AI Drafter 
TaxTMI 
TaxTMI 
2022 (12) TMI 610
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....l', Division Bench - I, Chennai). 2. The 'Adjudicating Authority', ('National Company Law Tribunal', Division Bench - I, Chennai), while passing the 'impugned order' dated 04.10.2021, in IBA/751/2020, at Paragraphs 12 to 15, had observed the following: 12. "It was submitted that the principal amount due and payable by the Corporate Debtor is Rs.3,25,00,000/- and that the Corporate Debtor despite having its liability with respect to the outstanding sum, failed to make payments notwithstanding several requests and reminders and it is evident that there is no dispute with regard to the existence of the said operational debt. It was further submitted by the Operational Creditor further submitted that as on 20.02.2020, a principal sum of Rs.3,25,00,000/- along with interest of Rs.46,34,301/- (calculated @ 24% p.a. up to 20.02.2020 on the principal amount), totalling to Rs.3,71,34,301 was due and payable by the Corporate Debtor up to 20.02.2020. 13. Under such circumstances, it was submitted that the Operational Creditor issued a notice of Demand as stipulated under Section 8 of the IBC, 2016, to the Corporate Debtor on 20.02.2020, which was received by the Corporate....
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....nce the default on the part of the Corporate Debtor is proved beyond any reasonable doubt. Thus, the Operational Creditor has proved that there is an 'operational debt' and 'default' which has been committed on the part of the Corporate Debtor. Further, it is also pertinent to note that the default arising in the present Application is much prior to the advent of the Covid-19 pandemic and hence the Corporate Debtor cannot seek shelter also under Section 10A of IBC, 2016. Under the said circumstances, this Tribunal is left with no other option than to proceed with the present case and initiate the Corporate Insolvency Resolution Process in relation to the Corporate Debtor." and admitted the 'Application' and declared 'Moratorium', etc. Appellant's Contentions: 3. Assailing the 'Propriety', 'Validity' and 'Legality', of the 'impugned order' dated 04.10.2021 in IBA/751/2020, passed by the 'Adjudicating Authority', ('National Company Law Tribunal', Division Bench - I, Chennai), in admitting the 'Application' under Section 9 read with Rule 6 of the Insolvency and Bankruptcy Code, 2016 (filed by the '1st Respondent / Petitioner / Operational Creditor'), the Learned Counsel for t....
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....ed to be a 'Substitute', to a 'Recovery Forum', and the instant case, is not a 'fit' one to initiate 'Corporate Insolvency Resolution Process'. 9. The Learned Counsel for the Appellant forcefully contends that 'where a 'Party', wishes to avail the remedy under the I & B Code, 2016, for breach of the terms of a 'Settlement Agreement', an 'Application', under I & B Code, 2016, 'shall not be maintainable'. 10. The Learned Counsel for the Appellant, submits that it is a matter of record that with the payment of the amount, claimed by the Respondent, is partially due from another Company, by the name 'Uniply Décor Limited', who is not a 'Party' to the proceedings. Further, 'Uniply Industries Limited', had paid its 'old Debt', as per the terms of the 'Settlement Agreement'. 11. The Learned Counsel for the Appellant points out that it is the 'Debt' of 'Uniply Décor Limited', which remains 'unpaid' and hence, the 'Petitioner, in the Company Petition could not have continued to proceed with the Company Petition, despite, the above payments. 12. The Learned Counsel for the Appellant comes out with a plea that the 'Memorandum of Compromise', is binding on the necessa....
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....subsequently, entering into a 'Memorandum of Compromise'. Hence, the 'Appellant', is obliged to 'Discharge its Liability', towards the 'New Contract'. 17. The Learned Counsel for the Appellant contends that the 'discharge of one's Contractual obligations', by way of performing the 'Original Terms of the Contract', is substituted by either a whole 'New Contract' or a new set of obligations, within the same 'Contract'. Also that, the 'Respondent', had charged interest till 30.06.2020 at 24% and that the 'Claim' of 'Interest' is untenable, because of the fact that the 'Respondent', had accepted 'part payments', without giving any 'Notice' that they would 'Claim' interest for the 'Delayed Payment', and therefore, the 'Respondent', is precluded from 'Claiming' interest, based on the principle of 'Waiver' and 'Acquiescence'. 18. The Learned Counsel for the Appellant while rounding up, submits that the 'Appellant', had continued to pay the 'Respondent', towards his 'Outstanding Dues', even during the 'Adjudication' of 'Petition', under Section 9 of the Code', which the 'Respondent', had deliberately concealed before the 'Adjudicating Authority', and prays for 'allowing' the 'Appeal'....
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.... Supra, we are of the considered view that the case of the Applicant is also covered with the aforesaid decision. Therefore, in our considered view, the default of payment of settlement agreement do not come under the definition of Operational debt. Hence, we are not inclined to allow the prayer of the Applicant." 22. The Learned Counsel for the Appellant, refers to the 'Order' of the 'Tribunal' (New Delhi) in M/s. Brand Reality Services Ltd. v. M/s. Sir John Bakeries (India) Pvt. Ltd., reported in MANU/NC/7776/2020, wherein, it is observed that an 'Operational Debt', under the I & B Code, 2016, does not take account of unpaid 'Debt' instalments, under the 'Settlement Agreement', and that if the relationship between the 'Parties', to the dispute is not of 'Corporate Debtor' and 'Operational Creditor', then, such other payment defaults would not come, within the ambit of the I & B Code, 2016. 23. The Learned Counsel for the Appellant, falls back upon the 'Order' of the 'Tribunal', ('National Company Law Tribunal', Delhi Bench) in Bajaj Rubber Company Private Limited Vs. Saraswati Timber Private Limited, wherein it is held that, the breach of the terms and conditions of payment....
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.... and more than Rs.198 Crores of admitted Claims. 27. The Learned Counsel for the 1st Respondent points out that, it is evident from the timelines, that the 'Defaults', had occurred in the year 2018 and in the year 2019, with a promise to effect 'payments', by Oct'2019, much before the spread of 'Covid-19 Pandemic' in India, Viz. March 2020. As such, the contra stand of the Appellant, that it was prevented from making 'payments', because of Covid-19 Pandemic', is an 'incorrect' one. 28. The Learned Counsel for the 1st Respondent contends that the 'Appellant' has admitted its 'Liability' in the instant Comp. App (AT) (INS) No. 260 of 2021 (vide Page 7 of the 'Memorandum of Appeal'), wherein, it is mentioned as under: DATE MODE OF PAYMENT AMOUNT RECEIVED 07.05.2019 NEFT TRANSFER Rs.25,00,000 08.05.2019 NEFT TRANSFER Rs.25,00,000 09.05.2019 NEFT TRANSFER Rs.10,00,000 09.05.2019 NEFT TRANSFER Rs.10,00,000 17.05.2019 NEFT TRANSFER Rs.15,00,000 24.05.2019 NEFT TRANSFER Rs.15,00,000 01.06.2019 NEFT TRANSFER Rs.15,00,000 28.06.2019 RTGS TRANSFER Rs. 5,00,000 17.07.2019 RTGS TRANSFER Rs.50,00,000 ....
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....n, at Paragraph 42, it is observed as under: 42. "Thus, in sequel to the aforesaid discussion, we find that the Operational Debt claimed by the Applicant, even if it is limited for the period up to 30.04.2018, being above Rs.1 (one) Lakh, the Application survives. Since, all this Adjudicating Authority is required to see is whether there is a debt due and default has occurred. However, while adjudicating the default, the Adjudicating Authority does not have to indulge in determining the extent or details of debt. The moment it is satisfied that the unpaid amount of default is above Rs 1 Lakh or Rs 1 Crore as the case may be, it is bound to admit the application. In the context, we are further strengthened by the law laid down by the Hon'ble Supreme Court in the matter of "Innoventive Industries Ltd. Vs. ICICI Bank and Ors. - (2018) 1 SCC 407", whereby it is held that: "The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning non-payment of a debt once it becomes due and payable, which includes....
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....th immediate effect." 35. The Learned Counsel for the 1st Respondent, cites the Order of this 'Tribunal' dated 10.03.2022 in Brand Realty Services Ltd. v. Sir John Bakeries India Pvt. Ltd. (vide Comp. App (AT) (INS) No. 958 of 2020, reported in MANU/NL/0162/2022, wherein, at Paragraph 13, it is observed as under: 13. "Our above conclusion is further fortified then we look into the scheme of Section 9(5)(ii) which provides that the Adjudicating Authority can reject the Application if - "notice of dispute has been received by the Operational Creditor or there is a record of dispute in the information utility". The above provision indicates that even if no notice of dispute has been received, and there is record of dispute in the Information Utility the Application under Section 9 is to be rejected by the Adjudicating Authority. The above provision clearly indicates that even in absence of notice of dispute, Adjudicating Authority can reject the Application if there is record of dispute in the Information Utility. It goes without saying that record of dispute in the Information Utility can very well be pointed out by the Corporate Debtor before the Adjudicating Authority w....
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....n in Part IV under caption of 'Particulars of Operational Debt'. 45. In totality, a sum of Rs.7,50,000/- being the due amount towards 'Principal' and Rs.1,35,000/- towards 'Penalty' is equal to Rs.8,85,000/- was claimed by the Appellant/Operational Creditor for the goods supplied by the Appellant/Operational Creditor through the various Invoices as stated supra, it is bounden duty of the Respondent/Corporate Debtor to pay the due amount in issue. Company Appeal (AT)(Insolvency)No.608 of 2020. 46. The other aspect of the matter to be significantly pointed out is that the Respondent/Corporate Debtor through its purchase orders had offered to make payment to the Appellant / Corporate Debtor within a period of 45 - 60 days and in fact the payment was agreed to be made within 30 days from the date of Invoice. As a matter of fact, the Respondent / Corporate Debtor had not made any payment in respect of the due amount even after the 'Consent Decree' passed by the Competent Court of law. 47. Section 3(10) of The Insolvency and Bankruptcy Code 2016 defines 'Creditor' and even in the said definition a 'Decree Holder' ....
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....-payment to the appellant. Consequently, the application under Section 9 will not be barred by limitation. G Conclusion 62. Therefore, we answer the three issues formulated earlier in the following terms: (i) The appellant is an operational creditor under the IBC, since an 'operational debt' will include a debt arising from a contract in relation to the supply of goods or services from the corporate debtor; (ii) The respondent will be considered to have taken over the Proprietary Concern in accordance with its MOA; and (iii) The application under Section 9 of the IBC is not barred by limitation. 63. The appeal is allowed by setting aside the impugned judgment and order of the NCLAT dated 12 December 2019. Since the CIRP in respect of the respondent is ongoing due to this Court's order dated 18 November 2020, no further directions are required. 64. Pending application(s), if any, stand disposed of." 38. The Learned Counsel for the 1st Respondent, submits that in the instant case, the 'Debt', arose out of the 'Unpaid Invoices', for the Goods, supplied by the 1st Respondent to the 'Corporate Debtor', and that the 'Outst....
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....fferently, a 'Person', acknowledging, must be aware of his 'Liability' and the 'Commitment', should be towards that 'Liability'. 45. Section 18 of the Limitation Act, 1963, applies not only where 'Liability' is 'Admitted', unconditionally, but also, where the 'Admission' is 'Conditional', provided the condition is satisfied, as per decision, in South India Insurance Company v. Union of India, reported in (1971) 1 MLJ at Page 373. Moreover, 'actual payment of money', is not required under Section 18 of the Limitation Act, 1963, but, it is 'essential under Section 19 of the Limitation Act, 1963'. 46. An 'Acknowledgement', has the effect of creating a new period run from the 'date of acknowledgment'. It does not create a 'New Contract'. Therefore, it is distinct from a 'Novation of Contract', with the meaning of Section 62 of the Indian Contract Act, 1872, as per decision in Hastimal v. Shankar, reported in AIR 1952 Raj at Page 7 (Full Bench). 47. An 'Acknowledgment', extends the 'Period of Limitation'. An 'Acknowledgement' of 'Liability', ought to be a necessary implication, so that the 'Acknowledgement', is 'clear' and 'unequivocal', as per the decision Sarangdhar Singh v. ....
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....No. Date of Default Details 1 08.05.2019 Failed to pay Rs.1.50 Crores. 2 08.06.2019 Failed to pay Rs.75 Lakhs. 3 08.07.2019 Failed to pay Rs.75 Lakhs. 4 08.08.2019 Failed to pay Rs.75 Lakhs. 5 08.09.2019 Failed to pay Rs.75 Lakhs. 6 08.10.2019 Failed to pay Rs.75 Lakhs. 53. Before the 'Adjudicating Authority', the '1st Respondent / Petitioner / Operational Creditor', under Part V of Form No.5 in IBA / 751 / 2020 at Serial No. 10 (vide Page 67 of the 'Appeal Paper Book' in 'Diary No. 864 dated 11.10.2021), had mentioned that the 'Ledger Account' of the 'Corporate Debtor', maintained by the 'Operational Creditor' along with 'Letter of Explanation', was filed vide Annexure - II (9) (Colly). 54. In the instant case, although on the side of the 'Appellant', a plea is taken, that the 'Unpaid Dues', under a 'Settlement Agreement', is not an 'Operational Debt', and also that, a 'Violation' of the 'Memorandum of Compromise' dated 30.04.2019, cannot be a basis to initiate 'Corporate Insolvency Resolution Process', against the 'Corporate Debtor', it is evident from the 'Memorandum of Compromise' dated 30.04.2019, and other mate....
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....n the side of the 'Appellant', to exhibit, the 'Existence' of a 'Preexisting 'Dispute', in regard to the 'Interest'. In fact, the 'Memorandum of Compromise', dated 30.04.2019 is a document, filed in support of the Section 9 'Application', before the 'Adjudicating Authority', by the '1st Respondent / Operational Creditor', to establish an 'Acknowledgement of Debt', by the 'Appellant / Corporate Debtor'. 63. Besides the above, an 'Affidavit' along with the 'Ledger Account' of the 'Appellant', maintained in the 'Books of Accounts' of the '1st Respondent / Operational Creditor', along with the 'Copy of Statement of Accounts', was filed by the '1st Respondent / Petitioner / Operational Creditor', vide Page 193 - 195 of the Appeal Paper Book (Diary No. 864 dated 11.10.2021 - filed by the 'Appellant'). 64. It cannot be brushed aside, that the 'Invoices' and the 'Ledger Account', were the cementing platform, for the '1st Respondent / Petitioner / Operational Creditor', to prefer an 'Application' in IBA/751/2020, before the 'Adjudicating Authority', ('National Company Law Tribunal', Division Bench - I, Chennai). 65. In the instant case, the 'Appellant', had not produced any 'Docume....