Major Dispute Cleared: TVS Supply Withdrows Insolvency Plea Against ZTE After Settlement Agreement

Major Dispute Cleared: TVS Supply Withdrows Insolvency Plea Against ZTE After Settlement Agreement​

TVS Supply Chain Solutions has reached a resolution regarding its long-standing debt dispute with ZTE Telecom India. The company has subsequently withdrawn its appeal before the National Company Law Appellate Tribunal (NCLAT) concerning the rejected insolvency proceedings. This settlement marks the conclusion of a complex legal battle spanning several years.

The withdrawal was formally requested by TVS Supply Chain counsel this week. The NCLAT bench, comprising Chairperson Justice Ashok Bhushan and Member (Technical) Barun Mitra, permitted the withdrawal of the appeal. The tribunal noted that the matter had been settled between both parties, allowing the closure of the protracted legal chapter.

NCLAT Grants Permission for Appeal Withdrawal​

The NCLAT allowed the withdrawal after the appellant's counsel confirmed a settlement between ZTE and TVS. The court confirmed that TVS's appeal would no longer proceed, bringing official closure to the dispute regarding the insolvency filing. This development signals a shift from legal confrontation to direct resolution between the two large entities.

Background of the Disputed Debt Claim​

The core issue revolves around payments and reconciliation of invoices for various telecom projects. TVS Supply Chain Solutions, formerly known as TVS Logistics Services, had initially filed a plea under Section 9 of the Insolvency & Bankruptcy Code. The company claimed a default amount of ₹4.27 crore from ZTE.

This dispute covered a long period, specifically from June 2012 to February 2019. ZTE, a significant telecom equipment supplier for companies including Reliance, Tata, Aircel, and BSNL, had been involved in two Master Service Agreements (MSAs) with TVS. Under these MSAs, TVS was required to raise invoices, payable within 30 days.

Complex History of Invoice Reconciliation Between Parties​

TVS alleged that ZTE had frequently issued part payments or delayed payments. These delays were often rationalized by ZTE, citing that the invoices were not satisfactory. Consequently, certain amounts allegedly remained due and payable at all times since 2012.

The financial records showed an outstanding amount of ₹7.04 crore owed by ZTE as of September 2015 for various projects. The dispute intensified when ZTE began issuing audit queries concerning earlier invoices, leading to an exchange of emails between the two companies.

By January 29, 2018, ZTE wrote to TVS, indicating purported discrepancies in invoices amounting to ₹5.60 crore. Notably, ZTE did not provide supporting documentation for these discrepancies.

NCLT Dismisses Initial Insolvency Plea​

Following the escalating dispute, TVS issued a demand notice under Section 8 of IBC on July 9, 2018, demanding payment of ₹4.27 crore as principal plus 12 per cent per annum interest. In response, ZTE contested the claim by pointing to a pre-existing dispute regarding alleged excess payments to TVS.

Despite TVS filing an insolvency petition in the NCLT on May 7, 2019, the lower tribunal dismissed the plea. The NCLT observed that the matter involved multiple reconciliation and audit objections that were pending even before the statutory demand notice was issued. Critically, the NCLT highlighted that the debt had never been formally admitted by ZTE.

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