National Company Law Appellate Tribunal
M/S Raunaq Epc International Ltd vs M/S. Hiranmaye Energy Ltd on 18 January, 2022
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
Company Appeal (AT) (Insolvency) No. 439 of 2020
[Arising out of order dated 10.02.2020 in C.P. (IB) No. 987/KB/2019 passed
by the Adjudicating Authority (National Company Law Tribunal), Kolkata
Bench, Kolkata.]
IN THE MATTER OF:
M/s. Raunaq EPC International Ltd.
Regd. Office: 20, K.M. Mathura Road,
Post Office Amar Nagar,
Faridabad-121003 (Haryana)
...... Appellant.
(Operational Creditor)
Versus
M/s. Hiranmaye Energy Ltd.
(formerly known as India Power Corporation
Haldia) Limited), Regd. Office: Plot No. X, 1,2 & 3
(2nd Floor) Block-EP, Sector-V, Salt Lake,
KOLKATA-700091
....... Respondent.
(Corporate Debtor)
Present:
For Appellant: Mr. U.K. Chaudhary, Sr. Advocate along with Ms. Preeti
Goel, Mr. Anubhav Goel (CA), Advocates.
For Respondent: Mr. Rishav Banerjee, Mr. Rajarshi Banerjee, Mr. Shambo
Nandy, Mr. Arijit Mazumdar and Ms. Rajshree Banerjee,
Advocates.
2
JUDGMENT
(18th January, 2022) Justice Anant Bijay Singh;
This Appeal has been preferred by the Appellant (Operational Creditor) being aggrieved and dissatisfied by the order dated 10.02.2020 passed by the Ld. Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata in C.P. (IB) No. 987/KB/2019 whereby and where under the Application filed by the Appellant/Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016 (for short IBC) was rejected holding that the Corporate Debtor (Respondent herein) in the case succeeded in proving existence of disputes.
2. The facts giving rise to this Appeal are as follows:
i) The Appellant (Operational Creditor) is a Company incorporated under the Companies Act, 1956. The Appellant (Operational Creditor) was previously known as M/s Raunaq International Limited and the name of the Operational Creditor Company was changed from M/s Raunaq International Limited to M/s Raunaq EPC International Limited.
ii) The Appellant is inter-alia engaged in the business of execution of Turnkey Jobs of LP Piping Work. The Appellant is a pioneer in the field of LP Piping work and has completed assignment for various distinguished Companies like M/s Hindustan Zinc Limited, Adani Power Maharashtra Limited, NTPC Limited etc.
iii) The Respondent (Corporate Debtor) is also incorporated under the Companies Act, 1956. The Respondent was previously known as M/s India Company Appeal (AT) (Insolvency) No. 439 of 2020 3 Power Corporation (Haldia) Limited and later on the name of the Respondent was changed from M/s India Power Corporation (Haldia) Limited to M/s Hiranmaye Energy Limited.
iv) The Respondent has issued two Letters of Award dated 25.11.2014 for supply of Complete LP Piping System Packages (First Part) 3 x 150 MW TPP and also contract for "Service of Complete LP Piping System Packages (First Part) for 3 x 150 MW TPP IPC (H) L Haldia Project". In other words, there were two Letters of Award (i) one for Supply Portion and another (ii) Service Portion (Annexure - VI at page 112 to 132 of the Appeal Paper Book).
v) Further case is that the Respondent issued amendments to the Letter of Award for making amendments to the Letter of Award. The scope of work includes total Lump sum price for unloading, handling, intra site transportation, site storage, security of items, erection, internal painting, final painting, wrapping coating, back filling, sand filing testing & commissioning services of complete LP Piping system (CW & ACW, DM Transfer, DMCW and Condenser on line tube cleaning system), tanks with all accessories & fittings inclusive commissioning of IPC(H)L free issue material. The value of the contract towards "Service Portion" was for a sum of Rs. 4,77,54,300/- and Rs.
20,97,47,000/- towards "Supply Portion" on account of supply of (i) Pipes (ii) Pipe Fittings and (iii) Plates etc.
vi) Further case is that the supplies of materials were made by the Appellant to Respondent under the "Letter of Credits" and even then, substantial payments were late. However, as regards "Service Portion", it was not supported by "Letter of Credits" and hence payments of Running Account Company Appeal (AT) (Insolvency) No. 439 of 2020 4 Bills were received late, as would be evident from the statement of payment received (Annexure-VIA at page 133 to 134 of the Appeal Paper Book).
vii) The Appellant (Operational Creditor) Company from time to time has raised Running Account Bills for the value of the work done, a statement showing the details of Running Account Bills raised by the Operational Creditor upon the Corporate Debtor (Annexure-VII at page 135 to 145 of the Appeal Paper Book). The statement also shows the adhoc amounts released by the Corporate Debtor from time to time, were all beyond then stipulated period of payments within which the Respondent /Corporate Debtor were to make payment to the Appellant/Operational Creditor.
viii) The Appellant supplied the goods to the Respondent during the period March, 2015 to March, 2017 and also rendered/provided services towards installation of LP Piping System and Tank etc. at the project site of the Respondent during the period August, 2015 to June, 2018.
ix) Further case is that the debt fell due for payment from time to time in the month of February, March and June, 2018 when these invoices were submitted for services rendered by the Appellant to the Respondent. These invoices were also sent in the month of November, 2018 for retention amount. In fact, the Respondent has been deducting amounts from the Running Account Bills on account of "Retention Money" which was payable after the completion of the project.
x) The Appellant has successfully completed their part of the Job to the entire satisfaction of the Respondent as early as February, 2018. Since the work has been completed to their entire satisfaction, therefore, there was no Company Appeal (AT) (Insolvency) No. 439 of 2020 5 cause for concern or issue and hence, there had not been any letter or E-mail or correspondence from the side of the Respondent to the Appellant pointing out any finger or issue or concern.
xi) The Appellant has successfully executed their contract and as a result of which, the Respondent issued a Work Completion Certificate dated 28.02.2019 certifying that the work has been completed in May, 2018 (Annexure VIII at page 146 to 153 of the Appeal Paper Book).
xii) The project was delayed solely because of the default, neglect and breaches on the part of Respondent in performing their obligation and to cite few instance: a) delay in approval of drawing and documents, b) delay in approval of supply/service BBU/Price break-up, c) delay in opening of Letter of Credit, d) delay in attending inspection, e) delay in release of advance and bills payment, f) delay in release of work fronts.
xiii) Further case is that the default and delay was solely due to the reasons attributable to the Respondent. The Respondent did not write a single letter after January, 2016 about any delay, default, neglect or breach by the Appellant in performance, execution and completion of the whole project.
xiv) The regular outstanding of Rs. 31,65,374/-, the Joint Managing Director of the Appellant / Operational Creditor sent an email dated 11.10.2018 to Mr. Jyotirmay Bhaumik, Whole Time Director of the Respondent / Corporate Debtor. Despite receipt of the email, no payment has been released by the Respondent to the Appellant and the same time, the Respondent had naver denied their liability to the undisputed payment of a sum of Rs. 31,65,374/- on account of Running Account Bills. Company Appeal (AT) (Insolvency) No. 439 of 2020 6
xv) Further case is that the Appellant / Operational Creditor has sent a notice dated 04.06.2019 under Section 8 of the IBC to the Respondent / Corporate Debtor (Annexure- XXII at page 194 to 208 of the Appeal Paper Book).
xvi) Despite receipt of the legal notice, the Respondent did not release any payment, thereafter, the Appellant/Operational Creditor filed an Application under Section 9 of the IBC against the Respondent/Corporate Debtor and the same was rejected by the Ld. Adjudicating Authority on 10.02.2020. Hence this Appeal.
Submissions on behalf of the Appellant
3. The Learned Counsel for the Appellant during the course of arguments and his memo of Appeal along with Written Submissions submitted that the Respondent / Corporate Debtor issued Two Letters of Award dated 25.11.2014 for Supply of Complete LP Piping Systems Packages (First Part) 3x150 MW TPP and also contract for "Service of Complete LP Piping System Packages (First Part) for 3x150 MW TPP IPC(H)L Haldia Project (at page 112 to 132 of the Appeal Paper Book).
4. It is further submitted that the Appellant commenced the execution fully mobilizing, Plant, Machinery, Working capital, Man-power and facilities. The supply of pipes and other materials were against Letter of Credit (for short LC) to be opened by the Respondent. The payments for supplies were received in time but, however, the Respondent on many occasions, delayed opening Letter of Credit. However, in service contract, there was no provision of LC Company Appeal (AT) (Insolvency) No. 439 of 2020 7 and therefore there were regular delays and default on the part of the Respondent in paying Running Account Bills.
5. It is further submitted that the Respondent has relied upon E-mails written during 18.05.2015 to 12.09.2016 in their Reply to Notice under Section 8 of the IBC in order to "inject", "manufacture" create Pre-existing disputes which never existed.
6. It is further submitted that the Appellant raised three Invoices dated 23.02.2018, 20.03.2018 and 25.06.2018 all aggregating to Rs. 31,65,374/- on account of "Construction Services" rendered by the Appellant to the Respondent. The Appellant also raised two Invoices both dated 31.11.2018 on account of "Retention Money" aggregating to Rs. 1,28,77,256/-. As per contract a sum of Rs. 1,28,77,256/- pertains to the "Deductions" made from time to time by the Respondent from various "Running Account Bills"
submitted by the Appellant to the Respondent. Thus, a total sum of Rs. 1,60,42,630/- admittedly and undisputedly payable by the Respondent to the Appellant. But after receipt of these Invoices, there is no letter, email or communication alleging any defect, deficiency, neglect and breaches on the part of the Appellant towards any counter claim, claims, losses, damages, recoveries or dues till 30.09.2020.
7. It is further submitted that the Respondent issued "Unconditional" and "Unqualified" "Work Completion Certificate" dated 28.02.2019 (at page 146 of the Appeal Paper Book) certifying that the work covered under the contract has been actually completed on 31.05.2018 to their entire satisfaction. Company Appeal (AT) (Insolvency) No. 439 of 2020 8
8. It is further submitted that the Appellant before start of the project, the Appellant had furnished two Performance Bank Guarantee (from 09.12.2014 valid upto 17.09.2018 with claim period upto 17.12.2018) for a sum of Rs. 2,07,74,700/- and Rs. 47,75,300/- issued by ICICI Bank favoring the Respondent and were unconditionally discharged/released by the Respondent vide their letter dated 17.08.2018 (at page 364 of the Appeal Paper Book) without any claim.
9. It is further submitted that the Appellant furnished Contract Performance Guarantee both dated 17.07.2018 (at page 80 to 85 of the Reply Affidavit) valid upto 31.03.2019 as per proforma furnished by the Respondent and thereafter these Performance Guarantee also stood expired/lapsed automatically unconditionally without any claim.
10. It is further submitted that the Respondent is relying on various emails written during the year 2015 and September, 2016 in their Reply to the statutory Notice under Section 8 of the IBC. However, some letters pertaining to the period 2016 or for the year 2017 have now been filed for the first time while filing Reply to this Appeal which did not see the light of the day earlier.
11. It is further submitted that the Appellant relying on the Judgment of this Appellate Tribunal in the case of "Unistill Alcoblends Pvt. Ltd. Vs. India Brewery & Distillery Pvt. Ltd. Company Appeal (AT) (Insolvency) No. 162 of 2019" held as follows:
" 7. Considering the documents pointed out by the leaned Counsel for the Appellant, and the fact that the learned Counsel for the Respondent is unable to show us any Company Appeal (AT) (Insolvency) No. 439 of 2020 9 document before the Notice under Section 8 was issued which would indicate that there was any dispute communicated by the Respondent to the Appellant, we find that the Adjudicating Authority erred in dismissing the Section 9 Application observing that "it is deemed that there is dispute prior filing the instant petition". What was relevant was to see whether there was pre-existing dispute when Section 8 Notice was issued."
12. It is further submitted that the Appellant relying on the Judgment passed by this Appellate Tribunal in the case of "Ahluwalia Contracts (India) Ltd. Vs. Raheja Developers Ltd. Company Appeal (AT) (Insolvency) No. 703 of 2018" wherein the Appellate Tribunal held that "From the aforesaid decision, it is clear that the existence of dispute must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice".
13. It is further submitted that the based on these submissions the Ld. Adjudicating Authority has not considered the facts of the case and have not properly appreciated the law and judgment cited by the Appellant during the course of argument, therefore, the impugned order cannot be sustained in the eye of law and fit to be set aside and the Appeal be allowed.
Submissions on behalf of the Respondent
14. The Learned Counsel for the Respondent / Corporate Debtor during the course of arguments and in his Reply Affidavit along with Written Submissions, submitted that the amount claimed by the Appellant / Company Appeal (AT) (Insolvency) No. 439 of 2020 10 Operational Creditor as a purported unpaid operational debt is not payable in fact and or law.
15. It is further submitted that the Respondent is entitled to Liquidated Damages under the Contract amounting to 10% of contract value as per clause 9 of both the Supply and Service Contract and this amounts to Rs. 2,57,50,130/- i.e. much in excess of the amount claimed by the Appellant.
16. It is further submitted that the additionally and without prejudice to the aforesaid the Respondent is entitled to retain Rs. 1,28,75,065/- as per Payment Terms of Clause 6(c) and Cause 6(d) of the Supply and Service contracts respectively since the Appellant failed to ensure closure of all punch points and submission of valid performance bank guarantee as per the terms of the said clauses 6(c) and 6(d).
17. It is further submitted that the Respondent has paid the Appellant a cumulative amount of Rs. 23,49,00,000/- in good faith which is more than 91% of the Contract value. Therefore, necessary and proper reconciliation of accounts reflects excess payment by the Respondent amounting to Rs. 1,60,25,195/- which the Respondent is also entitled to recover from the Appellant.
18. It is further submitted that the Appellant has admittedly violated multiple contractual obligations while purportedly attempting to perform the same and these breaches and/or omissions were duly notified by the Respondent multiple times via written correspondence exchanged between the parties hereto much prior to the issuance of statutory notice of demand under the IBC.
Company Appeal (AT) (Insolvency) No. 439 of 2020 11
19. It is further submitted that the Ld. Adjudicating Authority had noted the same and based on these rejected the Application filed under Section 9 of the IBC. The Ld. Adjudicating Authority had taken note of the email dated 27.03.2015 sent by the Respondent (at page 52 of the Reply Affidavit), HEL's email to Appellant on 30.03.2015 (at page 53 of the Reply Affidavit), HEL's email to Appellant on 06.04.2015 (at page 54 of the Reply Affidavit), HEL's email to Appellant on 30.04.2015 (at page 56 of the Reply Affidavit), HEL's email to Appellant on 24.06.2015 (at page 60 of the Reply Affidavit), HEL's email to Appellant on 27.06.2015 (at page 59 of the Reply Affidavit), HEL's email to Appellant on 18.08.2015 (at page 63 of the Reply Affidavit), Minutes of Meeting dated 17.08.2015 (at page 61 of the Reply Affidavit), HEL's email to Appellant on 26.08.2015 (at page 63 of the Reply Affidavit), Project review meeting on 09.11.2016, HEL's email to Appellant on 06.06.2017 (at page 78 of the Reply Affidavit) and also further emails and rightly come to the conclusion that the pre-existing dispute between the parties.
20. It is further submitted that the issuance of a Work Completion Certificate by it did not imply waiver of any right to compensation and/or liquidated damages payable by the Appellant and naver implied acquiescence to any delay or any other breach of contract by the Appellant during execution of the same.
21. It is further submitted that admittedly there was an inordinate delay of 3 years and 1 month on part of the Appellant to complete the project which is made evident by the Work Completion Certificate (at page 146 of the Appeal Paper Book).
Company Appeal (AT) (Insolvency) No. 439 of 2020 12
22. It is further submitted that the Respondent relying on the judgment of the Hon'ble Supreme Court in the case of Innoventive Industries Limited Vs. ICICI Bank & Anr. reported in 2018 (1) SCC 407 relied on paragraph 29 and also on the judgment of the Hon'ble Supreme Court in the case of Mobilox Innovations Private Limited Vs. Lirusa Software Private Limited reported in 2018 (1) SCC 353 relied on paragraph 33 in both the judgments the Hon'ble Supreme Court have held that the existence of multiple pre- existing disputes duly notified by it to the Appellant / Operational Creditor via written correspondence much prior to receipt of the statutory demand notice under Section 8 of the IBC, rather the Application 9 of the IBC filed by the Appellant liable to the rejected.
23. It is further submitted that the Respondent further relied on the judgment passed by this Appellate Tribunal in the case of "Vinod Mittal Vs. Rays Power Experts Private Limited & Ors. in Company Appeal (AT) (Insolvency) No. 851 of 2019" this Appellate Tribunal had held that issuance of a Completion Certificate in its favour ipso facto bars the Corporate Debtor from raising any dispute regarding quality of services, while holding that there were pre-existing disputes with both installation as well as operation of the pertinent project.
24. It is further submitted that in the instant case there is delay of more than 3 years from scheduled date of completion under the contract, so issuance of completion certificate will not prohibit them from raising the dispute, this fact has also been taken note by the Ld. Adjudicating Authority. Company Appeal (AT) (Insolvency) No. 439 of 2020 13
25. It is further submitted that the pre-existing dispute between the parties evident from the emails much prior to issuance of statutory notice under Section 8 of the IBC. The Ld. Adjudicating Authority through the impugned order rightly rejected the Application under Section 9 of the IBC filed by the Appellant/Operation Creditor. Therefore, no merit in the instant Appeal. The Appeal is fit to be dismissed.
FINDINGS
26. After hearing the parties and having gone through the pleadings made on behalf of the parties, we are of the considered view that the following facts are admitted in the instant Appeal.
The Respondent has issued two Letters of Award dated 25.11.2014 for supply of Complete LP Piping System Packages (First Part) 3 x 150 MW TPP and also contract for "Service of Complete LP Piping System Packages (First Part) for 3 x 150 MW TPP IPC (H) L Haldia Project". There were two Letters of Award (i) one for Supply Portion and another (ii) Service Portion (Annexure - VI at page 112 to 132 of the Appeal Paper Book).
The value of the contract towards "Service Portion" was for a sum of Rs. 4,77,54,300/- and Rs. 20,97,47,000/- towards "Supply Portion" on account of supply of (i) Pipes (ii) Pipe Fittings and (iii) Plates etc. The Appellant has successfully completed their part of the Job to the entire satisfaction of the Respondent as early as February, 2018. The Respondent issued a Work Completion Certificate dated 28.02.2019 Company Appeal (AT) (Insolvency) No. 439 of 2020 14 certifying that the work has been completed in May, 2018 (Annexure VIII at page 146 to 153 of the Appeal Paper Book).
The Appellant / Operational Creditor has sent a notice dated 04.06.2019 under Section 8 of the IBC to the Respondent / Corporate Debtor (Annexure- XXII at page 194 to 208 of the Appeal Paper Book), thereafter, Application under Section 9 of the IBC was filed before the Ld. Adjudicating Authority.
From the perusal of the record and argument advanced on behalf of the Respondent and the emails corresponded between the parties are much prior to receipt of the statutory notice issued under Section 8 of the IBC which is evident from Reply Affidavit filed by the Respondent. The email dated 27.03.2015 sent by the Respondent (at page 52 of the Reply Affidavit), HEL's email to Appellant on 30.03.2015 (at page 53 of the Reply Affidavit), HEL's email to Appellant on 06.04.2015 (at page 54 of the Reply Affidavit), HEL's email to Appellant on 30.04.2015 (at page 56 of the Reply Affidavit), HEL's email to Appellant on 24.06.2015 (at page 60 of the Reply Affidavit), HEL's email to Appellant on 27.06.2015 (at page 59 of the Reply Affidavit), HEL's email to Appellant on 18.08.2015 (at page 63 of the Reply Affidavit), Minutes of Meeting dated 17.08.2015 (at page 61 of the Reply Affidavit), HEL's email to Appellant on 26.08.2015 (at page 63 of the Reply Affidavit), Project review meeting on 09.11.2016, HEL's email to Appellant on 06.06.2017 (at page 78 of the Reply Affidavit). The Respondent have raised disputes much prior to sending of the notice under Section 8 of the IBC.
Company Appeal (AT) (Insolvency) No. 439 of 2020 15 The Appellant neither denied these facts nor doubted these emails corresponded between the parties. These facts show that there was pre- existing dispute between the parties.
The Ld. Adjudicating Authority has rightly taken note of these emails and come to the conclusion that there is pre-existing dispute between the parties and rejected the Application under Section 9 of the IBC filed by the Appellant herein.
ORDER
27. Taking all these facts and circumstances of the case, we have no other occasion to interfere in the impugned order. The impugned order dated 10.02.2020 passed by the Ld. Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata, in C.P. (IB) No. 987/KB/2019 is hereby affirmed. There is no merit in the Appeal. The Appeal is hereby dismissed. No order as to costs.
28. Registry to upload the Judgment on the website of this Appellate Tribunal and send the copy of this Judgment to the Ld. Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata, forthwith.
[Justice Anant Bijay Singh] Member (Judicial) [Ms. Shreesha Merla] Member (Technical) New Delhi 18th January, 2022 R. Nath.
Company Appeal (AT) (Insolvency) No. 439 of 2020