TaxTMI 
TaxTMI 
2023 (1) TMI 745
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....National Company Law Tribunal, Mumbai) in Company Petition No. IB 246/MB/2021, whereby an application under 9 of the IBC filed by SDMC against the Respondent MEP Infrastructure Developers Ltd. (in short MEP Infrastructure) was rejected and, the Interlocutory Application being IA 1670 of 2021 filed by MEP Infrastructure challenging the maintainability of CP No. IB 246/MB/2021 was allowed. 2. In brief, the facts of the case, as stated and argued by the Appellant. are that the Appellant entered into an agreement called 'Toll Tax and ECC Collection Agreement' (in short 'Toll Tax Agreement') on 28.9.2017 for collection of Toll Tax and Environment Compensation Charge (in short 'ECC') at border points from specified vehicles entering Delhi. The Appellant has further stated that by virtue of clause 12.1(A)(a) of the said Toll Tax Agreement, the MEP Infrastructure was required to remit an amount of Rs. 23,12,87,671 on weekly basis to the SDMC, which was the proportionate weekly remittance amount out of the total payment of Rs.1206 crores per annum, payable for a period of 5 years by the contractor MEP Infrastructure in accordance with the said Toll Tax Agreement. 3. The Appellant has ....
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....d a writ petition before Hon'ble High Court of Delhi being WP(C) No.12483/2019. This writ petition was disposed of vide order dated 26.11.2019 by the Learned Single Judge with the observation that the present writ petition be treated as representation and the same be decided after providing an opportunity of hearing to MEP Infrastructure by a speaking order. The Appellant has further stated that the Commissioner, SDMC, in compliance passed an order dated 30.1.2020, in which certain benefits which were just and warranted were given to MEP Infrastructure and most of its claims were rejected. 6. The Appellant has further stated that a fresh demand notice dated 14.2.2020 for an amount of Rs.7,56,80,748 was issued by SDMC. He has added that, in the meanwhile the claims of the Respondent were dealt with by the Commissioner, SDMC through an order dated 30.1.2020, where after the Respondent filed another writ petition being WP(C) No. 2241/2020 on 2.3.2020 before Hon'ble High Court of Delhi seeking quashing of the order dated 30.1.2020 passed by the Commissioner, SDMC, wherein the Learned Single Judge vide order dated 2.3.2020 directed the Respondent to comply with the order dated 26.11.....
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....create any equities in favour of MEP Infrastructure and shall be without prejudice to the rights and contentions of the SDMC. 9. The Appellant has further stated that the fresh NIT was pursued by the SDMC and a letter of intent No. NY ABC/TT/HQ/2020-D 1496 dated 27.5.2020 was issued in favour of Sahakar Global Ltd.-GB being the highest bidder at Rs.786.60 crores per annum. 10. The Appellant has further added that the writ petitions filed in the Hon'ble High Court of Delhi bearing nos. WP(C) 12483/2019 and WP(C) 2241/220 primarily claiming that the amount to be remitted by the Respondent MEP Infrastructure to SDMC was based on collection of toll tax and ECC and since there were many challenges in Toll Tax and ECC Collection the revenue had gone down drastically and, therefore, the Respondent prayed for reassessment of toll tax revenue in view of changed conditions and circumstances. 11. The Appellant has further stated that despite certain interim orders passed by the Hon'ble High Court of Delhi for payment of amounts on weekly basis in writ petitions (WP No. 12483/2019 and WP No. 2241/2020), MEP Infrastructure has failed to comply with the said orders and filed various app....
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....DMC and SDMC, executed a 'Toll Tax and ECC Collection Agreement' on 28.9.2017. She has further argued that the Toll Tax Agreement very clearly stipulates payment by the contractor of an amount of Rs.1206 crores p.a. for a period of five years with the possibility of enhancement of 5% of the existing awarded amount/committed amount after completion of every two years. She has further argued that SDMC, in accordance with section 113(2)(g) of The Delhi Municipal Corporation Act, 1957 (in short 'DMC Act') has been authorised to levy, assess and collect Toll Tax and the collection can be given after auction to a private party as per Bye Law 4 of the Delhi Municipal Corporation (Toll Tax) Bye Laws, 2007. She has argued that the operational creditor SDMC is a local authority and the amount being paid by the users as Toll Tax and collected by the Respondent is Toll Tax amount and therefore the amount due and payable to SDMC is an "operational debt" as per the definition of operational debt in the IBC. 14. The Learned Senior Counsel for Appellant has explained that Bye-law 4(2) of the Delhi Municipal Corporation (Toll Tax) Bye Laws, 2007 gives power to the Commissioner of SDMC to allot t....
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....nege from its obligation to pay the agreed amount of Rs. 1206 crores every year to SDMC as per the Toll Tax Agreement. She has clarified that the writ petitions bearing nos. WP 12483 of 2019 and 2241 of 2020 do not relate to any dispute regarding the agreement, but relate to declaration of the Toll Tax and ECC Collection Agreement as ultra-virus section 113 (2)(g) of the DMC Act and has further argued that the disputes alleged do not relate to any deficiency in quality or quantity of goods or services. She has, further, referred to the admission made by MEP Infrastructure in its reply to section 9 application, wherein MEP Infrastructure has, at the time of entering into contract, agreed to be bound by the terms and conditions of the Toll Tax Agreement and not seek any rebate or concession in payment of the agreed amount even if there is decrease in traffic intensity or traffic flow. 17. The Learned Senior Counsel for Appellant has further argued that in case the Toll Tax Agreement does not provide any alternative dispute resolution mechanism, any contractual dispute has to be settled in terms of the Contract Act in a court of law of appropriate jurisdiction, which evidently the ....
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....ld, therefore, not come in the definition of an 'operational' debt as defined in section 5(21) of the IBC. 20. The Learned Senior Counsel for Respondent has further claimed that the dispute regarding the contractual conditions had started in 2019 and MEP Infrastructure has filed WP No. 12483/2019 in 2019 assailing the demand made by the SDMC and has been pursuing litigation regarding the dispute since then. He has added that the section 8 notice was issued on 22.1.2021, which was much after the dispute had already arisen and therefore, the dispute is in the nature of 'pre-existing dispute'. He has referred to the order of Hon'ble High Court of Delhi in WP(C) 12483/2019 dated 20.6.2019 to point out that this order deals in detail about the grievance of the petitioner (MEP Infrastructure) regarding the issue of opening of Eastern Peripheral Expressway (in short 'EPE') for general traffic on 27.5.2018 when the issue was discussed and considered by the High Level Committee of SDMC when the matter of reduction in 30% of commercial traffic was also highlighted. He has claimed that the order by Hon'ble High Court of Delhi in WP (C) No. 12483/2019 clearly mentions that MEP Infrastructur....
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....IBC qua an operational debt is to ensure that such debts, which are usually small in amount, should not put the corporate debtor into corporate insolvency prematurely and therefore, existence of dispute is a good enough reason to prevent the admission of a section 9 application. He has also pointed out to the observation in this judgment that if a notice of dispute has been received by the operational creditor, the Adjudicating Authority must reject the application without examining whether the dispute is likely to succeed or fail on consideration of the merits of the dispute. 23. Looking at the grounds raised in the appeal and the arguments of the rival parties, the following two issues arise in this appeal:- (i) Whether the amount claimed by SDMC in connection with Toll Tax and ECC Agreement is an 'operational debt' as defined in section 5(21) of the IBC? (ii) Whether a 'pre-existing dispute' is present between SDMC and the contractor MEP Infrastructure, which would lead to rejection of the application filed under section 9 by SDMC? 24. It is noted that the SDMC is authorised to levy Toll Tax in accordance with section 113(2)(g) of the DMC Act, 1957. Furth....
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....now examine the first issue which is regarding the classification of debt that is claimed to be in default and payable to SDMC. The Learned Senior Counsel for MEP Infrastructure's contention is that this debt arises out of a grant given by SDMC for collection of Toll Tax, but the amount sought to be paid through the Toll Tax Agreement by MEP Infrastructure has no direct relevance to the collection of Toll Tax and Environment Compensation Charge (ECC) by the contractor. In this connection, the Learned Counsel for SDMC has referred to section 113(2)(g) of the DMC Act, 1957 to state that the SDMC and two other municipal corporations viz. EDMC and NDMC are authorized to levy and collect Toll Tax and ECC (which is imposed vide order dated 9.10.2015 and 16.10.2015 passed by the Hon'ble Apex Court in WP No 13029/85 titled M.C. Mehta vs. Union of India & Ors). She has referred to Bye-Law 4 of the Delhi Municipal Corporation (Toll Tax) Bye Laws, 2007, where the Commissioner of the Municipal Corporation is authorised to allot the work of collection of Toll Tax to one or more private agencies byway of auction which was exactly how the contractor was selected and an agreement entered into with....
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.... decision given in writing by the Competent Officer in any matter in connection with or arising out of the Agreement, to be unacceptable, it shall promptly within [15] days request the Competent Officer in writing to give his instructions or decision in respect of the same. Thereupon, the Competent Officer shall give his written instructions or decision within a period of [30] days from the receipt of the Contractor's letter. 16.3 If the Competent Officer fails to give his instructions or decision in writing within the aforesaid period or if the Contractor is dissatisfied with the instructions or decision of the Competent Officer, the Contractor may, within [15] days of receipt of the Competent Officer's instructions or decision, appeal to the Commissioner, SDMC who shall afford an opportunity to the Contractor to be heard, if the latter so desires, and to offer evidence in support of its appeal. The Commissioner, SDMC shall give his decision in writing within [30] days of receipt of Contractor's appeal which shall be acceptable to the Contractor." 32. The termination of the Toll Tax Agreement is also provided in clause 17 in case of default and it is provid....
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....affecting toll collection taking into account the circumstances highlighted by the petitioner and reassess and re-determine the annual/ weekly amount payable by the petitioner to the SDMC towards toll tax; d. Issue a writ in the nature of mandamus directing the respondents to take into consideration the change in circumstances make suitable downward revision in the weekly/ annual remittance commensurate with the reduction in toll tax paying commercial vehicles and taking into account the tax leakages on account of free lanes; xx xx xx g. Issue a writ in the nature of Mandamus directing the SDMC to provide a suitable mechanism for resolution of disputes/grievances of the petitioner as the mechanism provided by the contract has become unworkable." (Emphasis Supplied) 35. It is further noted that Hon'ble Delhi High Court vide its orders dated 26.11.2019 disposed WP (C) No. 12483/2019 with the direction that the Writ Petition No. 12483/2019 would be treated as representation of MEP Infrastructure made to Commissioner, SDMC, who shall after giving opportunity of hearing to the contractor, pass a reasoned order/speaking order within two months. 3....
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....oss towards evading Toll Tax by the commercial vehicles plying from free lanes at - 13 major border entry toll plaza for the period October-2017 to August-2019 vide letter No. MEPIDL/OUT/2019-20/862 dated 04.10.2019. Rs. 241,92,89,000/- Total claim amount Rs.465,49,10,137/- 37. A perusal of the claims submitted by the MEP Infrastructure before the Commissioner, SDMC, makes it clear that the contractor MEP Infrastructure was seeking various monetary reliefs in payment of remittances on account of Road Transport strike during 20.07.2018 and 28.07.2018, loss of road revenue due to drop in traffic of account of commercial vehicle pollution in Delhi, diversion of traffic at Eastern Periphery Expressway and Western Periphery Expressway for the period from June 2018 to June 2019, reduction in vehicular traffic on account of preparation of main event of Independence Day, 2019 and loss of Toll Tax revenue due to evasion by commercial vehicles plying from free lanes at thirty border entry points during the period of October 2017-August 2019. It is thus clear that these claims that amount to Rs.465,49,10,137/- were first taken for consideration by the High Level Committe....
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....onsideration by High Level Committee of SDMC, then by Commissioner, SDMC upon order of Hon'ble Delhi High Court were in the nature of disputes between SDMC and the contractor and these disputes were subsequently carried to the Hon'ble Delhi High Court for resolution. 41. The order dated 20.4.2020 in WP(C) 2241/2020 was challenged in LPA No. 139/2020 and an earlier order dated 26.11.2019 of the Hon'ble High Court of Delhi in WP (C) No. 12483/2019 was challenged in LPA 140/2020, but later both the LPAs were withdrawn and LPA no. 165/2020 challenging order dated 12.6.2020 in WP No. 2345/2020 and LPA No. 167/2020 challenging order dated 24.6.2020 were filed before the Division Bench of Hon'ble High Court of Delhi. These LPAs were also in pursuance of the issues and disputes raised by the contractor. It is worthwhile to note the operative part of the order of Delhi High Court in LPAs No.165/2020 and 167/2020 (attached at pp. 217-301 of appeal paperbook, Vol.II), which is as follows:- "29. In view of the above we hereby dispose-of both the Letters Patent Appeals by holding that: 1). The Force Majeure clause stands invoked- w.e.f. 26.03.2020 in terms of OM dated 18.05....
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....er dated 12.1.2021, whose operative portion is as follows:- "We are not inclined to entertain this special leave petition which arises out of an order passed by the Division Bench of the Court which in turn arises out of an interim order passed by the Learned single Judge of the High Court. Having regard to the fact that the matter has been pending before the learned single judge, we are of the view that it would he appropriate in the interest of justice, if the learned single Judge is requested to dispose of the matter expeditiously preferably by the end of February, 2021. Xx xx xx xx All points are left open for decision before the learned single Judge." 44. The above observation made by Hon'ble Supreme Court also goes to show that the Hon'ble Supreme Court left the issue of resolution of dispute to the wisdom of Single Judge of Hon'ble Delhi High Court. It implies that there was an implicit understanding that there was some dispute that needed to be resolved or addressed. We also note while the writ petition was pending before the Learned Single Judge of Hon'ble Delhi High Court for adjudication, the SDMC went ahead to issue notice under se....
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....rbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? If any one of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factor s mentioned in Section 9(5) of the Act. xx xx xx 38. ........................................ 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. xx xx xx 51. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the a....