TaxTMI 
TaxTMI 
2022 (4) TMI 432
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..... For Respondent No.1/RP: Mr. Y. Suryanarayanan, Advocate, Ms. Aditi Deshpande, Advocate, Mr. Tushar Nagar, Advocate, Mr. Badri Narayanan, Advocate For Respondent No. 2 Mr. Anirudh Krishnan, Mr. Advaidh Nelakanttan, Mr. K. Mohit Kumar, Ms. Lakshana Viravalli, Mr. Adarsh Subramaniam, Shiva. K, Advocates For Mr. P.S. Raman, Sr. Advcoate For Respondent No. 3 Mr. Bishwajit Dubey, Ms. Srideepa Bhattacharyya, Ms. Neha Shivhare, Advocates For Mr. Ramji Srinivasan, Sr. Advocate JUDGMENT KANTHI NARAHARI, MEMBER (TECHNICAL) (A) Company Appeal (AT) (Ins) No. 234 of 2021 filed by Resolution Professional of KSK Mahanadi Power Company Ltd. challenging the impugned order dated 17.06.2021 passed in I.A. No. 270 of 2021 in CP (IB) No. 492 of 2019, and (B) Company Appeal (AT) (Ins) No. 239 of 2021 filed by Committee of Creditors of KSK Mahanadi Power Company Ltd. challenging the impugned order dated 17.06.2021 passed in I.A. No. 270 of 2021 in CP (IB) No. 492 of 2019. (C) Since in both the Appeals the facts and issues are common and in both the Appeals the Appellants challenged the common impugned order, hence this Tribunal decided to take up both the Appeals together by addressing....
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....ansportation Charges payable by KMPCL to KWIPL would be limited to certain Operation and Maintenance ('O & M') expenses being incurred by KWIPL for Water Transportation. In that regard the KMPCL had engaged the services of ACB India Power Ltd as the O & M Contractor to carry out the aforementioned O & M for the Water Transport Infrastructure. It is submitted that both KWIPL and KMPCL are related parties and are under Corporate Insolvency Resolution Process ('CIRP'), the Appellant and the first Respondent being the Resolution Professionals of KMPCL and KWIPL, cannot undertake any related party transaction between them without prior approval of Respondent No. 2 & 3 in line with the provisions of Section 28 (1) (f) of the I & B Code, 2016. 5. It is submitted that pursuant to the Respondent No. 1 taking control of the management of KWIPL, there have been several correspondences that have been exchanged between the Appellant and the Respondent No.1 inter alia regarding the issue of payments to be made under the Water Transport Agreement failing which KWIPL would not supply water to KMPCL. The payments under the Water Transport Agreement are not required to be paid by KMPCL owing to t....
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....e payment of water supply charges as per the 2014 Water Transport Agreement and as per the invoices raised by the first Respondent to enjoy the uninterrupted supply of water to KMPCL. 9. It is submitted that the Appellant made ad hoc payment to the first Respondent as follows: (i) Invoice dated 17.05.2021 for the month of April, 2021 on 25.06.2021. (ii) Invoice dated 25.06.2021 for the month of May, 2021 on 12.07.2021. (iii) Invoice dated 02.08.2021 for the month of July, 2021 on 13.08.2021. The above payments were made under protest. 10. It is submitted that the payments as made above does not amount to an admission of liability of KMPCL to make payments as per the invoice dated 17.05.2021. 11. The Learned Senior Counsel submitted that the KMPCL has been making rightful payments as per the terms of the revised Commercial Arrangement that existed between the parties since October, 2016 in due compliance of Law. 12. The Learned Senior Counsel submitted that the impugned order to the extent that it has directed the payment of water supply charges as per the Water Transport Agreement dated 14.03.2014 and any invoices raised by the first Respon....
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....il No. 99 of 2018) dated 25.01.2019. 1st Respondent's Submissions (RP of KWIPL) 18. The Learned Counsel appearing for this Respondent submitted that the reliefs sought in the present Appeal cannot be granted by this Tribunal in exercise of its Appellate Jurisdiction for the reason that the Appellant is seeking grant of original reliefs and it never raised before the Learned Adjudicating Authority therefore there was no opportunity to consider the reliefs sought by the Appellant herein. 19. It is submitted that the following reliefs sought by the Appellant in the Application before the Learned Adjudicating Authority and in the present Appeal is set out hereunder: Reliefs sought before Ld. Adjudicating Authority [2 Pg. 447-448 of Application] Reliefs sought in the present Appeal [@Pg. 30 of Appeal] • As an interim measure, direct Respondent No. 1 to provide uninterrupted supply of water from KWIPL to KMPCL as far as KMPCL reimburses the operation and maintenance and other payments to KWIPL aligned with the terms of the commercial arrangements that has subsisted between the parties since October 2016 as detailed in paragraph 11 above; &nb....
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.... Adjudicating Authority nor argued by the parties, hence no findings in this regard have been given by the Ld. Adjudicating Authority, therefore, the Appellant cannot raise these fresh reliefs in the Appeal for the first time. 21. The Learned Counsel submitted that it is an admitted fact that KWIPL and KMPCL entered into an agreement dated 14.03.2014 for transport of water through pipeline to the power plant of KMPCL. Since the terms and conditions of the Agreement were agreed between KMPCL and KWIPL related parties, no specific approval under Section 188 of the Companies Act, 2013 was required. 22. In terms of Article 2.1 of the Agreement dated 14.03.2014 (WTA) KWIPL was responsible for undertaking the transportation of water to KMPCL. Under Article 5.2 of the agreement KMPCL had a minimum take or pay obligation for a quantity of 6 MCM of water on and from 1st April, 2017 to 31st March, 2018 and every year thereafter. In accordance with the said Article the KMPCL was obligated to pay for a minimum of 6 MCM of water irrespective of whether it took supply of such quantity and irrespective of its project size. The billing and payment mechanism is set out under Article 11. 23....
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....l other operational expenses of KWIPL including servicing of the debt obligations of KWIPL directly. 27. It is submitted that the CIRP of KWIPL commence vide order dated 01.01.2021 and IRP was appointed. After going through the records by the first Respondent of KWIPL, this Respondent informed the CoC that no invoices were being raised on KMPCL in accordance with an understanding under the CLA and no payments were made by KMPCL resulting repayment defaults by KWIPL to its lenders. In view of the aforesaid reasons the this Respondent after deliberations with the CoC of KWIPL and having not received any response from the Appellant despite repeated requests, the CoC of KWIPL advised this Respondent to stop water supply to KMPCL and raise an invoice for the services rendered by KWIPL to KMPCL during the CIRP in the interest of KWIPL. However, in good faith the Respondent No.1 took immediate steps to restore water supply to KMPCL. Thereafter, extensive correspondences were exchanged between the Appellant and this Respondent and set out in Table No. 2 at pages 19 to 25 of the first Respondent's Reply Affidavit. 28. The Learned Counsel further submitted that the Appellant is require....
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....18. 32. Adverting to Section 14 (2A) of the I & B Code, 2016, the Learned Counsel for the Respondent submitted that Section 4 (2A) of the I & B Code, 2016 mandates that where the Resolution Professional considers the supply of certain goods/ services critical to protect and preserve the value of Corporate Debtor and managed the Operations of such Corporate Debtor as a going concern, then the supply of such goods/services cannot be terminated, suspended or interrupted during the period of moratorium, except in cases where the Corporate Debtor has not paid dues arising from such supply during the moratorium. Therefore, it is submitted that the KMPCL is statutorily mandated to pay KWIPL for the transportation of water during moratorium of KMPCL (w.e.f 03.10.2019) failing which KWIPL is well within its right to suspend the supply until receipt of such payment and the same is also settled position of law. 33. It is submitted that the Hon'ble Adjudicating Authority while passing the impugned order enforced payment of legitimate consideration as per terms of valid and subsisting agreement for upholding spirit of Section 14(2A) of I & B Code, 2016 and has not interfered in the commer....
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.... In absence of any further arrangement, we consider that the first amendment agreement will expire on 31st March 2017. Accordingly from 1st April 2017, the agreements executed on 14th March 2014 will become effective till the tenor of the respective agreement...." 39. It is submitted that the KMPCL and its lenders unilaterally entered into an amended and restated Common Loan Agreement ('CLA') on 22.11.2016 whereby the Water Transportation Charges payable to KWIPL for the interim period prior to the proposed merger of KWIPL and KMPCL was limited to operation and maintenance. 40. While so on 17.05.2021 the R-1 raised an invoice for services rendered in April, 2021. However, the Appellant was unable to release payments against the May,2021 invoice and the R-1 forced to suspend water transport service to KMPCL on 02.07.2021 temporarily and as per the directions of Hon'ble NCLT the water transportation services was resumed subject to payment of transport charges as agreed between the parties under Water Transport Agreement of 2014. 41. It is submitted that the commercial arrangement under the Water Transportation Agreement dated 14.03.2014 was only amended vide Am....
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....judicating Authority is required any interference by this Tribunal? (iii) Whether the Appellant has made out any case to grant the reliefs as prayed for? Now we deal with the issues: Issue No. (i) 47. The Appeals are emanated against the order passed by the Adjudicating Authority in I.A. No. 270 of 2021 in CP (IB) No. 492 of 2019 filed by the Appellant (in CA 234 of 2021) herein against the first Respondent herein. The Adjudicating Authority vide its order dated 17.06.2021 passed the following order which is impugned in these Appeals and recapitulated as under: "1. This application by the RP of M/s. KSK Mahanadi Power Company Ltd. requesting inter-alia to give directions to the Respondents to resume uninterrupted flow of water to the Corporate Debtor so as to enable the Corporate Debtor to generate electricity, which is the business of the Corporate Debtor. 2. It is submitted that in order to keep the Corporate Debtor as going concern, free flow of the water requires but the Respondent stopped water supply on the ground of non-payment of water transport charges. 3. We heard the Learned Senior Counsel for the Applicant, Learned Sr. Counse....
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....IPL, such as towards insurance costs, fees of legal advisors, employees exclusively performing duties on behalf of KWIPL, as was the existing position until May 2021 (including CIR period); (c) Direct KWIPL to raise invoice on an arm's length basis for per cubic meter of actual water supply by KWIPL instead of Rs. 16 per cubic meter charges by KWIPL which is comparatively at a higher side, pending disposal of this Appeal. (d) Direct payment by KWIPL for a total amount of INR 252 crores to KMPCL as damages due to daily EBITDA loss of INR 6 crores per day for non-supply of water for 42 (Forty two) days during the months of June and July (until 6 July 2021) due to which KMPCL was unable to operate its power plant for want of supply of essential services of water to KMPCL by KWIPL; (e) Direct KWIPL to refund the amounts paid under protest by KMPCL towards the invoices dated 17 May 2021, 25 June 2021 and 02 August 2021 raised by KWIPL, to the extent that they are in excess of the amounts to be paid as per the October 2016 arrangement between the parties; (f) Set aside the Impugned Order passed by the Hon'ble National Company Law Tribunal, Hyderabad on....
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....the required water infrastructure facilities to achieve the same; - KMPCL to meet the requirement of water for operations of the Power Plant, has been allocated 100 Million Cubic meter per annum of water from river Mahanadi (" Water Allocation") in the state of Chhattisgarh by Water Resources Department, Government of Chhattisgarh (WRD, GoCG) vide its letters dated 23/06/2008 and 29/07/2009; 52. From the above agreement it is clear that the KWIPL under took to supply water to KMPCL and the terms are governed in the Articles. Article 2 deal with Water Transportation and Article 5 deal with quantity of Water. Since, the Articles which deal with quantity and the main issues/disputes starts with regard to Article 5.1 and 5.2 the same is reproduced here at for beneficial reference: "5.1 (a) Subject always to availability of water in Mahanadi River and Article9, KWIPL agrees to transport water, at the Delivery Point to KMPCL as detailed below. Particulars FY 2014-2015 FY 2015-16 FY 2016-17 and onwards Minimum Quantity 23 MCM 59 MCM 72 MCM Maximum Quantity 31 MCM 67 MCM 80 MCM (b)Further, KWIPL shall have the necessary infr....
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....on the commissioning of the subsequent units of the power project. 5.2.a Notwithstanding Article11, Article 16, for each Year for quantities mentioned under Article 5.1 (a) there shall be Minimum take or Pay Quantity (MTPQ), to be taken or paid for, on monthly basis, if not taken KMPCL to be calculated as follows: Financial Year Minimum Take or Pay Quantity ("MTPQ") For March 2015 1.00 MCM per month 1st April 2015 to 31st March 2016 2.55 MCM per month 1st April 2016 to 31st March 2017 2.55 MCM per month The annual take or pay will be subject to the reconciliation at the end of close of each financial year. 54. Contractual Disputes: The bone of contention of the Learned Senior Counsel for the Appellant that in pursuance of the Amendment to the Agreement dated 14.03.2014, the Amended Agreement only subsists. On the other hand the Learned Senior Counsel for the Respondents contend that the Amendment Agreement of 2015 valid for a period of 2 years and after completion of 2 years i.e. 31.03.2017, the original Agreement i.e. 2014 will be enforceable. The Learned Senior Counsel for the Appellants contend that in view of the Amendmen....
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.... Learned Counsel for the Respondents contend that the basis for supply of water to KMPCL by KWIPL is based on the Water Transport Agreement dated 14.03.2014 and the same is very much in vogue. It is also contended that by way of Amendment Agreement dated 01.03.2015 certain clauses were amended only for a period of two years and the same has been intimated to the Appellant vide letter dated 30.03.2017 page 47 of the Reply filed by the first Respondent. However, the Learned Counsel for the Appellants vehemently opposed the existence of such letter and receipt of the same by the Appellant. In view of rival submissions it is apt to extract the said letter here under: "Date: 30th March 2017 KSK Mahanadi Power Company Ltd.,8-2-293/82/A/431/A, Road No. 22, Jubilee Hills, Hyderabad- 500033. Sir, Sub: Water Transportation Agreement Ref: Water Transportation Agreement dated 14th March 2014 First Amendment to Water Transportation Agreement dated 1st March 2015. Considering the above-referred executed agreements to enable to transportation of water to the project of KSK Mahanadi Power Company Limited, we would lik....
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.... No. 1 dated 31.03.2017 supra to the Appellant after taking over as IRP and invoice dated 17.05.2021 for the month of April, 2021 and the Appellant replied to the said letter on 25.05.2021 and also various correspondences took place between the Appellant and the first Respondent. The first Respondent vide letter dated 31.05.2021 intimated the Appellant that the water supply from KWIPL shall stand suspended from 01.06.2021 due to non-payment of invoice dated 17.05.2021 and absence of an O & M Contract. Aggrieved by the same the Appellant filed the application before the Adjudicating Authority and the Adjudicating Authority passed the order which is impugned. 59. Reference to Section 62 of Indian Contract Act, 1872: That be so the Counsel for the Appellant contend that the amendment agreement dated 01.03.2015 is a substitution to the original agreement and the original agreement automatically novated as per Section 62 of the Indian Contract Act, 1872 in view of amendment agreement dated 01.03.2015. On the other hand, the Learned Counsel for the Respondents contend that the amended agreement dated 01.03.2015 is valid for a period of 2 years i.e. up to 31.03.2017 and the original....
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....first Respondent vide letter dated 23.04.2021 addressed to the KMPCL requesting for payment of outstanding dues with reference to water transported to KMPCL and also made a note with regard to the water transport agreement and amended agreement. In its letter the first Respondent stated that the minimum take or pay quantity from 01.04.2017 to 31.03.2018 and onwards 6.00 MCM per month and stated that as per the invoices till September 2016 an amount of aggregating to Rs. 1,11,76,581/- is due from KMPCL. The Learned Counsel for the Appellant submitted that the minimum take or pay quantity as mentioned 6.00 MCM per month w.e.f 01.04.2017 to 31.03.2018 and onwards is not mentioned in the amendment agreement. It is seen that the Appellant replied to the said letter on 01.05.2021. It is also seen that the various correspondences made between the Appellants and the Respondents with regard to above disputes. 61. Now we deal with the Provisions of Law Section 14 (2A) of IBC: The Adjudicating Authority while passing the order also dealt with Section 14(2A) of the I & B Code, 2016. To elaborate and discuss and to address the said provision of law, in this regard it is apt to refer to Se....
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....A) empowers/emphasises to protect and preserve the value of the Corporate Debtor and manage the operations of such Corporate Debtor as a going concern, the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium. It is an admitted fact that the KWIPL is admitted into CIRP and the payments due to supplier cannot be stopped taking into account if KMPCL failure to pay its outstanding dues, thereby taking away KWIPL's revenue stream and pushing the KWIPL into financial stress, at the same time KMPCL is admitted into CIRP as such the supply of water cannot be stopped to it to keep the Corporate Debtor as a going Concern. 63. The Law is very clear on the aspect and cannot be interpreted to suit either to the Appellants or the Respondents. However, we are unable to accept the contentions of the Learned Counsel for the Appellants that "such supply" meaning thereby the quantity mentioned in the amended agreement dated 01.03.2015. As per the definition of Black's Law Dictionary Sixth Addition, the word 'such' defined as "of that kind, having particular quality or character specified". "Identical with, being the same as what has be....
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....d Counsel appearing for the respective parties on the issues as raised by them in this Appeal, this Tribunal is of the view that Whether such issues can be adjudicated upon by this Tribunal sitting as an Appellate Authority on the Jurisdiction vested with the Adjudicating Authority who decides the matters in a summary jurisdiction. In this regard, this Tribunal relies upon the Judgments of the Hon'ble Supreme Court on the issues. Precedents: The Hon'ble Supreme Court in (i) 'Tata Consultancy Services Ltd. vs Vishal Gisulal Jain, Resolution Professional, SK Wheels Pvt. Ltd.' Civil Appeal No. 3045 of 2020 dated 23.11.2021 held paragraph 28, 29. "28. While in the present case, the second issue formulated by this court has no bearing, we would like to issue a note of caution to the NCLT and NCLAT regarding interference with a party's contractual right to terminate a contract. Even if the contractual dispute arises in relation to the insolvency, a party can be restrained from terminating the contract only if it is central to the success of the CIRP. Crucially, the termination of the contract should result in the corporate death of the Corporate Debtor. In Gujarat Urja ....
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....the centrality of the Facilities Agreement to the success of the CIRP and Corporate Debtor's survival as a going concern. The NCLT has merely relied upon the procedural infirmity on part of the Appellant in the issuance of the termination notice, i.e. it did not give thirty days' notice period to the Corporate debtor to cure the deficiency in service. The NCLAT, in its impugned judgment, has averred that the decision of the NCLT preserves the 'going concern' status of the Corporate Debtor but there is no factual analysis on how the termination of the Facilities Agreement would put the survival of the Corporate Debtor in jeopardy. (ii)'Gujarat Urja Vikas Limited vs. Amit Gupta & Ors.' Civil Appeal No. 9241 of 2019 dated 08.03.2021. The Hon'ble Supreme Court at paragraph 165 held as under: "165. Given that the terms used in Section 60 (5) (c) are of wide import, as recognized in a consistent line of authority, we hold that the NCLT was empowered to restrain the Appellant from terminating the PPA. However, our decision is premised upon a recognition of the centrality of the PPA in the present case to the success of the CIRP, in the factual matrix of this case, since it is ....