TaxTMI 
TaxTMI 
2017 (12) TMI 1180
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....nd Bridges etc. (2) Gayatri Projects Limited (herein referred to as Respondent/Corporate Debtor) was incorporated under the provisions of Companies Act, 1956 on 15.09.1989. And its authorised share capital is Rs. 80 crores with paid-up capital of Rs. 35.45 crores (approx) divided into 3, 54, 50, 380equity shares of Rs. 10/- each. (3) On 09.10.2007, the Corporate Debtor was awarded a contract by NHAI of design, construction, development, finance, operation and maintenance of km 0.000 to km 49.700 On National Highway No. 25/26 in the states of Uttar Pradesh and Madhya Pradesh under North South Corridor (NHDP Phase-II)- Package NS1/BOT/UP-2 and of design, construction, development, finance, operation and maintenance of km 49.700 to km 990.005 on National Highway No. 26 in the States of Utter Pradesh and Madhya Pradesh under North South Corridor (NHDP Phase-II)-Package NS1/BOT/UP-3 and operation creditor made an offer to the corporate debtor for execution and completion of certain works arising out of the said contract. (4) Subsequently, the petitioner and respondent entered into Sub-contract Agreement on 12th October, 2007 for carrying out Bridge Work in con....
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....all be paid by them in the month of April, 2014 instead of March, 2014 and second instalment shall be paid in the month of June, 2014 instead of April, 2014. However, till date nothing has been paid so far. (8) The Petitioner/Operational Creditor issued a Demand notice dated 20th February, 2017 in prescribed Form 3 under Rule 5 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 to the Corporate Debt or by calling upon them to pay the outstanding amount of Rs. 2,28,32,742 which includes interest within 10 days from the date of receipt else communicate pendency of suit or arbitration proceedings in respect of demand. (9) The said notice was duly received and served upon the Corporate Debtor on 27.02.2017, and despite expiry of the period of 10 days as provided under the code; the Corporate debtor failed to either reply or bring to the notice of the Operational Creditor; existence of any dispute or proof of payment of unpaid operational debt as claimed by the applicant/operational creditor. Hence this Company petition is filed by the Petitioner/Operational Creditor. 3. The Respondent/Corporate Debtor have filed a counter dated 25th Ap....
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.... work was never executed by the Petitioner. (d) It is reiterated that the Respondent entrusted a bridge work to the Petitioner vide Agreement dated 19.04.2011 and it has to construct the bridge at km. 577.550 to km. 610.00 of Indore-Dewas Project and should be completed within a period of 18 months from the date of handing over of the site. The Respondent handedover the hindrance free site on 31.06.2011. Therefore, the schedule completion date was 31.12.2012. As per the agreement dated 19.04.2011, all the works to be completed in all respects by January, 2013. However, the Petitioner has executed only up to 51% work. As per Clause No.29 of Agreement dated 19.04.2011, if the Agreement works are not completed as agreed upon, the Petitioner is liable to pay pre-estimated damages. Accordingly, the Petitioner agreed to compensate the damages of Rs. 50,000/- per day subject to ceiling of 10% of the contract sum. (e) Because of the Petitioner's irresponsible actions/inactions, the Respondent suffered delay of 518 days. As per clause 19 of the said Agreement, the Petitioner is liable to pay pre-assessed damages i.e. Rs. 50, 000/- x 518 days, which is more than 10% of the ....
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....es and the Corporate Debtor has come with plea of liquidated damages, when the Petition is filed. (4) After receiving notice under Section 8 of the IBC, 2016 on 22.02.2017, the Respondents failed to reply the same within the stipulated period i.e. 10 days, thereby forfeited its right to give any reply for the same. The contentions of the Respondents that they have given reply to notice under section 8 of IBC i.e. on 16.03.2017 cannot be considered it as a reply to the demand notice. It is relevant to point out that the copy of the present petition was delivered to the Respondents on 15.03.2017 and sending the said reply on 16.03.2017 is an afterthought. Moreover, it is baseless, frivolous and unrealistic facts. (5) The Respondents have also filed CA No. 1620/2016 before the Hon'ble High Court by interalia seeking to convene the meeting of unsecured creditors of the Corporate Debtor for the purpose of considering and approving the Composite Scheme of Arrangement with or without modification. The meeting was held on 23.01.2017 and the Petitioner was also called for the meeting as one of unsecured creditors and the Scheme was opposed by the Petitioner during the said....
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....s counter; though in the counter-affidavit it has wrongly and falsely alleged to have paid certain amounts as claimed in the present petition It has also failed to give any reference of any dispute or proceedings pending before any court of law or arbitration in terms of the provisions of the Code and as discussed and settled in the case of "Kirusa Software (P.) Ltd. v. Mobilox Innovations Limited decided on 24.05.2017 vide Company Appeal (AT) (Insolvency) 6 of 2017 by the Hon'ble NCLT, New Delhi" (3) There are unequivocal, undisputed and unambiguous admissions on behalf of the corporate debtor in respect of the due amounts vide different communications as well as in its reply/counter filed to the present petition. The corporate debtor vide its e-mail dated 25.03.2014 while replying to an email dated 24.03.2014 of operational creditor undisputedly agreed for paying an amount of Rs. 24,90,497/- to the operational creditor in respect of first contract dated 12.10.2007 however nothing as such has happened till date despite repeated assurances. (4) That in respect of the second contract dated 19.04.2011, there are five R.A. Bills i.e. R.A. Bill No. 24, 25, 26, 27 ....
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....s being manufactured only with an intention to cause wrongful gains from it. (9) He has further contended that the Corporate Debtor has deliberately and mala fidely given adjustment to the amounts due to the Operational Creditor in respect of the contract dated 12.10.2007 against the contract dated 19.04.2011. And the same is not legally tenable in terms of the Judgment passed by the Hon'ble Supreme Court in the case of "Union of India v. Raman Iron Foundry AIR 1974 SC 1265" and by Punjab and Haryana High Court in the case of "SECL Industries Ltd. v. State of Haryana CWP No. 13285 of 2012 decided on 09.10.2012". (10) It is further contended that the I&B Code is a separate legislation, which has been introduced to keep a check on illegal activities of the corporate debtor. It is contended that a reply if any issued earlier, under Companies Act does not have any bearing upon the present proceedings as these proceedings are all together different. (11) The following judgments are relied upon by the petitioner in support of their case: (a) "Kirusa Software (P.) Ltd. (supra)" (b) "Union of India v. Raman Iron Foundry AIR 1974 SC 1265" ....
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....reditor in UP-2 package; (iii) Agreement dated 19.04.2011 in Indore-Dewas of NH-3 Package, whereby the Corporate Debtor entrusted a Bridge work; and (iv) LOI dated 23.01.2011, whereby the Corporate Debtor entrusted earth work in Indore-Dewas of NH-3 Package. The issues in relation to Agreement Nos. 1 and 2 were settled in June 2012. Therefore, the disputes in relation to Agreement Nos. 1 and 2 are barred by limitation. And no dispute was raised by the Corporate Debtor in relation to 4th Agreement. The present petition is filed against Agreements dated 12.10.2007 and 19.04.2011 and the following are his contentions: In re: The disputes in relation to the Agreement dated 12.10.2007: While agreeing with the execution of agreement, it is stated final account was settled in June 2012 i.e. almost 5 years prior to filing of subject Company Petition. As per the final account, the Operation Creditor was entitled to Rs. 50,30,451/-. However, the Operation Creditor was liable to pay Rs. 31,56,661/- to the Corporate Debtor in Indore-Dewas Project i.e. LOI dated 23.01.2011 (4th Agreement) referred above. The said amount was adjusted against the amoun....
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....d) It is contended that that since the Corporate Debtor had invoked the Arbitration in relation to the 2nd Agreement; Company Petition is liable to be dismissed on this count also." 9. The case listed for admission on 12.04.2017, 26.04.2017, 08.05.2017, 09.06.2017 and finally on 10.10.2017and the counsel for the Respondent takes notice on 12.04.2017. The case was adjourned on the above dates in order to give sufficient opportunity to the Respondent so as to put their defence to their satisfaction and also to see whether the respondent, being a reputed Company, wanted to settle the issue before initiating CIRP against it, by this Tribunal. Since the Respondent are not willing to settle the outstanding bills of the Petitioner pending with them, there is no other alternative the Adjudicating Authority to consider the merits of the case whether to initiate CIRP or not basing on the facts available on records. 10. Since the present Company petition is initiated u/s 9 of the IBC, the following are fundamental issues relevant for consideration. i. Whether there is an "operational debt" as defined exceeding Rs. 1 Lakh? ii. Whether the documentary evidence furn....
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....e is supposed to see whether statutory demand is responded by the Corporate Debtor with suitable material or not. Thereafter, it has to examine whether debt and default in question occurred or not. In the instant case, as stated by the learned counsel for the petitioner, the respondent did not respondent to the statutory demand notice under the provisions of IBC, 2016 except giving a belated reply, that too after filing the present Company petition, stating unrelated and untenable grounds, as an afterthought. 13. As per section 9(1) of the IBC, 2016, after the expiry of the period of 10 days from the date of delivery of the notice or invoice demanding payment, the Operational Creditor may file an application before the Adjudicating Authority for initiating a CIRP, if he has not received payment or intimation of dispute, the Adjudicating Authority has to admit the application within 14 days of the receipt of the application, if the application is complete in all respects and reject it, if it is incomplete. 14. In the instant case, after, making all efforts by the Operational Creditor to recover the outstanding amount due from the Respondent, has finally issued demand notice da....
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....ny itself under the Companies Act. Even they did not say they have raised any dispute before any authority or resorting to arbitration. Moreover, this reply cannot be treated a reply to the demand notice. 16. The petitioner has also filed his banker statement (State Bank of India) at Pages 123 to 127 of the material papers filed along with the CP, to show that the amount was not paid by the Respondent. The above circumstance clearly shows that the petition/application filed u/s. 9 of IBC is complete in all respects and it is a fit case to admit the application u/s. 9(5) of IBC, 2016. 17. It is also relevant to point out here the casual nature of filing counter, on behalf of the Respondent, in a case, where serious consequences would ensue by admission of the case by the Adjudicating Authority. The Company petition is opposed by Respondent by filing a counter by one Mr. M. Praveen Kumar, DGM (Contracts) of respondent Company. It is relevant to point out that this counter affidavit stated to have been signed on 25.04.2017, but it is stated to have been attested by one Shri Challari Nageswara Rao, Notary on the next day i.e. on 26.04.2017. It is also not known as to how an affid....
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....ime to the Corporate Debtor and it should admit the case by initiating CIRP as prayed for. Mr. Achin Goel is right with above contention. However, before initiating CIRP under IBC, which would have serious legal consequences apart from eroding the goodwill of Corporate Debtor, it is just and equitable to extend full opportunity to the Corporate Debtor so as to see that the issue in question should get some sort of solution. Apart from that, principles of natural justice are invariable to be to be followed by judicial Authorities, while passing any adverse orders affecting the rights of other party/parties. Therefore, we have granted enough time to the Corporate Debtor for reconciliation of the issue in question. Unfortunately, the Corporate Debtor, who is stated to be solvent to pay its debts, has failed to avail opportunity afforded by the Adjudicating Authority and taken Operational Creditor into confidence to resolve the issue, leaving the Tribunal with no other alternative except to decide the issue of CIRP. The Corporate Debtor have time and again reiterated the very same untenable grounds like, it is for the petitioner to refer the matter for arbitration, they have adjusted t....
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....e so called reply dated 16.03.2017 is cannot be called a reply to the Demand notice issued under the provisions of IBC and the Rules made thereunder. It is not in dispute that the petitioner and respondent are involved in several sub - contracts and the Adjudicating Authority cannot go into roving enquiry about each sub contract assigned to the petitioner by the respondent and it can consider only with reference to issue revolve around the Demand notice in question. Admittedly, the petitioner has made out a case with regard to the outstanding amount as per the impugned demand notice in question. In the absence of any agreement between the parties for set off, no party unilaterally can do it. And it should be mutually agreed between the parties. It is not case of respondent that the petitioner has accepted for the so called set off/adjustments/liquidated damages. 21. As per the arbitration clause made in the sub-contract agreement, an Engineer appointed by the respondent is Competent Authority to decide dispute with regard to outstanding amount of the respondent. It is for the respondent to refer the disputed question of outstanding amount to the arbitration as per the clau....
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..... One of the relevant para of the Hon'ble Supreme Court in the said judgment, with reference to the present is para 45 which is extracted below for ready reference: "Going by the aforesaid test of "existence of a dispute", it is clear that without going into the merits of the dispute, the appellant has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence. The defense is not spurious, mere bluster, plainly frivolous or vexatious. A dispute does truly exist in fact between the parties, which may or may not ultimately succeed, and the Appellate Tribunal was wholly incorrect in characterizing the defence as vague, got-up and motivated to evade liability." Under para 4, it is further stated that "the Demand notice sent by the respondent was disputed in detail by the appellant in its reply dated 27th December, 2016 which set out the e-mail of 30th January, 2015. In the instant, as stated supra, the respondent has not admittedly raised any dispute by giving a reply to the impugned demand notice dated 20.02.2017 issued by the petitioner, under IBC as stated supra. It ha....
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....r continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in any court of law, Tribunal, arbitration panel or other authority: (ii) Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein; (iii) Any action to foreclose, recover or enforce any security Interest created by the Corporate debtor in respect of its property including any action under Securitization and Reconstruction of Financial Assets and Enforcement of Security interest Act, 2002 (54 of 2002); (iv) The recovery of any property by an owner or lessor where such property is occupied by or in possession of the corporate Debtor; (v) Direct to cause a public announcement of the initiation of Corporate Insolvency Resolution Process immediately as prescribed under section 15 (1) and (2) of Insolvency and Bankruptcy Code, 2016 and on www.ibbi.gov.in (designated website of Insolvency and Bankruptcy Board of India, circulated vide IIBI/IP/PUBLIC ANN/221 dated 01.02.2017) and e-mail to [email protected], in addition to other accept....