TaxTMI 
TaxTMI 
2019 (8) TMI 874
X X X X Extracts X X X X
X X X X Extracts X X X X
....otal amount in default is stated as Rs.6,59,19,000/-, as on 05.01.2014. A. Background of the Case : 3. The Operational Creditor and the Corporate Debtor entered into a Power Purchase Agreement ("Agreement") dated 07.06.2007, wherein the Corporate Debtor was to set up a Co- generation facility under the Gujarat Electricity Regulatory Commission (Power procurement from renewable sources) Regulations, 2005. It was agreed between the parties that the Respondent Company would arrange with Gujarat Energy Transmission Corporation Limited for the construction, ownership, operation and maintenance of appropriate transmission line and inter-connection facilities upto the delivery point and would supply electricity/power to the Applicant Company up to the "contracted capacity" of 47.7 MW power during the crushing season and 60.2 MW during the non-crushing season annually. 4. The Scheduled Commercial Operation Date "SCOD" was agreed to be 48 months from the date of the execution of the Power Purchase Agreement i.e. by 06.06.2011. As per Clause 4.3 of the Agreement, it was agreed between the parties that in the event of delay in commissioning of the project beyond the SCOD, the Corpora....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tory Commission, Gandhinagar, for execution of the order dated 06.11.2012. 11. The Ld. State Commission passed an order in Execution Petition in favour of the Operational Creditor stating that the Operational Creditor "may take appropriate course of action as per the provisions of the applicable law of recovery of liquidated damages as decided in Commission's Order dated 06.11.2012". It is further stated that the Corporate Debtor failed to make payment despite the repeated requests made by the Operational Creditor and the order of the learned State Commission. 12. The Operational Creditor submits that the Corporate Debtor, pursuant to a direction of the learned State Commissions filed an affidavit dated 13.08.2016 stating that the Corporate Debtor does not hold any properties or assets of whatever kind or nature in or outside India. Therefore, it can be inferred that the Corporates Debtor is unable to pay and honour its legal and subsisting dues towards the Operational Creditor. 13. Further, on 25.11.2016, the Operational Creditor issued a Legal Notice under Section 434 R/w 433 (e) of the Companies Act, 1956 to the Corporate Debtor to pay the admitted outstanding amount of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ided in the Commission's order dated 06.11.2012 in Petition No. 1202 of 2012'. Therefore, to say that this Tribunal has been moved in order to execute the aforesaid order, is not barred anywhere in view of the NCLAT's Judgement (supra). 18. It is finally argued that since the Debtor is not making the payment and all the procedural formalities have been complied with, this Petition/Application may be Admitted for the initiation of the CIRP. C. Contentions of the Corporate Debtor: 19. In the reply letter dated 10.06.2017 to the Demand Notice sent by the Operational Creditor, the Corporate Debtor has acknowledged the liability by seeking two years' time for making the payment. The debt has not been denied. There is no affidavit in Reply filed by the Corporate Debtor to the present petition. However, the Corporate Debtor has placed its contentions through Written Submissions on record. 20. The first and foremost contention of the corporate Debtor is that the Advocate through which the Demand Notice has been sent is not authorised by the Board of Directors of the Operational Creditor to send the Demand Notice U/s 8 of the Code. 21. Secondly, the Corporate Debtor contends ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecovery of the liquidated damages as decided in the Commission's order dated 06.11.2012 in Petition No. 1202 of 2012". In view of this order it can be ascertained that the debt in hand pertains to 'liquidated damages' and is not an Operational Debt within the meaning of Section 5(21) of the Code. The Liquidated damages are the damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach, such as in this case, non-performance. 27. As held by the Hon'ble Supreme Court in the case of Union of India V. Raman Iron Foundry, [1974 AIR 1265], order dated 12.03.1974: The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty, and according to this principle, even if there is a stipulation by way of liquidated damages, a party complaining of breach of contract can recover only reasonable compensation for the injury sustained by him, the stipulated amount being merely the outside limit. It, therefore ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ein inter alia it was held that: "It is also important to point out that Petitioner had neither provided any goods nor any services to the Corporate Debtor. There is no amount given by the Petitioner to the Respondent in nature of debt. On the other hand, the Corporate Debtor is a vendor, and the applicant has not made payment to it. Hence the petitioner is not an Operational Creditor as defined under the Insolvency and Bankruptcy Code". 30. A conclusion can be drawn from a plain reading of the above said judgements that the liquidated damages arises on breach of contract for which a suit can be filed wherein the damages are required to be ascertained because the said damages must not be allowed arbitrarily. Hence, liquidated damages can be crystallised only after adjudication from a court of law. Its reasonableness is also decided by a court of law. on the other hand, the insolvency proceedings are not the appropriate forum to decide the reasonability of the liquidated damages or to file claim for damages. Hence, the damages claimed in the present case cannot be adjudicated as the same is the subject matter of a civil suit. Liquidated damages are not an actionable clai....