TaxTMI 
TaxTMI 
2023 (6) TMI 852
X X X X Extracts X X X X
X X X X Extracts X X X X
....de'.), has been admitted by the 'Adjudicating Authority', observing as follows: "14. In so far as the submissions made by the Learned Counsel for the Respondent, it is seen that as per the MOU they are required to pay the amount to the Operational Creditor in 6 instalments, however the stand taken by the Respondent in the present case that since no revenue has been generated and hence, they are not in a position to pay the amount to the Corporate Debtor would not fall under the term 'dispute' as per Section 8 of IBC, 2016. Further, the terms of the MOU clearly stipulates that the Operational Creditor is required to make the payment irrespective of whether the said engine is in operation or not at the time of payment dates. Thus, the 'operational debt' and the Corporate Debtor has committed 'default' in repayment of such operational debt. Also, the alleged disputes as submitted by the Learned Counsel for the Corporate Debtor in relation to non-payment of money is not sustainable in terms of provisions of IBC, 2016. 15. Further, this said debt amount claimed by the Operational Creditor amounting to Rs. 2,25,62,360/- (Rupees Two Crores Twenty Five Lakhs Sixty Two Tho....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... stipulated to be within 8-10 weeks. An 'MoU' was entered into between the 'Corporate Debtor' and the 'Operational Creditor' on 11/07/2018 for the purpose of carrying out 30K maintenance of GE-1 Gas Engine. It is submitted by the Learned Counsel that the 'MoU' was a composite contract for both supply of goods and for the provision of services. The Payment terms as per the said 'MoU' are reflected in Para 1(b) of the 'MoU'. The Learned Counsel drew our attention to the said clause which is extracted below: "Notwithstanding anything contrary contained elsewhere in this MOU, the Service recipient shall pay the dues of the Service Provider after repayment of Bank Loan dues for that month. If any shortfall arises in the said month for paying Service Provider after clearing the bank dues, the shortfall will be paid in the immediate next month. In the months of shortfall, service recipient agrees to provide bank statements of all banks to Service Provider to support collection during the month, bank loan repayment and shortfall in making payment to service provider." 3. It is submitted that from the aforenoted clause, it is clear that the payment is dependent on the Commercial....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tions Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd' reported in [(2018) 1 SCC 353] in which it was held that if any pre-existing dispute exists, the 'Adjudicating Authority' need not examine the merits of the dispute, but only the fact that the dispute 'truly exists', which the 'Adjudicating Authority' did not examine in the instant Case. 5. It is submitted that the Corporate Debtor did not file any 'Counter' to the Application of the 'Operational Creditor' and that the same cannot be said to be a part to establish the pre-existing dispute. It is strenuously contended that the Adjudicating Authority failed to consider the contention of the Corporate Debtor that the purchase Order dated 13/06/2018 and the 'MoU' dated 11/07/2018 are intrinsically connected and form a composite contract for goods and services. The Learned Counsel placed reliance on the following Judgments in support of his Contentions. i. Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt Ltd [(2018) SCC 353] @ Para 51 ii. Kay Bouvet Engineering Ltd. Vs. Overseas Infrastructure Alliance (India) Pvt. Ltd. [(2021) 10 SCC 483] iii. Agricultural Produce Marketing Committee Bangalore vs. The Stat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld payment of the remaining 118 spare parts for which admittedly there was no issue raised by the Corporate Debtor. This issue of ill-fitting spare parts was only raised by the Corporate Debtor for the first time after 13 months of supply of spare parts on 23/10/2018 and after 7 months of engine being made operational on 03/04/2019. 8. The Learned Counsel also contended that the issues on delayed commissioning and not achieving maximum utilization have nothing to do with the MoU dated 11/07/2018 as the MoU is purely a contract for supply of spares only. The Learned Counsel drew our attention to the e-mail dated 11/09/2019 in support of his case that there was an admission of debt on behalf of the Corporate Debtor. The MoU dated 11/07/2018 had specified a payment schedule which was to be strictly adhered to. The Plea as to payment of dues being dependent upon the generation of revenue and services of bank loan was never taken up by the Corporate Debtor ever before in any of their communications. The reference made by the Appellant to alleged non obstante clause or Section 102 of Evidence Act is misconceived as the Corporate Debtor cannot wriggle out of admissions of liability det....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inder Heads exhaust valves stem growth is abnormal. It is unbelievable to see this much of a fast rate of valve growth that too in the recently overhauled Engine which crossed just 5834 hours of operation after the major overhaul done in GE-1 Engine at 32244 hours by Clarke Energy (CEIPL). This observation is again indicated that the spares supplied and replaced by Clarke Energy during the 30K overhaul might be defective or could be wrong supply or not suits to our Engine operated at Natural Gas. Note in the below table in Cylinder Heads 1,3,6 & 18 having more valve growth and importantly in Cylinder no. 6 & 18 the exhaust valve wear almost neared the maximum limit of 2.5mm. As explained in our previous mail the modifications done in the Liners and material defective spares (Supply) replacement in our engine is the reason for higher lube oil consumption and fast wear rate of valves and valve seats. This is physically proven in the Lube oil consumption data and the Valve growth measurement data. Both the problems were existing since it is operated by the CEIPL O&M team. This valve growth problem is already identified by your O&M team in the 36K maintenance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on and approval from the owner of the Engine. Hence ultimately the purpose of the 30K overhauling is defeated due to Defective spares fitment in our Engine and change in the original design of our Engine. With this background, how do you expect us to make payment for the spares supply which ended up in performance degradation and in fact the 30K overhauling increased the risks in our Engine. Adding to it CEIPL suspended the services and demobilized the team from our plant without solving the abnormalities which arised and existed while you were operating our Engine. Here we would like to point that till the month of Aug'19 we were operating the Engine at the load less than 50% and hence this high lube oil consumption problem not come out. It is come to know only when the load increased beyond 50%. If the GE-1 Engine is tested by you at full load as soon as 30K overhaul is completed, this problem might have surfaced in the beginning stage itself and you must have resolved these issues before our payment dues begin. Hence it is not ethical to ask us to make payment with all these issues unresolved and all which emerged only after 30K overhauling done by CEI....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ything contrary contained elsewhere in this MOU, the Service recipient shall pay the dues of the Service Provider after repayment of Bank Loan dues for that month. If any shortfall arises in the said month for paying Service Provider after clearing the bank dues, the shortfall will be paid in the immediate next month. In the months of shortfall, service recipient agrees to provide bank statements of all banks to Service Provider to support collection during the month, bank loan repayment and shortfall in making payment to service provider." (Emphasis Supplied) 14. It is not in dispute that the 1st Respondent had entered into an MoU dated 11/07/2018, with the Corporate Debtor and that the payment terms included an advance of Rs.3,00,000/- (Rupees Three Lakhs Only) as well as balance payment which was to be paid in six instalments. It is the case of the Appellant that the amount ought to be paid only after service was done. It is the case of the Respondent that the Agreement was only for the supply of spares and has nothing to do with the performance of the Engine. Clause c of the terms and conditions of the MoU states as follows: "c. Others * Service re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of some time that the Engine efficiency can be ascertained and therefore, the lapse of 13 months from the date of supply of spare parts and 7 months of the Engine being made operational on 03/04/2019 for raising any dispute is justified, cannot be accepted. 17. It is significant to mention that the e-mails relied upon by the Appellant are dated 17/12/2019, 18/12/2109, 14/12/2020 & 28/12/2020, which were all sent more than a year after the supply of the spare parts. Further, the 1st email mentioned in the Reply Notice dated 02/03/2020 is 07/11/2019. It is pertinent to mention that in the interim period i.e., 11/09/2019, which is again 11 months after the expiry of the spare parts, the Appellant / Corporate Debtor has never raised a whisper of the Complaint regarding quality issues. In fact, the sum and substance of the email dated 11/09/2019 sent at 16:46 p.m., is that once they get permission from TANGEDCO, the amount would be paid by the Corporate Debtor to the Operational Creditor. The other email is on the same date at 6.23 p.m. which reads as follows: "From : dvpreddysaheliexports [email protected] Sent : 11 September 2019 16:46 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....neration. Payment will be made definitely once Engine generates more generation after necessary permission and formalities are completed. Please wait. Regards D.V.P. Reddy 20. It is the case of the 'Operational Creditor' that the 'spares' in entirety were supplied by 11/09/2019 and the engine was already in operation for around five months. The clauses of the 'Memorandum of Understanding' evidence that there was a strict payment schedule to be made in instalments, irrespective of the operation of the Engine. Para 51 of 'Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt Ltd' (supra) relied upon by the Counsel for the Appellant is reproduced as hereunder: "It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the Notice of the Operational creditor the 'existence' of the dispute or the fact that a suit or arbitration proceeding relating t....