TaxTMI 
TaxTMI 
2021 (8) TMI 447
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.... filed by the respondent herein under Section 9 of the Insolvency and Bankruptcy Code (hereinafter referred to as the "IBC"). By the impugned order dated 21st December 2018, the NCLAT while allowing the appeal, has remitted back the matter to the NCLT with a direction to admit the petition filed by the respondent herein under Section 9 of the IBC after giving limited notice to the appellant herein so as to enable it to settle the claim. 2. The facts in brief giving rise to the present appeal are as under: The Government of India extended Dollar Line of Credit (hereinafter referred to as the "LoC") of USD 150 Million to the Republic of Sudan through Exim Bank of India (hereinafter referred to as the "Exim Bank") for carrying out Mashkour Sugar Project in Sudan. This was in two tranches of USD 25 Million and USD 125 Million. On 26th January 2009, the first tranche of USD 25 Million was executed between Republic of Sudan and Exim Bank for financing the Mashkour Sugar Project. On 11th October 2009, Mashkour Sugar Company Limited, Sudan (hereinafter referred to as the "Mashkour") entered into an agreement with the respondent Overseas Infrastructure Alliance (India) Private Limited....
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....ecution of second tranche of USD 125 Million on 24th July 2013, between Republic of Sudan and Exim Bank, an agreement was executed between Mashkour and Overseas on 9th February 2014, for balance amount of USD 124,975,000 for financing the final part of the Sugar Factory Project. On 30th October 2014, Overseas informed Exim Bank to transfer partial amount of USD 95,580,000 in favour of Kay Bouvet from the funds to be received under the LoC in relation to Sugar Project. 5. It appears that in the meantime, there was certain exchange of communications between the Ministry of External Affairs, Government of India (hereinafter referred to as the "GoI") and the Sudan Government. In pursuance to such exchange of communications, on 17th April 2017, the Ambassador of Sudan to India addressed to the Minister of State of External Affairs, GoI and advised to terminate the contract of Mashkour with Overseas and in turn to appoint Kay Bouvet as a Contractor. In response thereto, the Ministry of External Affairs informed the Ambassador of Sudan that it will be necessary to execute an agreement with Kay Bouvet in order to enable Exim Bank to release funds to Kay Bouvet. Vide communication dated ....
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....mpugned order dated 21st December 2018, NCLAT allowed the appeal as aforesaid. Being aggrieved thereby, the appellantKay Bouvet has approached this Court. 9. Shri Jayant Bhushan, learned Senior Counsel appearing on behalf of the appellantKay Bouvet submitted that by no stretch of imagination, the claim made by Overseas could be considered to be an "Operational Debt" and as such, Overseas cannot be an "Operational Creditor", enabling it to invoke the jurisdiction of NCLT under Section 9 of the IBC. Shri Bhushan further submitted that Kay Bouvet could not have moved as a Financial Creditor and as such, by stretching the definition of "Operational Creditor", though it does not fit in the same, has filed the proceedings under Section 9 of the IBC. The learned Senior Counsel submitted that no amount is receivable by Overseas from Kay Bouvet in respect of the provisions of goods or services, including employment or a debt in respect of the payment of dues and as such, it will not fit in the definition of "Operational Debt" as provided under subsection (21) of Section 5 of the IBC. The learned Senior Counsel submitted that by the same analogy, Overseas would also not fall under the def....
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....manding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed. (2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in subsection (1) bring to the notice of the operational creditor- (a) existence of a dispute, [if any, or] record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute; (b) the [payment] of unpaid operational debt - (i) by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or (ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor. Explanation.-For the purposes of this section, a "demand notice" means a notice served by an operational creditor to the corporate debtor demanding [payment] of the operational debt in respect of which the default has occurred. 9. Application for initiation of corporate insolvency resolution process by operational cred....
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....linary proceeding pending against any resolution professional proposed under subsection (4), if any. (ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if- (a) the application made under subsection (2) is incomplete; (b) there has been [payment] of the unpaid operational debt; (c) the creditor has not delivered the invoice or notice for payment to the corporate debtor; (d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or (e) any disciplinary proceeding is pending against any proposed resolution professional: Provided that Adjudicating Authority, shall before rejecting an application under subclause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the Adjudicating Authority. (6) The corporate insolvency resolution process shall commence from the date of admission of the application under subsection (5) of this section." 13. Perusal of the aforesaid provisions would reveal....
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....xist, there is no time to approach either an Arbitral Tribunal or a court. Further, given the fact that long limitation periods are allowed, where disputes may arise and do not reach an Arbitral Tribunal or a court for up to three years, such persons would be outside the purview of Section 8(2) leading to bankruptcy proceedings commencing against them. Such an anomaly cannot possibly have been intended by the legislature nor has it so been intended. We have also seen that one of the objects of the Code qua operational debts is to ensure that the amount of such debts, which is usually smaller than that of financial debts, does not enable operational creditors to put the corporate debtor into the insolvency resolution process prematurely or initiate the process for extraneous considerations. It is for this reason that it is enough that a dispute exists between the parties." 15. It could thus be seen that this Court has held that one of the objects of the IBC qua operational debts is to ensure that the amount of such debts, which is usually smaller than that of financial debts, does not enable operational creditors to put the corporate debtor into the insolvency resolution process ....
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....ver equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently and probable in itself, it may be not having 'sufficient prima facie plausibility to merit further investigation as to [its] truth' (cf Eng Mee Yong v. Letchumanan [Eng Mee Yong v. Letchumanan, 1980 AC 331 : (1979) 3 WLR 373 (PC)] AC at p. 341G), or 'a patently feeble legal argument or an assertion of facts unsupported by evidence': cf South Australia v. Wall [South Australia v. Wall, (1980) 24 SASR 189 (Aust)] SASR at p. 194.' His Honour also referred to the judgment of Lindgren, J. in Rohalo Pharmaceutical Pty Ltd. [Rohalo Pharmaceutical Pty Ltd. v. RP Scherer, (1994) 15 ACSR 347 (Aust)] where, at p. 353, his Honour said: 'The provisions [of Sections 459H( 1) and (5)] assume that the dispute and offsetting claim have an "objective" existence the genuineness of which is capable of being assessed. The word "genuine" is included [in "genuine dispute"] to sound a note of warning that the propounding of serious disputes and claims is to be expected but must be excluded from consideration.' There have been numerous d....
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....or settle the dispute. The specified limits of the court's examination are the ascertainment of whether there is a "genuine dispute" and whether there is a "genuine claim". It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another. The essential task is relatively simple - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).' In Scanhill Pty Ltd. v. Century 21 Australasia Pty Ltd. [Scanhill Pty Ltd. v. Century 21 Australasia Pty Ltd., (1993) 12 ACSR 341 (Aust)] ACSR at p. 357 Beazley, J. said: '... the test to be applied for the purposes of Section 459H is whether the court is satisfied that there is a serious question to be tried that the applicant has an offsetting claim.' In Chadwick Industries (South Coast) Pty Ltd. v. C....
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....9;. In our view a "genuine" dispute requires that: (i) the dispute be bona fide and truly exist in fact; (ii) the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived. We consider that the various formulations referred to above can be helpful in determining whether there is a genuine dispute in a particular case, so long as the formulation used does not become a substitute for the words of the statute."" 17. It is thus clear that once the "Operational Creditor" has filed an application which is otherwise complete, the adjudicating authority has to reject the application under Section 9(5)(ii)(d) of IBC, if a notice has been received by "Operational Creditor" or if there is a record of dispute in the information utility. What is required is that the notice by the "Corporate Debtor" must bring to the notice of "Operational Creditor" the existence of a dispute or the fact that a suit or arbitration proceedings relating to a dispute is pending between the parties. All that the adjudicating authority is required to see at this stage is, whether there is a plausible contention which requir....
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....cuted between Mashkour and Corporate Debtor. In view thereof the Corporate Debtor can no longer perform under the said tripartite contract dated 18th April 2010 between Mashkour, the Corporate Debtor and the Operational Creditor as the same stands superseded by the fresh contract dated 5th July 2017 executed between Mashkour and the Corporate Debtor. 9. The Operational Creditor therefore states that in the light of the Corporate Debtors admission in the said reply, the Corporate Debtor is liable to refund the said Advance Amount forthwith to the Operatinal Creditor. The Operational Creditor further states that the said Advance Amount became due and payable as and by way of refund to the Operational Creditor by the Corporate Debtor on or about 5th July 2017 i.e. the date on which the Corporate Debtor was appointed as an EPC Contractor by Mashkour. 10. The Corporate Debtor has, therefore, defaulted in refunding the said Advance Amount" 20. It can thus be seen that the claim of Overseas is that in the reply filed to its Notice of Motion by Kay Bouvet, it has admitted that Mashkour has, as a replacement of Overseas, appointed Kay Bouvet as the Contractor. As such, ....
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.... the said amount of Rs. 47,12,10,000/was received as advance money on behalf of Mashkour. It has been specifically stated that in the agreement entered into between Mashkour and Kay Bouvet on 5th July 2017, the said advance payment of Rs. 47,12,10,000/has been duly considered. It is stated that the execution of the fresh contract in favour of Kay Bouvet in no manner creates an automatic liability on Kay Bouvet. As such, Kay Bouvet has pressed into service the "existence of dispute" for opposing the demand made by Overseas. 23. We will have to examine as to whether the claim of Kay Bouvet with regard to the "existence of dispute", can be considered to be the one which is spurious, illusory or not supported by any evidence. It will be relevant to refer to Clause 14.1 of the Tripartite Agreement dated 18th December 2010, between Mashkour, Overseas and Kay Bouvet:33 "1. 10% of the sub contract Price as interest free advance payment by way of telegraphic transfer directly to the bank account of the Sub-Contractor against submission of invoice and Advance Payment Bank Guarantee for 10% of the sub contract Price, from any Indian public sector bank acceptable to Mashkour upon r....
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....ted. Details of the disbursement are as under:Amt. in USD Disbursement No. Invoice Value (CIF) 100% Eligible Value 100% Net Remitted Value Date 2 15,000,000.00 10,500,000.00 10,476,781.85 April 18, 2011 2. The breakup of the disbursement made as follows: USD Eligible Value 10,500,000.00 465,911,250.00 Less Negotiation Charges (Service Tax) 23,218.15 10,30,247.00 Currency Conversion Chg. And Service Tax 110.00 Net Remittance 10,476,781.85 46,48,80,893.00 3. Please confirm receipt of the credit." [emphasis supplied] 27. It will further be relevant to refer to the communication addressed by Overseas of the same date to Mashkour: " We have been paid the advance amount to 10.05 million USD in INR by Exim Bank because of Stringent Sanction entrancement by the United State Office of Foreign asset Control (OFAC) as per the letter enclosed herewith. The amount has been delivered to us @ Rs. 44.37 per disbursement advice of the Exim bank attached herewith. Further OIA will release payment of USD 10.62 Million to Kay Bouvet on Submission of Advance Bank Guarantee and Performan....
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....ch reads thus: " With reference to the earlier correspondence, we have received the DO No. 1425/Secy(ER)/2017 dated 18th April, 2017 from Mr. Amar Sinha, Secretary (Economic Relations) Ministry of External Affairs, Government of India, New Delhi, India expediting the termination of the agreement with Overseas Infrastructure Alliance (India) Private Limited (OIA) and that an agreement be signed with Kay Bouvet Engineering Ltd. (KBEL) as a direct contractor for the unutilized portion of the GOI's Line of Credit for US Dollars 150,000,000 for the Mashkour Sugar Project. It is on the record that a sum of Rs. 47,12,10,000/( US $ 10.62 Million) was paid by OIA to Kay Bouvet Engineering Ltd. "KBEL" on behalf of Mashkour Sugar Company from the funds released to OIA by Exim Bank from the 1st disbursed tranche of US $ 25 Million. Kindly make a note, while signing the revised contract with KBEL that the above mentioned amount of US Dollars 10.62 shall be adjusted by Kay Bouvet Engineering Ltd. against the supplies to be made to Mashkour Sugar Company Ltd. for the purpose of completing the project. Naturally, it should be borne in mind that the termination o....