TaxTMI 
TaxTMI 
2021 (10) TMI 595
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....perational Debt" the total amount in default is stated to be Rs. 788,45,20,136/-. SUBMISSIONS BY THE PETITIONER 3. The Petitioner is a statutory body incorporated under the Delhi Municipal Act, 1957 having the responsibility of monitoring, upgrading and developing civic amenities which are enshrined to it under the statute as detailed in Delhi Municipal Act, 1957. 4. The Corporate Debtor is a public limited company, incorporated on 08.08.2002. The Corporate Debtor is classified as Non-govt company and is registered at Registrar of Companies, Mumbai. It is involved in building of complete constructions or parts thereof; road infrastructure, etc. 5. The Petitioner submits that the one of the main sources of revenue for the Municipal Corporations under Section 113(2)(g) of the Delhi Municipal Act, 1957 is the collection of Toll Tax from commercial vehicles entering Delhi from 124 toll points around Delhi. 6. Since the Corporation themselves do not have the manpower to collect Toll tax and monitor the huge daily cash collection of almost Rs. 3,00,00,000/- per day from 124 toll points around Delhi, the said work is given on a lumpsum contract to third parties. After following the ....
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....the Hon'ble High Court of Delhi: Order Date Directions violated by MEP 26.11.2019 Directions in W.P.(C) No. 12483/2019: (i) Deposit Rs. 20 crores per week (ii) Deposit PDCs worth Rs. 312 crores within two weeks 02.03.2020 Directions in W.P.(C) No. 2241/2020: (i) To continue to deposit Rs. 20 crores per week in compliance order dated 26.11.2019 (ii) To deposit the arrear of Rs. 115 crores in three instalments. First instalment within 15 days from today. (iii) To give PDCs worth Rs. 312 crores to SDMC as per order dated 26.11.2019 Order dated 02.03.2020 not complied: - Payment of Rs. 20 crores due on 02.03.2020 not paid. Payment of Rs. 20 crores due on 09.03.2020 not paid. Payment of Rs. 20 crores due on 16.03.2020 not paid. Payment of Rs. 38 crores due on 16.03.2020 not paid. PDC worth Rs. 312 crores not given. 20.03.2020 Directions in LPA No. 139/2020 - to immediately comply with order dated 02.03.2020 before next date i.e. 24.03.2020 (Not complied - order stood vacated) 20.04.2020 Application filed by MEP in W. P. No. 2241 of 2020 (C. M. No. 10326/2020). Directions: MEP to pay actual Toll collected to SDMC till handling over - not complied. Not even a penny depo....
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....d that the termination notice dated 16.03.2020 was wrongly issued a day earlier. Though there were another default committed by the Corporate Debtor i.e., not depositing PDCs. The issues raised before the Hon'ble High Court vis-à-vis the question of fact was liable to be adjudicated before a Civil Court, however, the Corporate Debtor has maliciously commenced several bouts of litigation at Delhi High Court in an endeavour to deny statutory dues to the Petitioner and others. 12. It is most pertinent to highlight here that what transpired through the above spate of litigations was most exclusively relating to circumstances arising post COVID-19, more particularly the issue of force majeure which has been acknowledged in the interim order of the Ld. Single Judge. However, all the liabilities of the Corporate Debtor under the Agreement, arising pre COVID-19, stand as it is. There is no dispute in respect of such pre COVID -19 amounts which have become due at different points in time before 25.03.2020 and the Corporate Debtor continues to be in default of such payments without demur. 13. The Petitioner mentions that the Petitioner as well as the Corporate Debtor challenged the ....
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....letely misplaced and liable to be disregarded. Therefore, the Petitioner is compelled to approach this Hon'ble Tribunal under Section 9 of Insolvency and Bankruptcy Code, 2016. SUBMISSIONS BY THE CORPORATE DEBTOR IN ITS REPLY AND IN I.A. 1670 OF 2021: 18. The Corporate Debtor filed a reply and an Interlocutory Application No. 1670 of 2021 challenging the maintainability of the petition for the purported operational debt of Rs. 788,45,20,136/-. The Corporate Debtor in its reply and in Interlocutory Application No. 1670 of 2021 raised the following contentions: a. This Bench lacks jurisdiction to decide the present petition. This petition is filed by the Petitioner as if it is an operational creditor. Bare perusal of the facts and documents executed between the parties clearly demonstrate that the present petition is not for an operational debt as the Petitioner is not an operational creditor. b. The Petitioner has failed to demonstrate that the claim made in the present petition is an operational debt. Section 5(20) of the Code, defines an "operational creditor" to mean "a person to whom an operational debt is owed and includes any person to whom such debt has been legally as....
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....ifferent causes of action. In these circumstances, the petition deserves to be dismissed on this ground itself. e. According to the Petitioner the debt has fallen due on 02.10.2017 and therefore, the petition filed after the period of 3 years is barred by law of limitation. The payments made by the Respondent were made under protest and under orders of the Hon'ble Delhi High Court and therefore, the same cannot be considered as part payment to revive the period of limitation. It is admitted by the Petitioner in its own demand notice that the default occurred in 2017. Having failed to take any steps within the period of limitation prescribed, there is default on the part of the Petitioner. There is no acknowledgement of any outstanding amount on the part of Respondent and in fact, the Respondent has in series of correspondence contended that it is not liable to pay any amounts. Further, it was also contended by the Respondent in its correspondence with the Petitioner that in fact it is entitled to recover substantial amounts from the Petitioner and any payment made by the Respondent under protest or under the orders of the Court cannot be considered as an acknowledgement of debt.....
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....rties, and that these disputes are yet to be adjudicated by a Civil Court. In these circumstances, any attempt by the Petitioner to portray to this bench that there is a crystallised, undisputed operational debt payable by the Respondent and that this position follows from an order dated 26.11.2019 of the Hon'ble Delhi High Court in nothing but an attempt to mislead. l. Prior to dealing with the grounds on which the captioned petition ought to be dismissed, the Respondent would like to place on record the facts and events that transpired between the parties herein, which are pertinent for adjudication of the present petition. m. The parties to the present petition had entered into a Toll Collection Agreement dated 28.09.2017. while the Respondent's role under the contract was collect toll, it was also entitled to collect certain penalties. Needless to state, the Respondent by then was one of the foremost till-booth operators and infrastructure developers in the country. Even today, the Respondent continue to successfully manage the iconic Bandra- Worli Sea/Link in Mumbai. However, only a few months into contract with the Petitioner, several glitches arose which curtailed the ....
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....f collection, that is to say. Tendering/auctioning all or any number of toll tax posts on the basis of monthly/ annual lump sum payment to the Corporation or on the basis of payment of per cent of collection as collection charges to the agencies: .... " c. The Delhi Municipal Corporation has power under Section 455 of the DMC Act vide which the Corporation can recover any sum due to the DMC on any account under DMC Act or any byelaw thereunder as an arrear of tax. d. The aforesaid provision read with Section 156 of the DMC gives the power to the Commissioner to recover such sums in the nature of arrears of tax. The same understanding has been very categorically laid out in the Agreement dated 28.09.2017 between the Petitioner and the Respondent. e. The sums dues from Respondent to the Petitioner are payment of dues arising under the DMC Act and payable to SDMC. Accordingly, the claims of the Petitioner are very well operational debt under IBC. f. The claims arising out of toll and penalty relating thereto are only considered, even then the said claims are much above the threshold limit of rupees one crore. g. The various writ petitions and LPAs filed by Respondent ar....
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....he Central Government, any State Government or any local authority;" 23. Therefore, it is to be seen in this case that this operational debt claimed by South Delhi Municipal Corporation is a claim in respect of at least one of the following :- a. Provision of goods; or b. Provision of services, including employment; or c. A debt arising under any statute and payable to Government/ Local Authority. 24. The claim is based on an Agreement where the Petitioner has appointed the Respondent as a "Contractor" to collect toll tax from commercial vehicles. This is evident from Clause 1 of the Agreement which reads as under: - "1. Subject to and in accordance with the provisions of this and the applicable laws and relying upon the representations and warranties of the Contractor to fulfil the obligations contained hereunder, the SDMC hereby appoints the Contractor to provide Toll& ECC collection Service." (emphasis supplied) 25. Therefore, it is clear to the Bench that Petitioner is not providing any goods or services to the Respondent and to that extent is not covered under the definition of Operational Debt u/s 5(21). 26. That the Petitioner is not providing any service ....
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.... the claim does not fall into any of these categories, then the claim cannot be categorised as an 'operational debt'. In the present case, the Petitioner has not pleaded any supply of any goods or services being rendered by the Petitioner. However, the Petitioner claims that the debt falls under the ambit of 'operational debt' in respect of payment of dues arising under any law for the time being in force and payable to Central Government or any State Government or any Local Authority. The Petitioner mentions that just because the Operational Creditor and Corporate Debtor had entered into a contract, does not render the dues as a due not arising out of a law. 30. It is the claim of the Petitioner that in the instant matter the contract is an outcome of a specialised legislation, that is, Delhi Municipal Corporation Act (DMC Act). To buttress its claim, the Petitioner mentions that under Section 455 of the DMC Act, the Petitioner has power to recover any sum due to the DMC on any account under the DMC Act or any bye-law thereunder as an arrear of tax. 31. The Petitioner mentions that the claim amount is a debt due under a statute. This, it mentions, is on the basis of Section 455 ....
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....iance has been placed by the Respondents on Judgment SICOM Limited & Ors v/s State of Maharashtra (this judgement relies on Builders Supply Corporation vs Union of India, (1965) 2 SCR 289) "4. The learned Counsel appearing for the Appellants relying on the judgment of the Supreme Court in the case of Central Bank of India v. State of Kerala and Ors. MANU/SC/0306/2009: (2009) 4 SCC 94 submits that the Supreme Court in this judgment has considered the entire law on the subject and has held that to a property in relation to which provisions of Section 529A of the Companies Act operates, Section 38(c) of the Bombay Sales-tax Act does not operate. The learned Counsel relying on the judgment of the Constitution Bench of the Supreme Court in the case of Builders Supply Corporation v. Union of India MANU/SC/0156/1964: (1965) 2SCR 289 submits that the provisions of the land revenue Code which provide for recovery of the dues of the State Government as arrears of land revenue does not elevate the dues to the level of dues of land revenue. The learned Counsel therefore submitted that the learned single Judge has misread the provisions of the Companies Act and the Bombay sales-tax Act." "....
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....h less so for the purposes of an entirely different statute such as the Insolvency Act are concerned. ... ..... ..... 42. The words "as if" demonstrate that award and decree or order are two different things. The legal fiction created is for the limited purpose of enforcement as a decree. The fiction is not intended to make it a decree for all purposes under all statutes, whether State or Central." 36. The Bench notes that in the above Judgment Hon'ble Supreme Court has observed that the legal fiction is not intended to convert an Award into a Decree for all purposes under all statutes - whether State or Central. In this case, the deeming fiction is restricted to the DMC Act and cannot be extended to cover another Act. In light of the above the Bench is of the view that the operational debt claim is not covered as "a debt in respect of payment of dues arising under any law for the time being in force". 37. The Bench therefore is of the considered view based on the above that the claim of the Petitioner as "operational debt" does not meet the criteria as set out in Section 5(21) of IBC i.e. the claim of the SDMC does not fall in either if the following; a. Claim in respe....
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....ect the application. ... ......... "56. Going by the aforesaid test of "existence of a dispute", it is clear that without going into the merits of the dispute, the appellant has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence. The defence is not spurious, mere bluster, plainly frivolous or vexatious. A dispute does truly exist in fact between the parties, which may or may not ultimately succeed, and the Appellate Tribunal was wholly incorrect in characterizing the defence as vague, got-up and motivated to evade liability." 40. Similarly, the Bench would refer to another Judgment of the Hon'ble Supreme Court in the matter of Kay Bouvet Engineering Ltd. V. Overseas Infrastructure Alliance (India) Private Limited dated 10.08.2021 in which the apex Court held as under: - "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 t....