TaxTMI 
TaxTMI 
2024 (2) TMI 972
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....Mr. Aditya Pandey & Ms. Drishti Kaushik, for Intervenor ( REC Ltd. ) JUDGEMENT NARESH SALECHA , MEMBER ( TECHNICAL ) 1. The present Appeal i.e., Company Appeal (AT) (Insolvency) No. 1185 of 2022 was filed by Mr. Chandan Mishra, Suspended Director of Sinnar Thermal Power Ltd. (in short 'Corporate Debtor') under Section 61 of the Insolvency & Bankruptcy Code, 2016 (in short 'Code') being aggrieved by the Impugned Order dated 19.09.2022 in C.P. (IB) No. 2561/(ND)/ 2019 passed by the National Company Law Tribunal, New Delhi Bench- IV (in short 'Adjudicating Authority') whereby the Adjudicating Authority admitted the Corporate Insolvency Resolution Process (in short 'CIRP') filed under Section 9 of the Code by M/s Shapoorji Pallonji & Co. Private Limited who is the Operational Creditor and Respondent No. 1 herein. 2. Mr. Chandan Mishra expired on 22.11.2022 and Mr. Jeevagan Narayana Swami Nadar moved an application for change name as the Appellant which was allowed by this Appellate Tribunal. 3. Mr. Adarsh Sharma is the Respondent No. 2 herein, was appointed as Interim Resolution Professional (in short 'IRP') of the Corporate Debtor. 4. Heard, the Counsel for the Parti....
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....ion before the Adjudicating Authority, the Respondent No. 1 filed an application bearing C.A. No. 503 of 2019 to bring on record work completion certificate 09.05.2019 issued by the Corporate Debtor with reference to BTG work as additional document which was dismissed by the Adjudicating Authority vide order dated 17.01.2022. 13. It has also been brought out that on 23.09.2019, the Respondent No. 1 issued notice to the Corporate Debtor invoking arbitration under Section 21 of the Arbitration Act. The Arbitral Tribunal was constituted on 24.11.2019 to adjudicate upon the claims and counter claims in the matter of Shapoorji Pallonji and Company Private Limited Vs. Sinnar Thermal Power Limited. The final arbitration award was passed on 22.04.2022. 14. It is the case of the Appellant that Arbitral Tribunal award was challenged by him before Hon'ble High Court of Delhi under Section 34 of Arbitration Act being O.M.P. (Comm.) No. 324 of 2024 which is still pending. The Appellant submitted that in view of the pendency of the challenged Arbitral Tribunal's Award, the averment made by the Respondent No. 1 regarding their claims allowed by the Arbitral Tribunal should not be given undu....
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....ant treating these to be as misleading, mischievous, frivolous and without any substantial basis. 21. At the outset, the Respondent No. 1 submitted that the Impugned Order has been passed by the Adjudicating Authority after detailed consideration and after going into all details of facts and law. 22. The Respondent No. 1 refuted the allegations made by the Appellant that the Respondent No. 1 concealed the fact regarding arbitration proceeding pending before the Hon'ble High Court of Delhi. 23. The Respondent No. 1 gave full background of the case, including the awarded work through legally binding contracts on account of the Corporate Debtor executed by them and chequered history of pending payments. 24. It is the case of the Respondent No. 1 that out of total cumulative work done worth Rs. 208.33 Crores, the Appellant paid only Rs. 146.14 Crores and thereby leaving outstanding dues of Rs. 62.19 Crores. The Respondent No. 1 submitted that he gave all the opportunities to the Corporate Debtor to settle the dues but the Corporate Debtor miserably failed to meet its obligation according to the contracts and therefore, the Respondent No. 1 was compelled to issue demand noti....
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....r dispute regarding any items of schedule of work was to be referred to 'Engineer-in-Charge' appointed by the Corporate Debtor. The Respondent No. 1 strongly pleaded that during the entire duration of contract or even during the 'Defect Liability Period' (in short 'DLP') or even prior to issue of demand 8 notice, the Appellant never raised any dispute and so-called issue being raised in response to the demand notice No. 8 are only with ulterior motives. 29. It is further the case of the Respondent No. 1 that in reply to demand notice dated 29.08.2019, the Corporate Debtor admitted that the entire work was done by the Respondent No. 1 and did not raise any issue regarding quality or quantity of services provided under the contracts. 30. The Respondent No. 1 submitted that only in response to his petition before the Hon'ble High Court of Delhi filed under Section 9 of the Arbitration Act, the Corporate Debtor raised alleged pre-existing disputes in order to illegally encash PBG of the Respondent No. 1 of Rs. 9 Crores. 31. The Respondent No. 1 submitted that the very fact that unqualified work completion certificate was issued by the Corporate Debtor as on 09.05.2019 to the R....
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....revival of the Corporate Debtor is practically impossible. 37. Concluding his arguments, the Respondent No. 1 requested this Appellate Tribunal to dismiss this Appeal with exemplary costs. Finding 38. From the above averments, the following issues emerges :- a) Whether there were any pre-existing disputes between the parties prior to the issue of demand notice issued under Section 8 of the Code by the Respondent No. 1 to the Corporate Debtor on 16.08.2019. b) Whether the arbitration case pending before the Hon'ble High Court of Delhi has any impact on Section 9 application under the Code by the Respondent No. 1 which is subject matter of the present appeal before this Appellate Tribunal. c) Whether, the work completion certificate dated 09.05.2019 was rightly relied upon by the Adjudicating Authority. 39. These issues and other issues raised in the appeal are inter-connected and inter- dependent and hence we shall deal all the relevant issues conjointly in the following discussions. 40. We will go through some of cited judgments by the Appellant which reads as under :- a) K. Kishan v. Vijay Nirman Co. (P) Ltd., (2018) 17 SCC 662 ....
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....ated to be a notice under Section 8 of the Code. Within 10 days, by a letter dated 16-2-2017, KCPL disputed the invoice that was referred to in the said notice, stating that the said amount was, in fact, the subject-matter of an arbitration proceeding, and as per KCPL's accounts, the respondent was liable to pay larger amounts to them. After the notice and reply, on 20-4-2017, a Section 34 petition was filed by KCPL under the Arbitration and Conciliation Act, 1996 (the A&C Act) challenging the aforesaid award. This petition was filed within the period of limitation set down in Section 34(3) of the A&C Act. It is only thereafter that a petition was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (the Code), on 14-7-2017. The issue involved in this appeal was whether the Insolvency and Bankruptcy Code, 2016 can be invoked in respect of an operational debt where an arbitral award has been passed against the operational debtor, but which has not yet been finally adjudicated upon?" (Emphasis supplied) Thus, we find that above cited case is based on fact that the Demand Notice was based on the Arbitral Tribunal which was challenged unde....
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....rely because the petitioner had approached Competition Commission of India or is a corporate debtor in the proceedings before the NCLT, cannot be held to be a bar to raise the disputes for adjudication by way of arbitration." ( Emphasis Supplied ) 44. We also take note of the part IV of demand notice dated 16.08.2019 issued under Section 8 of the Code by the Respondent No. 1 to the Corporate Debtor. In part IV, the Respondent No. 1 specifically asked for pendency of any suit or arbitration proceedings in relation to any pre-existing disputes before the receipt of any demand notice dated 16.08.2019. However, in the reply dated 29.08.2019 no specific reference of any pending arbitration case or suit, has been given and reference were given only to their alleged deficiency of services address to the Respondent No. 1 in their correspondence made earlier especially with regard to alleged slow progress by the Respondent No. 1. 45. We further note from the said part IV of application that the Respondent No. 1 specifically brought to the notice of their petition filed before the Hon'ble High Court of Delhi vide petition number O.M.P. (Comm.) No. 262 of 2019 under Section 9 o....
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.... relating to Respondent's counter claim shall stand terminated. The matter shall then proceed only in relation to Claimant's claim. 16. In the event of Respondent not depositing its share of fee as noted above by 05.04.2021, the Claimants are directed to deposit the entire Reading fee and fee for writing Order in terms of Procedural Order no. 1 and 3 on or before 30.04.2021." ( Emphasis Supplied ) 48. Now we will take up the issue regarding pre-existing disputes between the parties prior to issue of demand notice under Section 8 of the Code on 16.08.2019. Dispute is not mere denial and dispute should be in accordance with the Section 5(6) of the Code. 49. It has been the case of the Respondent No. 1 that alleged pre-existing dispute were raised for the first time by the Corporate Debtor in his reply to petition filed under Section 9 of the Arbitration Act before the Hon'ble High Court of Delhi. Since, the Corporate Debtor raised issues regarding contractual breaches and disputes, the Respondent No. 1 also had to issue notice invoking arbitration in compliance with the terms of contract regarding raising of disputes and had to move a suitable applicat....
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....l debt, invoices have been delivered, no notice of disputes has been received by the Operational Creditor or there is no record of dispute in the information utility. 52. Other cited judgements of the Appellant are not found helping the cause of the Appellant. We will also like to refer here the landmark judgement of Hon'ble Supreme Court of India caring issue of Pre-existing disputes under the Code. In Mobilox Innovations P. Ltd. vs. Kirusa Software (P) Ltd. [(2018) 1 SCC 353]. The Hon'ble Supreme Court of India has stipulated the following test for existence of dispute :- a) Whether the Corporate Debtor has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence; b) Whether the defence is not spurious, mere bluster, plainly frivolous or vexatious; c) A dispute, if it truly exists in fact between the parties, which may or may not ultimately succeed. 53. From the various averments of the parties, we note that prior to issue of demand notice, no formal letter has been written by the Corporate Debtor to the Respondent No. 1 regarding raising any specif....
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....tor had brought to the notice of the Operational Creditor that the following significant checks were pending and were to be completed i.e. a) Grid wise Column Alignment First & Second part (verticality) b) Span and diagonal between column. c) Alignment of skirt girder & verticality of stub column. 8. Sufficient time was provided to them, even adequate and qualified erection welders were not deployed at the elevated structure, there was lot of compromise with the quality of the work by the Operational Creditor, as there were various defects in the same. It is also submitted that vide MoM dated 01.11.2014 the Corporate Debtor expressed its concern over the nonavailability of 250 MT Crane, which the Operational Creditor have to provide in the month of Oct 2014 and the Corporate Debtor also asked the Operational Creditor to provide the completion programmer in line with the requirement of the Corporate Debtor, but no further progress was made. Subsequently, vide MoM dated 12. 11.20 14, the Corporate Debtor has expressed his concern on shortage of manpower, especially structural manpower and accordingly, the Operational Creditor was asked to immediate....
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..... 1 lakh and the Application shows that the aforesaid debt is due and payable and has not been paid, in such case , in absence of any 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', the Application under Section 9 cannot be rejected and is required to be admitted. 14. On a cojoint reading of the provision envisaged under Section 9 of the Code, 2016 and the Mobilox Innovations (Supra), we are of the considered opinion that it is a settled preposition that 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 factors mentioned in Section 9(5) of the Act. 15. Adverting to factual matrix of the present case, we are satisfied that present petition is complete as per the provisions of Code, 2016 read with rules made thereunder, outstanding operational debt claimed in part IV of Forrn-5 of the petition is above the pecuniary threshold limit as envisaged ....
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.... Certificate, otherwise, the corporate debtor would not have issued an incorrect certificate. Therefore, the corporate debtor is estopped from raising the plea of the pre-existing dispute between the parties. The work completion certificate dated 09.05.2019 is as below : - ( Emphasis Supplied ) 55. We note that the Adjudicating Authority has taken all efforts to go into every detail of the reply of the Corporate Debtor including reference to their various e-mails, other correspondences regarding slow progress of work, etc., and only after detailed analysis, the Adjudicating Authority came to conclusion that the Corporate Debtor has not raised any substantial objection or dispute pertaining to work performance by the Operational Creditor prior to issuance of demand notice dated 16.08.2019. 56. In Civil contract for construction of certain civil facilities like in the present case of BTG and OBTG contracts, what is to be seen is that the work has been completed and there has been no issues regarding quality or quantity of the services. Mere allegations regarding less mobilisation of manpower or regarding delay during the contract which was ultimately completed to the s....
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....termination letter, correspondence exchanged and final termination withdrawal letter by the Corporate Debtor, which reads as under : - 61. From the letter dated 22.01.2016 written by the Corporate Debtor to the Respondent No. 1, it is seen that letter was written on "mobilisation work" w.r.t. progress of the work and nowhere any other aspect of disputes have been mentioned. In the response to the same, the Respondent No. 1 replied the Corporate Debtor vide e-mail dated 23.01.2016, refuting the content and indicating action taken to mobilise resources and further raised the issue regarding pending payments to be released by the Corporate Debtor to the Respondent No. 1. This was followed with the communication from the Corporate Debtor on 23.01.2016, giving outcome of discussion with the Respondent No. 1 relating to payment to be made by the Corporate Debtor and mobilisation of manpower and tools and plants to be made available by the Respondent No. 1. The content of the letter was confirmed by the Respondent No. 1 vide their letter dated 25.01.2016 and finally the Corporate Debtor withdrew the termination letter. Thus, we find from above correspondence that the issue was regardin....
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.... 2019 was dismissed since this was not readable/ legible. As regard, other argument the completion certificate dated 09.05.2019 was issued to the Respondent No. 1 based on their request for participating in tenders in public and private sector, PSUs or any other private organisations and therefore, this should be treated as Caveat and should not be relied upon. In this connection, on a pointed query by this Appellate Tribunal put to the Appellant, the genuineness and issuance of the work completion certificate was not denied by the Appellant. We note that the Corporate Debtor has issued completion certificate on 09.05.2019 prior to issue to demand notice on 16.08.2019 stating that the Respondent No. 1 has completed the contract and their performance was found satisfactory. We find that the completion certificate was unqualified and without raising any issue regarding quality or quantity or progress of the work by the Respondent No. 1. Merely the fact that the certificate was issued at the request of the Corporate Debtor, the existence and validity and impact of the same cannot be denied at this stage by the Corporate Debtor. Thus, the work completion certificate was rightly take....
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....ny ather private organizatios. INAR THERMAL OWER LIMITED Indiabulls Reulte:s Limited Authorised Saputry Received Completion cercate levied Jor work completee xx 31/Mar/2018 CC: M/s Shapeorji Pallonji & Co enter Document 2 RattanIndia THROUGH REGISTERED POST/COURIER/EMAIL WITHOUT PREDUDICE To, Dated : 22 January 2016 The General Manager Contract and Commerclal Shapoorjl Palonji Company Private Limited Furungl, Pune - 412308 Kind Attentlon: ' We write In refation 0: 2 [ Contract Agreement between Rattanindla Nasik Power Umited (erstwhile IndlaBulls Realtech Umited) and Shapoorji Pallon]l Company Umited dated March 28, 2010, Contract Number lRl/CMUNTPP/&TGCML/OOI. b. Our letter dated January 11, 2016. Sub: Notice of termination of contract under clause 33 of the Contract Agreement between Rattanindia Naslk Power Limited (erstwhile IndiaBulls Realtech Limited) and Shapoorjl Pallonji Company Limited dated March 28, 2010 for BTG Civil and Structural Werks for 5270 MW Nashlk Thermal Power Project ("Contract ). Dear Sir, This has reference to the Contract and our letter dated January 11, 2016 wherein we have, after due consideration and settiement of y....
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....01/16. We were also waiting for Amendment and Payment release which was assured to us before restart of the work. We believe in Partnership concept and quality service. We have supported you from day one till now against all odds like delay/ Non release of payments, Delay in supply of materials, suspensions of works by incurring huge losses.At Amaravati we have demonstrated above and completed our works which you all are aware. I strongly feel the spirit of the contract in which we@SP have supported you, the letter saying "Termination of Contract" is painful considering the support and service we have given to you as client both at Nashik and Amaravati. I request you to please withdraw Termination letter and allow us to complete the works. Thanks SYK TRUE CUAY TRUE COPY Document 4T M u R~ % From: Damodar Venkatesh Prabhu Date: 23/01/2016 15:29 (GMT+05:30) To: "MAHIM.LAL" ,3ï¬k'~ "SANJAY KARKHANIS" Cc: Subodh Dixit , T K Prasad , "Rajesh Kumar (Sr.GM - C&O)" , Sampath Kumaran Narasimha Raghavan Subj.cct: Request form SPCL mangement to retrive the Letter of termination Dear Kharkanis Saheb / Mahimlalji The _termination letter....
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....to work done beyond the contractual completion "date of October 2012 to completion of work 2. An amount of Rs 1 Cr would be paid as bonus on completion of work as agreed a. All bunkers structures with sllos and operating floors by End September 2016 b. All major foundations by End October 2015 c. All civil works by End March 2017 3. Amount of Rs. 2.5 crores would be paid for Amravati as per existing arrangement dated 1st Dec 2014 4. All accepted amendments due at Nasik shall be facilitated and completed by RNPL 5. Release of 50% of the due payments Immediately after sufficient mobilization of manpower and tools and plants. Subsequent 50% shall be paid in the due course of time. There was no further discussion other than the above points. Subject to your unconditional acceptance of this letter we will request our lenders-and-management to reconsider the retrieval of the notice to terminate the contract. All terms and conditions of the contract shall remain the same. Yours faithfully, Head Contracts and commercials Rattanindia Nasik Power Limited (Formerly known as Indiabulls Realtech Limited.) Registered & Corporate Office: 5t....
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....r the February/16 Achieved till 25 Feb'16 390 Cum Concrete Fabrication 959 Cum 456 MT Erection 445 MT Completion of foundation unit 3 5 MT Mill foundation for Mill A, B. E and F for Only Foundations for E and F mill 82 MT. are ready From the above, It is very clear that you will not be able to achieve the targeted quantity by the end of this- month and this will create the huge work demand in next month. We would like to inform you that all other agencies for unit 3, 4 and 5 like turbine erection agency, Electrical & C&l work, are finalized and already mobilized at site. In order to make the front available for these agencies, you need to complete the work on priority and handover the same to respective agencies in time, as per agreed time frame. Lot of work fronts like Coal Bunkers for unit 3, 4 & 5 transformer yard unit 3, 4 & 5, Unit 4 & 5 UCR are still lying untouched and can be taken up in parallel. In view of the upcoming monsoon, we required you to push your efforts to complete all outside Brickwork & plastering, roof water proofing works, fixing of doors, rolling shutters, ventilators & windows and a....