2021 (7) TMI 109 - AT - Insolvency and Bankruptcy

Tribunal dismisses appeal on construction dispute, allowing Corporate Insolvency Resolution Process to proceed.

The Tribunal concluded that there was no pre-existing dispute regarding the construction works undertaken by the Operational Creditor. The issues related ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- Corporate Debtor has not shown anywhere that if the project was not completed or abandoned, any notice was sent to the Operational Creditor, before Operational Creditor sent Demand Notice u/s 8 of IBC. The Document Annexure R-1 filed by Respondent No.1 (Dy. No.25468) shows that even till August, 2016 bills were being paid. Thus, time was not essence of the contract. No dispute can be presumed merely by non-completion of the project in the fixed time or for the reason that the it was the contractor’s fault, when the contract shows responsibilities on both the sides. If Operational Creditor had to continue construction, Corporate Debtor also had to continue paying RA Bills. Thus it cannot be agreed with the argument to make a presumption that there was pre-existing dispute or that the responsibility of non-completion fell on the Operational Creditor. It is concluded that there was no pre-existing dispute regarding the construction works that were undertaken by the Operational Creditor for the Corporate Debtor. Since there was no pre-existing dispute, all the other issues/disputes that relate to the various clauses of the contract agreement such as joint measurements, lack of completion certificate and inadequate and inappropriate certification of the bills become irrelevant insofar as adjudication of Respondent No. 1’s application under Section 9 is concerned. The appeal is dismissed. Issues Involved:1. Pre-existing dispute between the Corporate Debtor and Operational Creditor.2. Validity of demand notices and responses under Section 8 of the Insolvency and Bankruptcy Code (IBC).3. Certification of Running Account (RA) bills and their relevance.4. Alleged payment made by a third party on behalf of the Corporate Debtor.5. Applicability of judgments cited by both parties.Detailed Analysis:1. Pre-existing Dispute:The primary issue was whether a pre-existing dispute existed between the Corporate Debtor and the Operational Creditor. The Adjudicating Authority did not find the dispute raised by the Corporate Debtor as a pre-existing dispute and consequently admitted the Section 9 application of the Operational Creditor. The Appellant cited two letters dated 14.10.2014 and 18.1.2016 as evidence of pre-existing disputes. However, these letters were not mentioned in the Corporate Debtor’s reply to the Section 8 demand notice or the Section 9 application, leading to the conclusion that the dispute was not pre-existing but an afterthought.2. Validity of Demand Notices and Responses:The Operational Creditor issued a demand notice dated 23.2.2018 under Section 8 of the IBC, and the Corporate Debtor replied on 23.3.2018. The Corporate Debtor was required to bring to the notice of the Operational Creditor the existence of a dispute within ten days of receiving the demand notice. The Corporate Debtor failed to do so, and the Adjudicating Authority found no credible evidence of a pre-existing dispute.3. Certification of RA Bills:The Appellant argued that RA bills were not submitted after joint measurements as required by the contract, and thus, the bills were not liable to be paid. The Corporate Debtor did not undertake joint measurements, shifting the responsibility to the Operational Creditor. The bills certified by Satish Wagh, an architect’s representative, were disputed by the Appellant, claiming Wagh was not assigned to the project at the relevant time. However, the RA bills were part of the record of the Adjudicating Authority, and the debt included in the Section 8 notice was deemed due and payable.4. Alleged Payment by Third Party:The Appellant claimed that an amount of Rs. 1,70,00,000 was paid to the Operational Creditor by a third party on behalf of the Corporate Debtor. The Respondent clarified that this payment was not to be adjusted against the debt payable to the Operational Creditor. Even if this amount was deducted, the outstanding balance was still above the threshold limit for the admission of the Section 9 application.5. Applicability of Judgments:The Appellant cited several judgments, including Mobilox Innovations Private Limited v. Kirusa Software Private Limited and Innoventive Industries Ltd. v. ICICI Bank & Anr., to support their contention of a pre-existing dispute. However, since no pre-existing dispute was found, these judgments were not applicable. The Respondent also cited judgments supporting the notion that the pre-existing dispute should be real and not spurious, which aligned with the findings of the Adjudicating Authority.Conclusion:The Tribunal concluded that there was no pre-existing dispute regarding the construction works undertaken by the Operational Creditor. The issues related to joint measurements, lack of completion certificate, and certification of bills were deemed irrelevant for the adjudication of the Section 9 application. The appeal was dismissed, and the Corporate Insolvency Resolution Process (CIRP) was allowed to proceed. The time spent in prosecuting the appeal was excluded from the CIRP period, and no order as to costs was made.