AI Drafter 
TaxTMI 
TaxTMI 
2022 (9) TMI 377
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....tor, for initiation of the Corporate Insolvency Resolution Process (CIRP) against HPCL Biofuels Ltd. (HBL), a wholly owned subsidiary of HPCL. The NCLAT directed the Adjudicating Authority NCLT to close the proceedings for CIRP initiated against HBL. 2. On or about 15.11.2018, the appellant filed an application for initiation of CIRP against HBL under Section 9 of the IBC in the Kolkata Bench of the NCLT. On 07.03.2019, HBL filed its reply to the said application made by the appellant and the appellant also filed a rejoinder thereto. 3. By an order dated 12.02.2020, the Adjudicating Authority (NCLT) admitted the application for initiation of CIRP filed by the appellant, rejecting the contention raised by HBL that there were pre-existing disputes between the parties in respect of the claim of the appellant. 4. From the List of Dates filed by the appellant, it appears that between 27.06.2012 to 30.08.2012, various tenders were floated by HBL for enhancing the capacity of the Boiling Houses of HBL at Lauryia and Sugauli from 1750 TCD to 3500 TCD. 5. The appellant submitted its offer pursuant to the tenders. On or about 15.10.2012, four purchase orders were issued to the ap....
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....rnover) Rules, 1957. The statutory duty of issuance of C-forms under the Central Sales Tax, do not and cannot constitute acknowledgment of any liability of HBL to the appellant, to make payment. On 09.7.2016, the appellant sent legal notice to HBL through its advocate, demanding payment or alternatively reference of the disputes to arbitration. 12. On 30.08.2017, the appellant sent a demand notice under Section 8 of the IBC to HBL claiming that a sum of Rs. 18,12,21,452/- (Rupees eighteen crores twelve lakhs, twenty one thousand four hundred and fifty two) along with interest, was due from HBL to the Appellant from 30.12.2013. A second demand notice was sent by the appellant to HBL on 07.08.2018. HBL replied to the demand notice dated 25.07.2018 received on 01.08.2018 disputing the claim. It is apparent from the records that there were pre-existing disputes between the parties and on 09.07.2016, a request had been made by the Operational Creditor to HBL to refer the disputes to Arbitration. 13. Sections 8 and 9 of the IBC read :- "8. Insolvency resolution by operational creditor.-(1) An operational creditor may, on the occurrence of a default, deliver a demand ....
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....orate debtor, if available; (d) a copy of any record with information utility confirming that there is no payment of an unpaid operational debt by the corporate debtor, if available; and (e) any other proof confirming that there is no payment of any unpaid operational debt by the corporate debtor or such other information, as may be prescribed. (4) An operational creditor initiating a corporate insolvency resolution process under this section, may propose a resolution professional to act as an interim resolution professional. (5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order - (i) admit the application and communicate such decision to the operational creditor and the corporate debtor if,- (a) the application made under subsection (2) is complete; (b) there is no payment of the unpaid operational debt; (c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor; (d) no notice of dispute has been received by the operational creditor or there is no record of dispute in the i....
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....Operational Creditor in the execution of the contract, entry tax, TDS, WCD, payment to parties/payment to Operational Creditor by the Corporate Debtor/sub-vendors and subcontractors/vendors of the Operational Creditor. These are normal deductions as per business practice and terms of contract. However, it is noteworthy that Liquidated Damage @ 5% amount to Rs.190.94 lakhs, Performance Bank Guarantee to the tune of 673.6 lakhs, work claim of Rs.352.00 lakhs for boiler house extension P.O. finalization and additional work 71 lakh have also been considered. The net effect has been worked out by Corporate Debtor as Rs.500 lakhs receivable from the Operational Creditor. If the boiler house extension and additional work are ignored, the amount recoverable from the Operational Creditor gets reduced to 63.13 lakhs. Further, if the amount retained for Performance Bank Guarantee is taken into consideration, then the amount payable to Operational Creditor works out at Rs.610.23 lakhs (i.e. 673-63.13). As noted earlier, L.D. is applicable @ 5% amounting to Rs.190,94 lakhs has already been deducted. Further, amount of Rs.400.55 lakhs in respect of Purchase Orders issued at the risk and cost of ....
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....exceeding Rupees one lac was due and payable and had not till then been paid; and (ii) whether there was existence of any dispute between the parties or the record of pendency of a suit or arbitration proceedings filed before the receipt of demand notice in relation to such dispute. If any one of the aforesaid conditions was not fulfilled, the application of the Operational Creditor would have to be rejected 17. In Mobilox Innovations Private Limited v. Kirusa Software Private Limite d (2018) 1 SCC 353, this Court held:- "34. Therefore, the adjudicating authority, when examining an application under Section 9 of the Act will have to determine: (i) Whether there is an "operational debt" as defined exceeding Rs 1 lakh? (See Section 4 of the Act) (ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? and (iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? If an....
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....o state that it disputes the award. Such a case would clearly come within para 38 of Mobilox Innovations [Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd., (2018) 1 SCC 353 : (2018) 1 SCC (Civ) 311] , being a case of a pre-existing ongoing dispute between the parties. The Code cannot be used in terrorem to extract this sum of money of rupees two lakhs even though it may not be finally payable as adjudication proceedings in respect thereto are still pending. We repeat that the object of the Code, at least insofar as operational creditors are concerned, is to put the insolvency process against a corporate debtor only in clear cases where a real dispute between the parties as to the debt owed does not exist...................................................................................................... 27. We repeat with emphasis that under our Code, insofar as an operational debt is concerned, all that has to be seen is whether the said debt can be said to be disputed, and we have no doubt in stating that the filing of a Section 34 petition against an arbitral award shows that a preexisting dispute which culminates at the first stage of the proceedings in an awa....
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....e exists' between the parties. The communication between the parties as noted in para 10 read together with the Arbitration invoked by the 'Operational Creditor', we are of the considered view that there is an 'Existence of a Dispute' between the parties which is a genuine dispute and not a spurious, patently feeble legal argument or an assertion of fact unsupported by evidence." 23. The learned NCLAT rightly observed that a perusal of the "Tender Enquiry dated 27.06.2012", "Instructions to Bidders", "General Conditions of Contract" and "Special Conditions of Contract", showed that the tender was for 'design, engineering, manufacture, procurement, supply, transportation to site, transit and storage, insurance storing at site, project management, civil work, mechanical works, electrical works, instrumentation work, mechanical works, electrical works, instrumentation work, erection, installation interfacing, testing, commissioning, performance testing, putting into successful commercial operation and handing over additional equipment goods, and material centrifugal section including civil foundation for enhancing the boiling house capacity from 1750 TCD to 3750 TCD on Lumpsum Turn....
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....ssion and perform their obligations and their senior personnel were stationed at the site of the 'Corporate Debtor' and additional staff always visited from time to time. It was only because of pendency of payment of the dues that the 'Operational Creditor' had faced difficulties in executing the ongoing Project. The 'Corporate Debtor' was making ad hoc payments but not as per the bills raised. 14. It is strenuously contended by the Learned Counsel that the conduct of the 'Corporate Debtor' in awarding fresh Purchase Order in August 2013 at the fag end of the completion of the previous 6 orders, while at the same time, complaining against their performance, is self-contradictory and goes to show the malafide intention of the 'Corporate Debtor'. It is the case of the 'Operational Creditor' that all equipment supplied was of good quality and all the valves which were procured were from a vendor mandated by the 'Corporate Debtor' only. If the 'Corporate Debtor' was dissatisfied with the quality of work or substandard material supplied, there are no substantial reasons as to why new contracts were awarded at the fag end of the previous 6 contracts. 87% of the material and serv....