TaxTMI 
TaxTMI 
2019 (2) TMI 1113
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....ce of a dispute between the two parties as the Appellant was contesting a specific performance civil suit on one hand and on the other hand pressing for commencement of insolvency proceedings in respect of an amount which is the subject matter in both the proceedings. The Appellant has, through the medium of instant appeal, assailed the impugned order on various grounds set out in the memo of appeal. 2. The factual matrix of the case lies within a narrow compass. Appellant was awarded an EPC Contract by one Mashkour Sugar Mills, Sudan (hereinafter referred to as 'Mashkour') for an amount of US$.149975000 for commissioning of a sugar plant at its site at White Nile State, Sudan with capacity of crushing 8750 tons of sugarcane per day which included all activities right from designing to commissioning. The said project was proposed to be financed under the Government of India's line of credit being operated through Export-Import Bank of India (EXIM Bank). Respondent was selected as sub-contractor for the said project through competitive bidding. A Tripartite Agreement dated 18th December, 2010 came to be executed between Mashkour, the Appellant and the Respondent in this regard. In ....
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....spute with respect to the Operational Debt. This was contested by the Appellant as being spurious. Appellant claimed that subject matter of the suit was completely different from the subject matter of the petition under Section 9 of the I&B Code and pendency of the suit in no manner operated as a bar against the Appellant to claim payments from Respondent qua the Operational Debt. 4. The Adjudicating Authority found that the Appellants suit for specific performance and initiation of Corporate Insolvency Proceedings at his instance could not run side by side. The Adjudicating Authority, while interpreting the terms of Tripartite Agreement observed as under:- "7.1. On elaborate analysis of the background of the case in the light of the Agreements/Tri-partite Agreements executed it emerges that there was an Agreement for Engineering, Procurement and Construction (EPC) to be executed under the instructions of Mashkour (in the Agreement referred as "The Employer"). EPC Contractor is made responsible for all the activities. On completion of the project had over the same to the Employer. A contracting party who is actually performing all these jobs as assigned for execution is, therefo....
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....t transaction which is neither the subject matter of demand notice issued by the Appellant under Section 8(1) of I&B Code nor the petition filed by it under Section 9 of the said code. 7. Per contra it is contended by learned counsel for Respondent that the Appellant is not an Operational Creditor of the Respondent as there is no existence of Operational Debt. Learned counsel would further submit that the Appellant has neither provided any goods nor services to the Respondent so as to raise a claim against the Respondent as an 'Operational Creditor'. It is further contended that no amount is due and payable to the Appellant under the Tripartite Agreement as in terms of the said agreement commissioning of the sugar plant was to be executed by the Respondent which was funded by EXIM Bank and the Respondent has received interest free advance of US$.10.62 millions equivalent to Rs. 47.12 crores from EXIM Bank on instructions from Mashkour. It is further contended that no amount is due and payable to the Appellant under the Memorandum of Understanding dated 18th December, 2010 executed between Mashkour, Appellant and the Respondent, which supersedes the Tripartite Agreement. It is furt....
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.... contractual relation between such person and the Corporate Debtor in regard to a transaction which may have been executed under the agreement. Thus, reference to the Tripartite Agreement executed inter-se 'Mashkour', Appellant and the Respondent becomes inevitable. A bare look at the aforesaid Tripartite Agreement dated 18th December, 2010 would reveal that the Appellant, who was appointed as EPC Contractor by 'Mashkour' in terms of agreement dated 11th October, 2009, and 'Mashkour' jointly appointed Respondent as sub-contractor to complete the works specified in the Tripartite Agreement against total consideration of US$.106.2 Million. It was in adherence to the aforesaid Tripartite Agreement that the Appellant made an advance payment of US$.10.62 Million in Indian currency to Respondent. This represented 10% of the sub-contract price as reflected in sub-clause 14.1 of the Tripartite Agreement. Subsequently on 15th June, 2017, 'Mashkour' terminated the EPC Contract dated 11th October, 2009 with the Appellant. Such an eventuality was contemplated in Tripartite Agreement in sub-clause 15.2 which provided in unambiguous terms that: "xxx... In the event of the Mashkour -OIA contrac....
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....ing advanced 10% of the contract value to Respondent - sub-contractor as advance payment had a claim in respect of provision of goods or services bringing him within the definition of 'Operational Creditor', to whom an 'Operational Debt' was owed by the Respondent - 'Corporate Debtor'. The plea raised by the Respondent that he had received the advance money from EXIM Bank on the instructions of 'Mashkour' cannot be said to be supported by record as such Advance money was admittedly paid under the Tripartite Agreement dated 18th December, 2010 well before the Tripartite Agreement got superseded. The Adjudicating Authority declined to address this issue on the ground that the matter was sub-judice before the Hon'ble High Court ignoring its own observation that the suit filed by the Appellant sought the relief of specific performance of contract. The reluctance on the part of Adjudicating Authority to address the issue whether non-refund of the amount paid by the Appellant to Respondent, as advance amount, in terms of the Tripartite Agreement gave rise to a claim in respect of provisions of goods and services cannot be appreciated as the nature of relief claimed in the suit was disti....
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....ault from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt", which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be. 29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first del....
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....he dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application." On perusal of record, we find that the Appellant - Operational Creditor has in his demand notice dated 23rd November, 2017 at page 253 of the paper book specifically stated that the Respondent-Corporate Debtor has replaced Appellant as EPC Contractor for the project in terms of EPC contract dated 5th July, 2017 and thereby the Tripartite Agreement dated 18th April, 2010 stands superseded and in view of the same Respondent, being unable to perform under the Tripartite Agreement was liable to refund the advance amount of Rs. 47,12,10,000/- being equivalent of US$.10.62 Million. Responding thereto the Respondent, while admitting that it had received equivalent of US$.10.62 Million as advance money, claimed that it had received the advance money on behalf of 'Mashkour' in terms of the Tripartite Agreement, which stood terminated as 'Mashkour' had entered into fresh contract with the Respondent. Respondent further stated that it was under no legal or contractual obligation to refund the adva....