National Company Law Appellate Tribunal
Sansing Limited vs Apl Metals Limited on 14 September, 2022
NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH,
NEW DELHI
Company Appeal (AT) (Insolvency) No. 1274 of 2019
[Arising out of order dated 15.10.2019 in CP (IB) No. 954/KB/2018 passed by
the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench,
Kolkata)]
IN THE MATTER OF:
SANSING LIMITED
Registered Office at:
Room 1707, 17th Floor,
Tai Yau Building,
181 Johnston Road,
Wan Chai, Hong Kong. ...... Appellant.
(Operational Creditor)
Versus
APL METALS LIMITED
Registered Office at:
18/1A, Hindustan Road,
Kolkata-700029,
West Bengal. ....... Respondent.
(Original Corporate Debtor)
Present:
For Appellant: Ms. Nandini Sharma, Advocate.
For Respondent:- Mr. Krishnaraj Thakkar, Mr. Sounak Sengupta, Ms.
Susmita Mahala and Ms. Mandeep Kaur, Advocates.
2
JUDGMENT
(14th September, 2022) Justice Anant Bijay Singh;
The Appellant preferred this Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (for short IBC) being aggrieved and dissatisfied by the order dated 15.10.2019 passed by the Ld. Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Kolkata) in CP (IB) No. 954/KB/2018 whereby the Appellant who is the Operational Creditor filed Application under Section 9 of the IBC against the Respondent-Corporate Debtor to start Corporate Insolvency Resolution Process (for short CIRP) of the Corporate Debtor as the Corporate Debtor committed default in paying the operation debt of Rs. 6,46,466.00 USD (equivalent to Rs. 4,39,72,617/- approximately), the Adjudicating Authority holding that the dispute appears to be bona fide and hence, this application is not maintainable under Section 9 of the IBC.
2. The facts giving rise to this Appeal are as follows:
i) Pursuant to arrangement between the Appellant/Operational creditor and the Respondent/Corporate Debtor, the appellant had supplied varied quantities of Lead Scrap Radio and other associated materials/equipment to the Respondent in 2011-12. The terms and conditions of such supply was that payment of the goods so supplied was to be made within 45 days of the receipt of the said goods. The goods were supplied by the Appellant in tranches in accordance with the arrangement between the parties and the same were received by the Respondent without any dispute or demur and the same had been utilized and/or consumed by the Appellant in the usual course of business.
Company Appeal (AT) (Insolvency) No. 1274 of 2019 3 Simultaneously with the supply of each trance, the Appellant used to raise its invoice and payments have been made by the Respondents from time to time. The Appellant raised eight Invoices during 2011-12 for supply of goods to the Respondent (Annexure A/2 to A/9 at page 66 to 73 of the Appeal Paper Book.)
ii) Further case is that the Respondent vide its email dated 06.09.2012 (Annexure A/10) admitted severe financial crunches including loses caused due to the drop, in retail prices and also the increase in value of dollar and thus, the Respondent could not clear the payments. In the said email, the Respondent set out a repayment schedule pursuant to which they themselves committed to pay off the entire outstanding dues as at that point of time from September 2012 till May 2013.
iii) The Respondent did not adhere to the payment schedule that was suggested by them vide their email dated 6th September 2012. They made certain paltry payments and the last of such payment was made on 05.01.2013 for a sum of USD 1,08,745.26 to the Operational Creditor. After adjustment of the said payment, a sum of USD 6,46,466.00 was still due and outstanding on account of the invoices raised for such supplies. Thereafter, the Advocates of the Appellant vide their letter 22.02.2013 (Annexure A/11) called upon the Respondent to make payment of the balance sum of USD 646,466.60 on the scheduled dates that had been agreed between the parties and as recorded in the emails exchanged between the parties.
Company Appeal (AT) (Insolvency) No. 1274 of 2019 4
iv) The Advocates of the Appellant once again vide their letter dated 14.06.2013 (Annexure A/12) called upon the Respondent/Corporate Debtor to make the payment of the balance outstanding debts of USD 646,466.00. The Respondent vide its email dated 22.04.2014 confirmed the discussions on the settlement of the dispute and also informed the Advocates of the Appellant that they are awaiting Restructuring Proposal from their Bankers which is in final stages and as soon as they receive the Restructuring from their bankers, the Respondent will be able to confirm the dates of payment of the outstanding dues. In the said email, the Respondent once again requested the Appellant to bear with them and also assured that they will clear up the outstanding (Annexure A/13 at page 78 to 79 of the Appeal Paper Book).
v) Further case is that Despite the assurances and commitments, the Respondent did not pay any amount whatsoever to the Appellant and as such, the Advocate of the Appellant issued a notice dated 23.03.2015 (Annexure A/14) under Sections 433 and 434 of the Companies Act, 1956. The Respondent did not reply to the same. Thereafter, the Respondent vide its email dated 25.05.2015 (Annexure A/15) admitted its entire outstanding dues of USD 646,466.60 and agreed to pay the 50% of the outstanding dues of USD 646,466.60 in 6 monthly instalments starting from July 2015 and ending on December 2015 as the Respondent was facing acute financial difficulties.
vi) Pursuant to negotiations between the parties at that point of time, a Settlement Agreement dated 21.07.2015 was entered into between the Appellant and Respondent with the consent of HSBC (Financer of Appellant)) and Euler Company Appeal (AT) (Insolvency) No. 1274 of 2019 5 Hermes (Credit Insurance Cover Provider) wherein the Respondent explicitly admitted its outstanding liability of USD 646,466.60 and further agreed to pay 50% of the entire outstanding dues i.e. USD 323283.00 in 6 monthly instalments from July 2015 to December 2015. Pursuant to Settlement Agreement dated 21.07.2015, the Respondent addressed a letter dated 30.07.2015 to the Allahabad Bank whereby it once again admitted the outstanding dues and further admitted that the dues have been settled at 50% of the debts and directed its bank to remit the first instalment of USD 55,000.00 to the Appellant. However, no such payment was received by the Appellant.
vii) The Advocates of the Appellant were constrained to issue a notice dated 19.06.2017 (Annexure A/18) under Section 8 of the IBC at the registered office of the Respondent and called upon the Respondent to make payment of the outstanding sum USD 646,466.00 as the Respondent failed to adhere to terms of Settlement Agreement and make payment to the Appellant in terms thereof. The Respondent through Advocates addressed its reply dated 30.06.2017 (Annexure A/19) wherein no dispute was raised to the existence and/or the right of the Appellant demand/recover the unpaid operational debt was raised. The Appellant through its Advocates issued a rejoinder dated 12.07.2017 (Annexure A/20) to the reply of the Respondent wherein all frivolous disputes raised on 30.06.2017.
viii) The Appellant being the Operational Creditor having an undisputed claim against the Respondent/Corporate Debtor for a sum of USD 646,466.00 filed an Application under Section 9 of the IBC against the Respondent before the Company Appeal (AT) (Insolvency) No. 1274 of 2019 6 Adjudicating Authority and after hearing the parties the Adjudicating Authority vide order dated 15.10.2019 dismissed the Application filed by the Appellant under Section 9 of the IBC. Hence this Appeal.
3. The Ld. Counsel for the Appellant during the course of argument and in his memo of Appeal along with written submissions submitted that the Appellant who is the Operational Creditor is an entity registered and incorporated outside India and made supply of lead scrap radio as per ISRI to the Respondent/Corporate Debtor from time to time and is making a claim in respect of the outstanding invoice for provisions of said goods for USD 6,46,466.60. The Respondent has made payment to the Appellant of invoices other than the outstanding invoices and has acknowledged the operational debt (USD 6,46,466.60) and has undertaken to make payment on multiple occasions and even entered into Settlement Agreement dated 21.07.2015.
4. It is further submitted that as per Settlement Agreement dated 21.07.2015 (at page 85 to 88 of the Appeal) executed between the Appellant and Respondent wherein clause 4 mentioned that the outstanding operational debt of USD 6,46,466.60 was acknowledged and also in clause 2, undertook to pay USD 3,23,383 in 6 instalments starting from July 2015 to December 2015. In the Settlement Agreement in clause 4, the Respondent agreed that in case of default with regard to payment schedule, the Appellant shall be entitled to recover the total outstanding of USD 6,46,466.60 less the amount paid and also claim interest @ 18% per annum till complete payment is received. In the Settlement Agreement in clause 1, the Respondent agreed to make payment to the Appellant Company Appeal (AT) (Insolvency) No. 1274 of 2019 7 and it was agreed that the Appellant has written consent of HSBC and Euler Hermes, Insurance Company of HSBC.
5. It is further submitted that the Adjudicating Authority dismissed the application filed by the Appellant under Section 9 on the ground that the Corporate Debtor (Respondent herein) raised the dispute about the operational debt and dispute appears to be bona fide, is erroneous in law, therefore, the impugned order is fit to be set aside and the Appeal be allowed.
6. The Ld. Counsel for the Respondent in his Reply Affidavit along with written submissions submitted that the Ld. Adjudicating Authority has rightly considered the letter dated 01.08.2012 (at page 155 of the Appeal) which is written by HSBC regarding payment of USD 61,073.99 for settlement of Sansing Limited's wherein it is mentioned that "the purpose of this letter is to remind you that consequent upon the assignment of your payment in respect of invoices issued by Supplier must be made to us directly at the below address. Payment to your Supplier (the assignor) or to any other party will not discharge your indebtedness in respect of such invoices".
7. It is further submitted that the 8 invoices which formed the basis of the notice dated 19.06.2017 had been assigned to the Bank absolutely, therefore, the Adjudicating Authority has rightly considered and came to the conclusion that dispute exists between the parties and dismissed the application filed under Section 9.
8. It is further submitted that the purported claim of the Appellant is highly disputed due to various reasons viz. delayed shipments of goods, supply of Company Appeal (AT) (Insolvency) No. 1274 of 2019 8 inferior quality of goods under Purchase Order dated 11.10.2021, change of price of LME (London Metal Exchange), invalidated contract, etc. The said reasons the aforesaid 8 invoices had been assigned to HSBC, who had financing arrangement with the Appellant in the year 2012 and such finance was under credit insurance cover from Euler Hermes in the year 2012. The Appellant deliberately concealed the fact from the Ld. Adjudicating Authority that its alleged claim which is the subject matter of this Appeal had already been settled by the said Euler Hermes, the credit insurance provider. The Appellant had received the value of the said 8 invoices from HSBC on its assignment and HSBC has recovered the same from the said Euler Hermes. The Appellant did not produce the same neither before this Appellate Tribunal nor before the Adjudicating Authority purposefully. By an email dated 06.09.2012 the Appellant confirmed the Respondent that with regard to the payment of the said 8 invoices the Appellant needs to communicate with HSBC because the same is not in the hands of the Appellant. However, by a letter dated 30.11.2018, HSBC notified that the right to receive payment of the said 8 invoices had been assigned by the Appellant to HSBC.
9. It is further submitted that the IBC also recognizes assignment and stipulates in sub-Section 20 of Section 5 of the IBC that operational creditor includes a person to whom an operational debt is legally assigned or transferred. Thus, in this case, on assignment, the operational creditor is HSBC and not the appellant and only HSBC is entitled to institute proceedings under IBC. Based on these submissions the instant Appeal is not maintainable and deserves to be dismissed.
Company Appeal (AT) (Insolvency) No. 1274 of 2019 9 FINDINGS
10. After hearing the parties and going through the pleadings made on behalf of the parties, we are of the considered opinion that Application filed under Section 9 of the IBC has rightly been rejected by the Adjudicating Authority in view of the Settlement Agreement dated 21.07.2015 arrived between the Appellant - Sansing Limited with HSBC and Respondent - APL Metals Limited (Annexure A/16 at page 85 to 88 of the Appeal) which has been quoted in the impugned order, reads as follows:
"Thus, Sansing has taken written consent of HSBC Bank Euler Hermes Insurance Company and all such persons (through whom Sansing had entered for financing or otherwise payments against the aforesaid invoices) for the full and final settlement of all dues against the invoices in terms of this agreement and shall be a sufficient discharge in favour of APL of all liabilities against Sansing."
Further, the Adjudicating Authority has rightly come to the conclusion that Corporate Debtor raised a bonafide dispute regarding the 'operational debt' wherein the Appellant- Operational Creditor had assigned the debt to HSBC Bank and HSBC Bank has not instituted this proceeding under Section 9 of the IBC, therefore, taking in the above facts, the Application under section 9 is not maintainable as the reasons assigned by the Adjudicating Authority is cogent and require no interference. The impugned order dated 15.10.2019 passed by the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Company Appeal (AT) (Insolvency) No. 1274 of 2019 10 Kolkata) in CP (IB) No. 954/KB/2018 is hereby affirmed. There is no merit in the Appeal. The Appeal is hereby dismissed.
11. Registry to upload the Judgment on the website of this Appellate Tribunal and send the copy of this Judgment to the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Kolkata), forthwith.
[Justice Anant Bijay Singh] Member (Judicial) [Ms. Shreesha Merla] Member (Technical) New Delhi 14th September, 2022 R. Nath.
Company Appeal (AT) (Insolvency) No. 1274 of 2019