NCLT Dismisses SS Rail Works VNR Payment Application

Case Details

Case Name: IA No.38 of 2022 in C.P.(IB).No.12/10/HDB/2017

Parties: M/s.SS Rail Works Pvt. Ltd. (Applicant) vs. M/s.VNR Infrastructure Limited (Under Liquidation) represented by its Liquidator Mr. T.S.N. Raja (Respondent)

Court/Authority: National Company Law Tribunal (NCLT), Hyderabad Bench-II

Date of Order: 20 May 2026

Judges: Shri Rajeev Bhardwaj, Hon'ble Member (Judicial) and Shri Sanjay Puri, Hon'ble Member (Technical)

Parties Involved

Petitioner/Applicant: M/s.SS Rail Works Pvt. Ltd., represented by its Chief Executive Officer, Mr. A. Srinivasulu Reddy.

Respondent: M/s.VNR Infrastructure Limited (under liquidation), represented by its Liquidator Mr. T.S.N. Raja.

Other Entities Mentioned: North East Frontier Railway (NFR) Authorities, IFCI (as a lender to VNR), Prakash Enterprises, Datta Supply Agency.

Issues / Allegations / Violations

• The Applicant (SS Rail Works) entered into a Sub-Contract Agreement dated 22.12.2016 with the Corporate Debtor (VNR) for execution of railway construction works valued at ₹11,10,42,578/- (reduced from ₹11,33,08,754/-).
• The Applicant claimed to have completed over 80% of the work and received on-account payments aggregating to ₹6,36,22,563/-, leaving a final bill of ₹65,63,617/- measured and finalized by the Railway Department.
• The core allegation was that the Liquidator received payments from NFR Authorities for work executed by the Applicant but failed to release the corresponding amounts, violating Clauses 3 and 5 of the Sub-Contract Agreement.
• The Applicant specifically alleged that the Liquidator received ₹16,88,27,523/- for its works but paid only ₹14,44,38,808/-, withholding ₹2,43,88,750/-.
• The Respondent/Liquidator counter-alleged that the Applicant caused delays leading to termination of all nine railway contracts, resulting in losses exceeding ₹10 Crores to the Corporate Debtor from invocation of Bank Guarantees and forfeiture of EMD/SD.
• The Liquidator alleged the final bill of ₹65,63,617/- was "fake" as it lacked proper Measurement Book extracts or countersignature from Railway Authorities.
• The Liquidator also alleged the Applicant failed to return equipment belonging to the Corporate Debtor, necessitating a police complaint.

Findings & Observations

• The Tribunal noted that the Corporate Debtor was sold as a "going concern" via e-auction on 09.03.2020 for ₹12,48,70,000/-, approved by NCLT on 07.07.2021. However, it held that this sale did not ipso facto complete the liquidation process.
• The Liquidator was found to still be accountable for residual liquidation functions, including reconciliation of estate accounts and lawful distribution under Section 53 of the IBC, as per the order in IA No.742 of 2021.
• The Tribunal observed that granting the substantive relief sought (a mandatory direction to accept measurements and process bills) would require adjudication of heavily disputed questions of fact, including measurement certification, stock reconciliation, equipment handover, royalty disputes, and alleged set-offs for losses.
• It was noted that related disputes, including an earlier order (IA No.676/2018) directing release of payments and challenges to contract termination, were sub-judice before the NCLAT.
• The Tribunal found ambiguity regarding which assets and contracts were transferred in the going concern sale and which receivables remained in the liquidation estate.

Penalties / Settlements / Directions

• No monetary penalties, disgorgement, or settlements were imposed by this order.
• The primary application (IA No.38/2022) was dismissed insofar as it sought substantive mandatory directions against the Liquidator.
• A limited direction was issued: The Liquidator must take note of the subject matter of this IA while preparing the project-wise and litigation-wise status report and reconciliation of receivables/liabilities as directed in IA No.742 of 2021. This is for accounting purposes only and not an admission of the claim.
• A further limited direction was given: If any records related to the Applicant's subcontract works are available with the Liquidator and were not handed over to the new management, they should be made available to the present management of the Corporate Debtor.

Corrective Actions & Future Obligations

• The Liquidator is obliged to continue the residual liquidation functions as directed in IA No.742 of 2021, which includes preparing comprehensive status reports and reconciliations.
• The transmission of available records (if any) to the new management is a future obligation for the Liquidator.
• No specific corrective actions or compliance measures were mandated for the companies involved.

Final Ruling & Enforcement

• The Interlocutory Application (IA No.38/2022) was dismissed.
• The dismissal was not construed as an adjudication on the merits of the Applicant's claim.
• The Applicant was expressly left at liberty to pursue its remedies against the Corporate Debtor under its present management (the successful going-concern purchaser) and/or before the appropriate contractual, statutory, or competent forum, including the concerned Railway Authorities.
• All rights and contentions of the parties were left open.