National Company Law Appellate Tribunal
Abc India Limited vs Oriental Epc Private Limited on 31 January, 2022
NATIONAL COMPANY LAW APPELLATE TRIBUNAL,
PRINCIPAL BENCH, NEW DELHI
Company Appeal(AT) (Ins)No. 1128 of 2020
IN THE MATTER OF:
ABC India Limited
P-10, New CIT Road,
Kolkata - 700 073
And
Corporate Office
40/8, Ballygunge Circular Road,
Kolkata - 700 019
Represented by Shri Sunip Mandal
Legal Officer/Legal Representatives ...Appellant
Vs.
Oriental EPC Pvt. Ltd.
(formerly known as
Oriental Nicco Projects Pvt. Ltd)
S.V.Kinariwala Marg,
Law Garden, Ellisbridge,
Ahmedabad - 380 006 ...Respondent
Present:
For Appellant: Mr. Tritharkar Das, Ms. Rituparna Saha, Mr. Kaushik
Chatterjee and Mr. Samridhi Solanki, Advocates.
For Respondents: Mr. Pinaki Reddy and Sharda Garg, Advocates.
J U D G M E N T
DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER
1. The present appeal has been filed by the 'Appellant' under Section 61 of the 'Insolvency and Bankruptcy Code, 2016' (in short 'Code') against the impugned order dated 12.02.2020 passed by the 'Adjudicating Authority' (National Company Law Tribunal), Ahmedabad Bench in CP(IB) No.620/NCLT/AHM/2018.
Company Appeal (AT) (Ins) No.1128 of 2020 Page 1 of 9
2. Brief facts of the case have presented by the Appellant in pleadings/submissions made by the Ld. Counsels are stated hereunder:
a. The Appellant/OC was awarded by the Respondent/ Corporate Debtor (CD) three works orders against Letter of Intent (LOI) dated 01.02.2016. The three works orders are of 15.02.2016, 11.04.2016 & 04.04.201.
b. It has also been stated that value of first work order was amended at a figure which was approximately the three times of the value of original first order by changing the scope of work. The Appellant raised bills to the tune of Rs.6,39,55,775/- out of which the Respondent paid Rs.5,31,34,343/- resulting into a sum of Rs.78,22,421/- due and payable by the Respondent. Site in charge of the Respondent has certified the bill in spite of that and repeated reminders, the outstanding amount has not yet been cleared. The Appellant has issued a demand notice under Section 8 of the Code dated 26.04.2018 to the Respondent. The Respondent has replied to the demand notice vide their letter dated 04.05.2018. The Respondent has disputed the dues on various count such as Liquidated Damage (LD) issue, performance bank guarantee issue etc. c. The Appellant has also stated that it cannot be covered under pre-existing dispute as the Respondent has continue to place multiple orders between April, 2016 to December, 2017. The Appellant has filed petition under the Code with Adjudicating Authority on 02.11.2018 for unpaid Operational Debt amounting to Rs.78,22,421/-.
However, the Respondent filed a money suit in the year 2019 in City Civil Court at Kolkata claiming Liquidated Damages etc. d. The Adjudicating Authority has rejected their petition on account of disputes considering the disputes as genuine disputes and not spurious, hypothetical or illusory. Company Appeal (AT) (Ins) No.1128 of 2020 Page 2 of 9 e. The Appellant has also stated that the four letters dated 09.04.2016, 18.04.2016, 19.10.2016 & 22.11.2016 alleging delay in execution of the work by the Appellant could not have been considered as pre-existing dispute. If that be so, than why they have placed further orders in April, 2016 and December, 2017 even has enlarged the scope of the work on the first work order. So as per the Appellant, the Appeal deserves to be allowed and has requested to set aside the order of the Adjudicating Authority dated 12.02.2020 and his application filed before the Adjudicating Authority be admitted etc.
3. The Adjudicating Authority in its order dated 12.02.2020 has observed that there is a delay in execution of the work, various correspondence between 09th April 2016 to November 2017 reflects slow progress of work, delayed in clearance of calculation, dispute in quality of work, issue of submission of Performance Bank Guarantee, levy of LD as per contract term etc., and has also observed that in its reply to the demand notice, the Respondent vide letter dated 26.04.2018 has disputed the claim and has intimated to the Petitioner after deduction of various amount only Rs. 6007/- is payable and has further observed that in case of dispute, the Adjudicating Authority is not the forum to examine and adjudicate the same claim and determine due and recoverable amount. It is not a substitute to a recovery forum. The operational debt is not free from dispute and has finally rejected the petition of the Appellant under Section 9 of the Code.
4. While the Respondent/CD has stated that in a project work changing of contractors do upset the programme. Hence, they have not changed the contractor and went on placing work order to complete the project work well in time.
5. They have also stated that the Appellant/OC failed to complete and delivere the contracted works within stipulated time as mentioned in the respective works orders leading to huge Company Appeal (AT) (Ins) No.1128 of 2020 Page 3 of 9 losses suffered by the Respondent/CD. The delay was 145 days in first work order, 191 days in second work order and the delay of 27 days to complete the third work order. They have also issued five letters in 2016 to the Appellant regarding the slow progress of work and lack of manpower assigned for the task which has not been denied by the Appellant. The Respondent has also stated that the workorder carries a term of LD , PBG etc .The Respondent has also submitted that the Appellant has not submitted valid Performance bank guarantee till the warranty period as per the contractual terms. The Appellant has failed to provide documentary evidence of the payment of royalties, local taxes etc. as per the contractual terms. As a result of all this, the Respondent has replied to the Demand notice raising all such issues.
6. The Respondent has also filed Money Suit No.16 of 2019 against the Appellant on or about 09.01.2019 before the City Civil Court at Calcutta seeking LD of Rs.30,53,802/- and on account of losses suffered due to such delay further damages of Rs.50 lakhs. In any case this is post issue of demand notice. The Respondent has also stated that it is a company which is earning profits and has several workmen and staffs and paying taxes well in time. They have also alleged that the Appellant wants to pressurize the Respondent Company/CD to extort money by filing petition under the Code.
7. We have gone through the submissions made by the Ld. counsels for the parties, order passed by the Adjudicating Authority and available input on record and are observing as follows:
a. The Appellant has no doubt issued a demand notice as required under the Code for initiation of proceedings under Section 9 of the Code. For brevity and clarity, we are reproducing Section 8 & 9 of the Code:
Company Appeal (AT) (Ins) No.1128 of 2020 Page 4 of 9 "Section 8: Insolvency resolution by operational creditor.
(1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debt or copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed.
(2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor--
(a) existence of a dispute, [if any, or] record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute;
(b) the [payment] of unpaid operational debt--
(i) by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or
(ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor.
Explanation.--For the purposes of this section, a "demand notice" means a notice served by an operational creditor to the corporate debtor demanding [payment] of the operational debt in respect of which the default has occurred.
Company Appeal (AT) (Ins) No.1128 of 2020 Page 5 of 9 Section 9 - Application for initiation of corporate insolvency resolution process by operational creditor.
(1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under subsection (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process.
(2) The application under sub-section (1) shall be filed in such form and manner and accompanied with such fee as may be prescribed.
(3) The operational creditor shall, along with the application furnish--
(a) a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor;
(b) an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt;
(c) a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt [by the corporate debtor, if available;] Company Appeal (AT) (Ins) No.1128 of 2020 Page 6 of 9
(d) a copy of any record with information utility confirming that there is no payment of an unpaid operational debt by the corporate debtor, if available; and
(e) any other proof confirming that there is no payment of any unpaid operational debt by the corporate debtor or such other information, as may be prescribed.] (4) An operational creditor initiating a corporate insolvency resolution process under this section, may propose a resolution professional to act as an interim resolution professional. (5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order--
(i) admit the application and communicate such decision to the operational creditor and the corporate debtor if,--
(a) the application made under sub-section (2) is complete;
(b) there is no [payment] of the unpaid operational debt;
(c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor;
(d) no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and
(e) there is no disciplinary proceeding pending against any resolution professional proposed under sub-section (4), if any.
(ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if--
Company Appeal (AT) (Ins) No.1128 of 2020 Page 7 of 9
(a) the application made under sub-section (2) is incomplete;
(b) there has been [payment] of the unpaid operational debt;
(c) the creditor has not delivered the invoice or notice for payment to the corporate debtor;
(d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or
(e) any disciplinary proceeding is pending against any proposed resolution professional:
Provided that Adjudicating Authority, shall before rejecting an application under sub-clause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the adjudicating Authority.
(6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5) of this section."
b. The Respondent, too , has also replied the same elaborating the disputes involved and has provided item wise deduction etc. including the issue of deduction of LD, Performance bank guarantee and other terms of payment (page 251 -252 of the Appeal paper book).
c. It is true that in a project work change of contractor results into delays and increased costs. So, in a commercial organization an understanding is always created to get the job done through the same contractor.
Company Appeal (AT) (Ins) No.1128 of 2020 Page 8 of 9 d. Deduction on account of LD and Performance bank guarantee is a part of contractual terms and hence the Code is being a summary proceeding, the voracity of the statement cannot be examined like a trial court.
e. Pre-existing dispute and chasing for payment also cannot be ruled out in this instant case.
f. The Hon'ble Supreme Court in Civil Appeal No.9597 of 2018, "Transmission Corporation of Andhra Pradesh limited Vs. Equipment Conductors and Cables Limited" vide para 15 has already held that IBC is not intended to be a substitute to a recovery forum and also laid down that whenever there is existence of real dispute, the IBC provisions cannot be invoked.
g. Considering the above facts and circumstances of the case and the law laid down on the subject, we are not in a position to set aside the order of the Adjudicating Authority and we uphold the order of the Adjudicating Authority dated 12.02.2020. Accordingly, the Appeal is dismissed. No order as to costs.
[Justice Ashok Bhushan] Chairperson (Dr. Ashok Kumar Mishra) Member(Technical) (Dr. Alok Srivastava) Member (Technical) 31st January, 2022 New Delhi Raushan.K Company Appeal (AT) (Ins) No.1128 of 2020 Page 9 of 9