited (IGL), a household name for CNG & PNG supply in Delhi-NCR, is in the midst of an ugly legal battle for not abiding by the contractual agreement it signed with M/s Shanivi Construction Private Limited and stopping payment of Rs 2.40 crore to the latter.

IGL, a semi-government company, though known for good corporate ethics has denied payment of Rs 2.40 crore to the contractor and the dues is pending since 2012-13, the time period for which contract was inked between the two parties.

IGL has come under serious scrutiny as its conduct in this case is raising many serious questions. In spite of settling the dispute with contractor, the company is escalating the matter even if it comes at the cost of public money. IGL has chosen to hire battery of lawyers for defending its bullying tactics rather than making amends for faulty payment structure.

M/s Shanivi Construction Private Limited approached the IGL management many times but the latter remained inaccessible and turned a blind eye to their requests for releasing the outstanding amount. Since 2012, the contractor has approached successive Managing Directors (MDs) of the company but to no avail.

What led to ugly legal battle?

In 2012, the IGL gave an Annual Maintenance Contract of PNG services at 15 control rooms to the MSME contractor at an agreed value of Rs 25 crore.
As part of one-year maintenance deal, the IGL was supposed to pay Rs 25 crores but it refused to honour full terms of contract and stopped payment after paying Rs 22.40 lakh to the contractor.

As the IGL stopped last tranche of payment of Rs 2.40 crores to Shanivi, citing many reasons, it resulted in an ugly war of words and then a protracted legal battle, which continues till date.

M/S Shanivi Construction Private Limited moved MSEFC, which further referred the case to DIAC for arbitration. But, IGL got a stay from the High Court on the ground that the former is not an MSME & thus the MSEFC is not legally competent body to adjudicate the matter.

The contractor then approached NCLT. It’s petition was admitted and the NCLT ordered CIRP against IGL.

In response to this, the IGL approached NCLAT by engaging top lawyers of India and obtained a temporary stay on the proceedings. Now, the next hearing is scheduled for Nov 26, 2021.

MSMEs facing threat from big corporates: 

According to M/S Shanivi Construction Private Limited, the dues in 2012 that were pegged at Rs 2.5 crores has now swelled to Rs 12 crores based on the MSME ACT, which allows interest 3 times the bank rate compounded monthly.

Industry bigwigs believe that the IGL may have its grudges against the contractor for some operational irregularities (which it claims) but procrastinating such a matter for long time neither sets an example of good corporate governance nor does it gives them any benefit of doubt, as the contractor fulfilled its responsibility to the best of ability and was duly paid sum of Rs 22.40 crores for unhindered service.

Amidst the legal tangle, what’s more concerning is the arm-twisting and alleged harassment of MSMEs by big corporates like IGL. MSMEs, forming a core base of Indian economy have been encouraged and promoted by Modi govt but such bullying of small contractors like Shanivi will set a very wrong precedent, especially when they are already burdened by impact of Covid-19.

Such treatment of MSMEs will only lead to their subjugation, loss of business and then eventually wilting under pressure. If the government doesn’t come to their rescue in time, they are most likely to die down due to exhaustion & overstress.