TaxTMI 
TaxTMI 
2019 (1) TMI 137
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....standing amount of Rs. 38,77,88,860/- (Rupees Thirty Eight Crore Seventy Seven Lakhs Eighty Eight Thousand Eight Hundred Sixty Only). 2. The case is listed for admission and hearing on various dates viz. 22.11.2017, 29.11.2017, 07.12.2017, 19.12.2017, 24.01.2018, 19.02.2018, 13.03.2018, 19.04.2018, 09.05.2018, 01.06.2018, 15.06.2018, 17.07.2018, 10.08.2018, 11.09.2018, and finally heard on 24.10.2018 and orders reserved. 3. Brief facts of the case, as mentioned in the Company Petition, are as follows: 1) M/s. IMECO Limited, (the Petitioner/Operational Creditor) is a company registered under the provisions of Companies Act, 1956. It is one of the largest engineering Organization in India, inter alia having required expertise and infrastructure for supply and execution of different types of EPC contracts including that for supply and Retro fitment of middle berths on longitudinal side wall of coaches berths etc. It has well equipped manufacturing facility for manufacture and fabrication of pressed, fabricated & welded structures and products including Berths at Kharagpur West Bengal. 2) M/s. BEML, a Mini Ratna Category (Respondent/Corporate Debtor) is a Public Sector under taki....
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....in completing the contract on time. * Payments to IMECO as per the work order will be paid on Back-to-Back basis i.e. in proportion to and in relation to receipt of payment from Supply and Retrofitment of middle berths on longitudinal side wall of coaches and cushioning of berths railways. b. IMECO * IMECO will offer its services to BEML for submission of tenders wherever required or any other services BEML may require. * IMECO will purchase and supply all the new seats and bought out components and other items, and BEML will purchase whenever required for completing the work as per the schedule. * IMECO will mobilise tools and tackles, plant and machinery etc. to undertake the work at various locations and work shop. * IMECO shall undertake the Supply and Retrofitment of Middle berths as well as all allied activities associated with it through its project teams on mutually agreed terms. * The above Project will be carried out at various sites/locations as required by Indian/Zonal Railways. IMECO will be responsible to maintain all such sites and the committed delivery schedule under the supervision of BEML team. * IMECO shall not participate directly in the tenders....
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.... of performance of the Contract. In total 44 contracts were executed between the Petitioner and the Respondent. (6) While the scope of work in respect of the contracts awarded by the respective Zonal Railways to the Corporate Debtor was nearing completion, on 18.02.2009, the Railway Board communicated the discontinuation of the scheme for provision of middle berths, thereby proposing to terminate the Corporate Debtor's contracts. The Operational Creditor had to take up the domino effect on account of the back-to-back applicability the contracts with respect to the payment terms. (7) On 06.03.2009 the Corporate Debtor had written to the respective zonal Railway Divisions intimating them about the completion of the manufacture of the entire quantity of the middle berths much before the cut-off date as finalized by the Railway Board as on 30.03.2009, and raised the invoices accordingly. In the meantime Railway Board vide its letter dated 30.03.2009, advised that payments be made to the contracting agency for the berths and mountings already manufactured but not fitted till the issue of notification. The Corporate Debtor accordingly submitted the requisite details, ....
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....1) When the Respondent/Corporate Debtor failed to pay the outstanding amount, a demand notice/invoices demanding payment was issued on 09.08.2017 under Form-3 to the respondent. In pursuant to the demand notice, a reply dated 21.08.2017 was sent by the Respondent raising dispute. (12) A copy of the Certificate issued by the Axis Bank Limited, Banker of petitioner, is filed confirming that BEML has not made any payment towards the undisputed operational debt. Therefore, the present petition is filed, by inter alia, seeking to initiate Corporate Insolvency Resolution Process in respect of Corporate Debtor. 4. The Respondent has opposed the Company Petition by filing a statement of objection dated 13.03.2018 and subsequent pleadings inter alia contending as follows: (1) In pursuant to the demand notice dated 09.08.2017 issued under the provisions of IBC, 2016, they have already given a reply dated 21.08.2017 by raising dispute. To constitute a default, debt claimed to be unpaid should have been due and payable, as per Section 3(12) of the Code. In the present case, although there does exist amounts that the Operational Creditor is entitled to, the same becomes payable only ....
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...."existence" of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. (4) It is stated that payment terms of each of the 12 LOAs executed between the Corporate Debtor and the Operational Creditor explicitly state that the payments will be done on a back-to-back basis, i.e., as and when payments are received from the respective zonal railways. Further, the MOA dated 18.09.2007 has stressed on the back-to-back payment mechanism. The Operational Creditor is estopped from feigning ignorance about the back-to-back applicability in light of its acknowledgement of the same in several correspondences issued by it. The payment alleged to have been made by the Corporate Debtor was in fact towards the tax amounts that were withheld by the Corporate Debtor, while releasing payments towards the remaining 32 contracts as and when amounts were received from the respective zonal Railways. (5) It is stated that the correspondence dated 15.06.2015, is in fact the Corporate Debtor's response to the Operational Creditor's RTI application dated 21.04.2015. The amount of Rs. 43,08,96,214/- that has been stated to be due as on....
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.... 10 contracts, the materials remain in the warehouse of the Operational Creditor. It is the contractual duty of the Operational Creditor to transport the same to the respective zonal Railways, however in the event of the scheme being withdrawn by the Government, there was nothing they could do to ensure the materials were transferred to the Railways. Therefore, they urged the Tribunal that the petition is liable to be rejected as it is not maintainable. 5. Heard Shri Naresh Balodia, Ms. Varsha Banerjee, Shri Ramesh Kumar Sharma and Ms. Jayashree Parthasarathy, learned Counsels for the Petitioner; Shri K.G. Raghavan, Learned Senior Counsel along with Ms. Ridhima T, Learned Counsel for the Respondent. We have carefully perused the pleadings of both the parties along with extant provisions of the Code and the Rules made thereunder and the law as cited by the respective parties. 6. Ms. Varsha Banerjee, Learned Counsel for the Petitioner/Operational Creditor, while reiterating various averments made in the Company Petition, has further contended as follows: (1) The Corporate Debtor, being a Company registered under the Clause 20 of Section 2 of the Companies Act, 2013 falls within ....
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....t gives rise to a fresh cause of action and thus the instant application is deemed to be filed within the limitation period. The Petitioner maintains a running account, and the last payment was received on 11.02.2016. In respect of this contention, they relied upon the judgment of the Hon'ble High Court of Delhi in Bharath Skins Corpn. v. Taneja Skins Co. (P.) Ltd. [RFA(OS) No. 13 of 2002, dated 21-12-2016. (5) It is the right to apply under the IBC accrued only on 01.12.2016 when the provisions of the IBC came into effect as held by Hon'ble NCLAT in the matter of Brijesh Kumar Agarwal v. Punjab National Bank [C.A (AT) (Insolvency) No. 312 of 2018, dated 5-7-2018]. Therefore, the instant Company Petition is within the limitation. (6) All the invoices in question were raised upon the Corporate Debtor by the Operational Creditor. The invoices raised by the petitioner are with reference to the purchase orders issued by the Corporate Debtor and the goods in question were manufactured on the demand of the Corporate Debtor. The invoices clearly provide that the amount is to be paid within 15 days of the invoice. (7) It is contended that the Corporate Debtor in its reply dat....
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....ons of Contract is reproduced hereunder: Extract of Para 7 of GCC, Indian Railways Assignment of subletting of contract: The Contractor shall not assign or sublet the contract or any part thereof or allow any person to become interested therein any manner whatsoever without the special permission in writing of the Railway. Any breach of this condition shall entitle the Railway to rescind the contract under clause 62 of these conditions and also render the contractor liable for payment to the Railway in respect of any loss or damage arising or ensuing from such cancellation. Provided always that execution of the details of the work by petty contractor under the direct and personal supervision of the Contractor of his agent shall not be deemed to be sub letting under this clause. The permitted subletting of work by the Contractor shall not establish any contractual relationship between the sub-contractor and the Railway and shall not relieve the Contractor of any responsibility under the Contract. (10) Further, all the payments were received by the Petitioner directly from the Corporate Debtor and thus convention of the respondent all payment would be basing on Back....
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....ird party. Therefore, the Appellant cannot take advantage of agreement of transfer of liability of debt of 'Corporate Debtor' to Mr. Dinesh Arora." 19. The 'Corporate Debtor' is a separate entity under Section 9 of the Companies Act, 2013. The order was given by the 'Corporate Debtor' based on which the supply was made to the 'Corporate Debtor' by the 'Operational Creditors', who received the supply on behalf of the 'Corporate Debtor' is an inter se dispute amongst the Directors and the Staff Officers or the Employees of the 'Corporate Debtor'. In absence of privity of contract between the 'Operational Creditors' and Mr. Dinesh Arora, the 'Operational Creditor' could not have made any claim against him based on an agreement reached between two shareholders of the 'Corporate Debtor'. (13) It is further stated that Indian Railways is not privy to the contract with the Petitioner herein, and there is no agreement between the Petitioner and Indian Railways. And further, even the General Conditions of Contract, Indian Railways, categorically provide that subletting of work by the Contractor shall n....
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....ed and it is completely distinct from those claimed through the present insolvency proceeding. (4) It is stated that the relief sought in the present company petition sought by the Operational Creditor is also with respect to recovery of outstanding dues as against the very same contracts that were a subject matter of the said writ petition but it is with regard to two out of the 12 contracts. And the matter is still subjudice before the Hon'ble High Court of Calcutta in APOT No. 79 of 2014 against the Learned Single Judge's judgment dated 18.10.2012 in WP No. 162 of 2012. It is also pointed out that the order of the Hon'ble High Court of Kolkata in WP No. 162 of 2012 acknowledged the back-to-back applicability of the contracts, which has not been challenged by the Operational Creditor to date. (5) It is apposite to note that of the 12 contracts that form the subject matter of the present proceedings, the invoices raised towards Southern Railways-Trivandrum (RFT 33 and 39- Rs. 4,81,54,608/-) and the North Eastern Railways-Gorakhpur (RFT 41- Rs. 3,42,39,768/-) are the highest. While the former remains subjudice before the Hon'ble High Court of Calcutta, the latte....
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....n under sub-section (1) shall he 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; and (d) such other information as may be specified. (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 ....
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....ould have to be rejected. Para 42 "This being the case, is it not open to the adjudicating authority to then go into whether a dispute does or does not exist? It is important to notice that Section 255 read with the Eleventh Schedule of the Code has amended Section 271 of the Companies Act, 2013 so that a company being unable to pay its debts is no longer a ground for winding up a company. The old law contained in Madhusudan has, therefore, disappeared with the disappearance of this ground in Section 271 of the Companies Act. We have already noticed that in the first Insolvency and Bankruptcy Bill, 2015 that was annexed to the Bankruptcy Law Reforms Committee Report, Section 5(4) defined "dispute" as meaning a "bona fide suit or arbitration proceedings...". In its present avatar, Section 5(6) excludes the expression "bona fide" which is of significance. Therefore, it is difficult to import the expression "bona fide" into Section 8(2)(a) in order to judge whether a dispute exists or not. The expression "existence" has been understood as follows: "Shorter Oxford English Dictionary gives the following meaning of the word "existence": (a) Reality, as opp. to appearance. (b)....
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....ointly take up the contracts from the Railways involving Supply and Retrofitment of middle berths on longitudinal side wall of coaches and cushioning of berths in question. As per Article 4 of the Agreement, as mentioned above, it is BEML, who would participate and orders would be obtained as per law from the Railways. Payments to IMECO as per the work order will be paid on back-to-back basis i.e. in proportion to and in relation to receipt of payment from Supply and Retrofitment of middle berths on longitudinal side wall of coaches and cushioning of berths railways. IMECO shall not participate directly in the tenders floated by Indian Railways for Retrofitment of middle berth and cushion seat/back rest or outside India relating to the Indian Railways projects LD, if any, levied due to delayed supply/completion of the contract beyond the delivery date stipulated in the contract, shall be borne by IMECO back-to-back. Both parties would work closely to ensure timely execution of the contracts. All the parties will bear their own costs and there will not be any obligation on Either Party to share or reimburse cost for either of the Parties. The relationship between the Parties is in t....
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....ents will be basing on back-to-back basis and by accepting the same, the Hon'ble High Court also directed the Railways to pay its dues to the BEML and thereafter, directed the BEML to pay to the petitioner herein. 12. Therefore, even though dues/claims are pending with BEML/Respondent, the same are liable to pay until and unless the Railways release its funds for the claims made by the BEML as rightly pointed out by Shri K.G. Raghavan, Learned Senior Counsel for the Respondent. Another issue relevant to the issue in question is that the goods in question were not delivered to the Respondent, and they are stated to be lying in the godowns of the petitioner. However, as per the terms of the contract, the Petitioner is entitled for part payment of the work done, and at the same time, it is entitled for payment only on receipt of the same from the Railways by BEML. As stated supra, due to the change of the policy of the Railways, the main contract in question itself was abruptly terminated. 13. So far as the question of limitation is concerned, although it is a settled position of law that the provisions of Limitation Act would apply to the provisions of IBC, it is to be seen whe....