2020 (10) TMI 222 - Tri - Insolvency and Bankruptcy

Tribunal orders liquidator to include idle charges in admitted claim

Navayuga Engineering Pvt. Ltd. Versus Devendra Prasad, Liquidator of East Coast Energy Pvt. Ltd.

The tribunal found the liquidator's rejection of the claim for idle charges improper and directed the liquidator to include the claimed amounts in the ... Rejection of part of the claim submitted by the Appellant against M/s. East Coast Energy Pvt. Ltd., (the Corporate Debtor herein) towards idle charges as a part of termination payment due under the contract between the parties - HELD THAT:- The claim of the applicant has arisen out of the contract and amended contract entered into between the applicant and the Corporate Debtor on 30.01.2010 and 4.10.2013 respectively. It is also a fact on record that the amount claimed relates to the period between 01.06.2015 and 30.11.2015 covered under Progressive Payment Certificates (PPCs) 46 to 51. It is also not in dispute that the applicant herein has written several letters dated 13.8.2015, 18.9.2015, 12.12.2015 and 25.01.2016 and reminder emails dated 19.8.2015, 15.10.2015 and 23.01.2016 to the Corporate Debtor calling for payment of outstanding amounts as per the contract - between them. Thereafter, since no reply was received to any of the letters or reminder emails, it appears that the Applicant herein issued termination notices dated 26.01.2016 and 27.02.2016 intending to terminate the contract that existed between the applicant and the Corporate Debtor - However, it was only on 06.04.2016, the Corporate Debtor had responded to the Applicant herein with regard to the payment of outstanding amounts. But even thereafter since nothing concrete materialized, the contract between the applicant and the corporate debtor came to be terminated on 04.06.2016 as per Article 15.2 of the Contract dealing with termination due to non payment of dues by the owner, i.e., the Corporate Debtor herein. It is a matter of record that the order of admission of the Corporate Debtor for CIRP was passed on 03.04.2018 and, subsequently, order of Liquidation was passed vide order dated 22.04.2019. However, in between the last PPC raised and the date of admission of CIRP (i.e. December, 2015 to March, 2018) the corporate debtor has neither disputed nor whispered anything contrary to the demand raised by the Applicant herein including the claim of 'idle charges'. From the records, it is also observed that the Corporate Debtor had not, at any point of time during the period December, 2015 to March, 2018, objected to the termination of Contract on 04.06.2016 by the applicant herein or raised any objection that such termination was not proper or was not as per the terms of the Contract. In the absence of any material to show that the Corporate Debtor during the period between the date on which the last PPC was raised and the date of admission of CIRP, had either disputed or objected to the amounts claimed including the 'idle charges' as part of termination payments under Article 15.7 or opted for any other legal recourse available against such claim, the Liquidator ought not to have rejected the claim under the caption 'idle; charges' on the basis of his own interpretation of the such claim to be of nature of 'consequential damages'. Application allowed. Issues Involved:1. Legitimacy of the liquidator's rejection of the claim for idle charges.2. Applicability of contractual provisions regarding termination and idle charges.3. Verification process and obligations of the liquidator under the Insolvency and Bankruptcy Code, 2016.Detailed Analysis:1. Legitimacy of the Liquidator’s Rejection of the Claim for Idle Charges:The appellant, M/s. Navayuga Engineering Private Limited, filed an Interlocutory Application under section 42 read with 60(5)(a) & (b) of the Insolvency and Bankruptcy Code, 2016, against the liquidator, seeking to set aside the liquidator's decision communicated via email dated 28.06.2019. The liquidator had rejected a part of the claim amounting to Rs. 24,01,63,511/- towards idle charges, which the appellant argued was part of the termination payment due under the contract with the Corporate Debtor, M/s. East Coast Energy Pvt. Ltd. The appellant contended that the rejection was illegal and arbitrary.2. Applicability of Contractual Provisions Regarding Termination and Idle Charges:The contract and its amendment between the appellant and the Corporate Debtor included provisions for termination and associated payments. The appellant argued that the termination of the contract was proper under Article 15.2 due to non-payment by the Corporate Debtor. The appellant claimed that upon termination, they were entitled to payments including idle charges as per Article 15.7. The respondent/liquidator countered that the termination was not proper and that the idle charges were consequential damages excluded under Article 9. The tribunal found that the claim was not for damages but for costs incurred due to the sudden stoppage of work and non-payment of dues, thus falling under Article 15.7 and not Article 9.3. Verification Process and Obligations of the Liquidator under the Insolvency and Bankruptcy Code, 2016:The tribunal noted that the liquidator did not offer the appellant a chance to substantiate the claim for idle charges. Under Section 39 of the IB Code, the liquidator is mandated to verify claims and may request additional documents or evidence. The tribunal found that the liquidator failed to provide this opportunity and instead interpreted the claim as consequential damages. The tribunal emphasized that the Corporate Debtor had not disputed the claims during the relevant period, and thus, the liquidator should not have rejected the claim based on his interpretation.Conclusion:The tribunal concluded that the liquidator's rejection of the claim for idle charges was improper. The tribunal directed the liquidator to include the amounts claimed under the head 'idle charges' to the admitted claim of the appellant. Consequently, the application was allowed, and the liquidator was instructed to admit the claim in its entirety. The application bearing IA No. 696 of 2019 was disposed of accordingly.