TaxTMI 
TaxTMI 
2020 (9) TMI 699
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.... on 11.09.2009 under the Companies Act, 1956, with the Registrar of Companies (RoC), Maharashtra, Mumbai. Its CIN is U70102MH2009PTC195720. Its registered office is at Flat No.103/C, Thosar House, Hanuman Cross Road No.1, Near Shivleela Hotel, Vile Parle (E), Mumbai 400 057, within the State of Maharashtra. Therefore, this Bench has jurisdiction to deal with this petition. 3. The present petition was filed before this Adjudicating Authority on the ground that the Corporate Debtor failed to make payment of a sum of Rs.94,64,770.00 (Rupees ninety-four lakh sixty-four thousand seven hundred and seventy only) as principal and Rs.68,66,919.00 (Rupees sixty-eight lakh sixty-six thousand nine hundred and nineteen only) as interest as on 22.08.2018, which is stated to be the date of default [page 5, Part IV-Particulars of Operational Debt]. 4. Mr Zaid Ansari, Learned Counsel, submitted that the case of the Operational Creditor is as follows: - (a) The Operational Creditor is engaged in the business of the construction of buildings. The Corporate Debtor hired the services of the Operational Creditor by a Work Order dated 25.05.2014 ("Work Order") for General Civil Works for a....
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.....2014 (third slab), 04.11.2014 (fourth slab), 19.11.2014 (fifth slab), 13.03.2015 (sixth slab) and 14.04.2015 (seven slab). Occupation certificate has been issued by Municipal Corporation of Greater Mumbai on 07.09.2016 (p.569 of the petition). Further, the Corporate Debtor has applied for vertical extension of this building, which points to the structural stability and quality of construction carried out by the Operational Creditor. (i) The Operational Creditor has handed over the project duly completed on 19.11.2015 after demobilising labour and equipment from the site; (j) The Corporate Debtor has been irregular in making payments to the Operational Creditor. The last part payment was made by the Corporate Debtor on 29.09.2015. 5. The Operational Creditor issued legal notice dated 29.03.2017 to the Corporate Debtor (pp 135-141 of the petition). There was no response to this legal notice. 6. Thereafter, the Operational Creditor issued Demand Notice dated 02.12.2017 under the IBC claiming a sum of Rs.1,94,62,148/- from the Corporate Debtor. The Demand Notice also included certain amounts claimed towards damages (pp.234-237 of the petition). This Demand Noti....
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....7 of the petition. In that reply also, the counter claim of Rs.30,18,856/- was raised. 12. Thereafter, the present petition bearing CP (IB) No.3753/2018 was filed. 13. The invoices have been placed at pp. 68-119 of the petition. Bank statements are also attached as Exhibit '10' at pp.117-135. The total debt due and payable to the Operational Creditor is Rs.1,63,31,689.00 (Rupees one crore sixty-three lakh thirty-one thousand six hundred and eighty-nine only), as mentioned at p.5 of the Petition. 14. Mr Nishit Dhruva, Learned Counsel appeared on behalf of the Corporate Debtor and made his submissions. 15. In its reply dated 02.03.2019, the Corporate Debtor has set up the following defence: - (a) The Corporate Debtor submitted that the Demand Notice dated 23.08.2018, issued by the Petitioner and received by the Corporate Debtor on 28.08.2018, is already disputed by the Corporate Debtor vide its 'Notice of Dispute'/reply dated 03.09.2018 which categorically states that the alleged claim of the Petitioner is not payable, and it is disputed. The Corporate Debtor further submitted that a 'dispute' was adequately raised by the Corporate Debtor and the ....
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....0.2015 (at p.202/Vol-I) the Operational Creditor addressed an email to the Corporate Debtor, inter alia seeking a further extension of ten days to complete the work. It is pertinent to note that the Operational Creditor has extended the time unilaterally by merely informing to the Corporate Debtor without obtaining extension of time in writing from the Engineer-in-Charge violating Clause 23.02 of the Work Order. The Corporate Debtor have paid Rs.5,00,000/- as mutually agreed upon in the letter dated 15.09.2015 (At page 252/Vol-II) [para (iv) of the Written Submission on behalf of the Corporate Debtor at p.6]; (j) The Corporate Debtor states that on 08.03.2018 in the said petition, an Affidavit-in-Reply was filed (at page 287/Vol-II) on the grounds that the Petition was not maintainable, in view of the fact that full and final payment was already made to the Operational Creditor and that a dispute had already been raised. Further, the petition was not maintainable as damages are not covered under the provision of the IBC (At Page 454/Vol-II) [para (viii) of the Written Submissions on behalf of the Corporate Debtor at p.7]; (k) The Corporate Debtor further states th....
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....ntract Value' is explicitly fixed (and without any scope for escalation) under Clause 2.03; (f) There is a pre-existing dispute prior to the various Demand Notices issued which is evident from the legal notice dated 13.03.2018, notice invoking Arbitration dated 10.04.2018; (g) The Operational Creditor did not comply with Guarantee certificate for anti-termite work as per clause 21.12 of the Work Order; (h) The Operational Creditor did not submit the report of the Engineer in charge as per clause 11 of the Work Order. (i) Insurance policy not taken as required under Clause 14 of the Work Order; (j) ESIC and PF obligation not complied with as required under Clause 16 of the Work Order. 17. We have heard the arguments of both sides at length and perused the documents placed on record. 18. The issues that arise for determination in the present Company Petition are the following: - (a) Whether the invocation of the arbitration clause between the withdrawal of the first petition vide order dated 13.03.2018 and the issue of the second demand notice dated 23.08.2018 to the Corporate Debtor should be treated as "pre-existing disput....
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....ed by Respondent was maintainable." 22. Applying the ratio laid down by the Hon'ble NCLAT in Dinesh Gupta (supra), we hold that to satisfy the criterion of "pre-existing dispute," the same shall have to be raised prior to the issue of the first demand notice under the IBC, and not later. 23. In this view of the matter, the invocation of the arbitration clause by the Corporate Debtor between 13.03.2018 (when the first Company Petition bearing CP (IB) No.1823/2017 was dismissed as withdrawn with liberty), and 23.08.2018 (when the second demand notice came to be issued by the Operational Creditor to the Corporate Debtor), is of no consequence and cannot be treated as "pre-existing dispute" within the meaning of section 5(6) of the IBC. Issue No.2: Whether there is a debt due and payable by the Corporate Debtor in favour of the Operational Creditor 24. The Corporate Debtor has argued that any claim for any purported 'additional work' is maintainable only as per Clause 20.02 of the said Work Order and only if - (a) there is any deviation/revision in the drawings; (b) such estimate of claim is mutually agreed upon in advance; and (c) invoicing (with necessary proof of....
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....s have noted their observations. Apart from the observations, the Architects have mostly noted that the work has been found "okay." Therefore, upon reading them, we are of the view that none of them can be elevated from the status of "Observations" to the status of "Dispute." 27. Further, the Learned Counsel for the Corporate Debtor has stressed that there was considerable delay on the part of the Operational Creditor to complete the work, and those reasons are attributable completely to the Operational Creditor. The Corporate Debtor has incurred costs and suffered losses since it could not claim input credit of service tax and also had to pay interest to its financiers to the tune of Rs.1.30 crore on 31.03.2015, Rs.2.04 crore on 31.03.2016 and Rs.2.34 crore on 31.03.2017, and also had to pay higher rent and other expenses. 28. The claim of the Corporate Debtor as to losses suffered, is not supported by any material on record. Further, even if the Corporate Debtor has a counter-claim, the same should be properly adjudicated by a proper judicial forum before it can be claimed against the Operational Creditor. Therefore, this argument does not commend itself to us and we reject....
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....t is the Operational Creditor who is responsible and liable to bear the costs of the said works. 33. In the reply dated 13.12.2017 to the first Demand Notice dated 02.12.2017 issued by the Operational Creditor, the Corporate Debtor has stated as follows in the unnumbered second paragraph at p.330 of the Petition: "We totally deny and dispute that any amount is due to you by us as alleged in the demand notice dated December 2, 2017 by you. We hereby further state that you have suppressed material fact in the notice and agreement dated September 25, 2015 arrived at between yourself and us whereby you were paid in full for the additional work carried out by you, but you have yet again failed and neglected complete the entire work even after been paid in full for the same (sic)." 34. There is an inherent contradiction in the stand taken by the Corporate Debtor. While on the one hand, the Corporate Debtor has taken the stand that the "additional work" carried out by the Operational Creditor was well within the scope of work as enumerated in Clause 1.0.1- Scope of Work of the Work Order, on the other hand in the reply dated 13.12.2017 to the first demand notice to the Corp....
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.... out by the Operational Creditor as "substandard" in nature as the Corporate Debtor has claimed. 38. The Corporate Debtor has taken the stand in Part-E at p.21 of the its Written Submissions that there was "deemed abandonment of the project by the petitioner." In support of this contention, the Corporate Debtor has relied on the letter dated 16.11.2015 (at p.259, Vol.II of the Petition) wherein it has been stated that "we are demobilizing on 19th November 2015 and two boys will attend your requirements." We do not regard this letter dated 16.11.2015 (at p.259, Vol.II of the Petition) to be indicative of "abandonment" of the project. However, even if this argument is assumed to be true, the Corporate Debtor has not written a single letter or email objecting to such "abandonment." The work order stood from 25.05.2014 till its completion and site being handed over on 19.11.2015. There was ample time and opportunity on the part of the Corporate Debtor to cancel the work order in case the work was deemed to be substandard. This was not done. Even after demobilisation by the Operational Creditor from the work site, this aspect of "abandonment" has never ever been raised by the Corpora....
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....to get along with the proceedings in the matter as per materials placed on record. 43. Therefore, the device of attempting to invoke the arbitration clause in the Work Order on the very day that the petition came to be dismissed with liberty by the Adjudicating Authority, can only be seen as a last-ditch effort to stave off the proceedings under section 9 of the IBC by claiming that the second petition cannot be admitted because it is blighted by the "pre-existing dispute." Therefore, the reliance on the judgment of the Hon'ble Supreme Court dated 21.09.2017 in Mobilox Innovations Private Limited vs Kirusa Software Private Limited does not help the cause of the Corporate Debtor. 44. The Learned Counsel for the Corporate Debtor has, apart from the judgment in Mobilox, relied on the following judgments: - (a) Judgment dated 14.08.2018 passed by the Hon'ble Supreme Court in K Kishan vs Vijay Nirman Company Private Limited, for the proposition that an application under section 8 must be rejected if notice of a dispute has been received by the operational creditor. However, that was a case where the petition under section 9 of the IBC came to be filed on 14.07.20....
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....tter of Design Worx Infrastructure India Private Limited vs. Premier Restaurant Private Limited for the proposition that the terminology "dispute" cannot be given a rigid interpretation or be limited to pendency of a suit or an arbitration proceeding. In view of the fact that the Hon'ble Supreme Court has interpreted the scope of the term "dispute" in Mobilox, and having considered the response of the Corporate Debtor in great detail, we are of the view that the issues raised by the Corporate Debtor do not fall within the broad contours of the term "dispute" as interpreted by the Hon'ble Supreme Court. (f) Judgment dated 28.04.2017 in CP (IB) No.43/2017 by the NCLT Principal Bench, in the matter of Eviro International Corporation vs. Gold Plus Glass Industry Limited, and Judgment dated 02.03.2017 in CP (IB) No.3/2017 by the NCLT Principal Bench, in the matter of Philips India Limited vs. Goodwill Hospital and Research Centre Limited, regarding "dispute." Again, the facts of those matters are not in pari materia with the present case, and so the ratio of those judgments do not apply. 45. The application made by the Operational Creditor is complete in al....
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....withstanding the above, during the period of moratorium,- (i) The supply of essential goods or services to the corporate debtor, if continuing, shall not be terminated or suspended or interrupted during the moratorium period; (ii) The provisions of sub-section (1) of section 14 of the IBC shall not apply to such transactions as may be notified by the Central Government in consultation with any sectoral regulator; (d) The moratorium shall have effect from the date of this order till the completion of the CIRP or until this Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 of the IBC or passes an order for liquidation of Corporate Debtor under section 33 of the IBC, as the case may be. (e) Public announcement of the CIRP shall be made immediately as specified under section 13 of the IBC read with regulation 6 of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. (f) Mr Jitendra Kumar Yadav [Reg. No.IBBI/IPA-003/IP-00022/2017-18/10169], having address at No.11, Singh House (2nd Floor), No.23, Ambalal Doshi Marg, Beside BSE Building, Fort, ....