Party Taking Over Contract Cannot Deny Liability By Claiming No Privity: NCLT Mumbai

It said that a party that has solemnly entered into a written arrangement acknowledging specific obligations cannot be permitted to approbate and reprobate by later denying those very obligations.

A coram of Judicial Member Nilesh Sharma and Technical Member Sameer Kakar made the observation while dealing with an insolvency petition by Baij Nath Ram Nath (India) Pvt Ltd, seeking initiation of insolvency against Trivenimudrai Projects Ltd.

"Where a party steps into the shoes of the original contracting entity and assumes obligations, it cannot escape liability by pleading absence of privity. A party that has solemnly entered into a written arrangement acknowledging certain obligations cannot be permitted to approbate and reprobate by later denying such obligations, the tribunal said. 

The dispute arose from the supply of shuttering and scaffolding materials to Rajkeshari Projects under work orders issued in June and September 2021 for a project in Tamil Nadu. Subsequently, Trivenimudrai Projects took over the said project and continued to utilize the materials supplied by the creditor.

In this context, a tripartite Memorandum of Understanding-cum-settlement dated 24 April 2024 was executed, whereby Trivenimudrai Projects expressly acknowledged its liability towards the creditor and undertook to clear outstanding dues.

As per the settlement, Trivenimudrai Projects agreed to pay a sum of Rs. 92.65 lakh by May 15, 2024, failing which it would be liable for the entire outstanding amount. However, no payment was made within the stipulated timeline, leading the operational creditor to issue a demand notice in October 2024.

Rejecting the debtor's contention that there was no privity of contract between the parties, the tribunal noted that Trivenimudrai Projects had consciously stepped into the contractual framework, derived benefit from the materials supplied, and executed a written settlement acknowledging its obligations. It held that such conduct disentitled the corporate debtor from disputing liability on technical grounds.

Concluding that the debt and default stood clearly established, the tribunal admitted the petition, declared a moratorium and appointed Mahesh Kumar Gupta as the interim resolution professional.

Case Title: Baij Nath Ram Nath (India) Pvt Ltd vs Trivenimudrai Project Ltd

Case Citation: 2026 LLBiz NCLT (MUM) 54

Case Number: CP (IB) No. 265/MB/2025

For Operational Creditor: Advocate Avneesh Garg

For Corporate Debtor: Advocates Pulkit Sharma, Naman Jain, Rohan Vasa, Ankit Pitti