TaxTMI 
TaxTMI 
2025 (6) TMI 773
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....e realization of the same by the Plaintiff forthwith." 2. The Plaintiff is a company previously known as Essar Steel India Limited and now as Arcelormittal Nippon Steel India Limited carrying on business inter alia of manufacturing steel products and is a fully integrated steel producer having steel mill in Hazira, Surat, Gujarat. The Defendant is a company (previously known as "Stemcor India Private Limited") engaged in the business of trading in steel and other materials. Moorgate Industries UK Limited (formerly known as "Stemcor UK") and Moorgate Industries DMCC (Formerly known as "Stemcor Mesa DMCC") are sister concerns / group companies of the Defendant. 3. On or about 7th April, 2012, the Defendant agreed to procure certain raw materials / consumables (Coke /coke pellets) for and on behalf of the Plaintiff worth Rs. 150 Crores on the terms and conditions to be agreed between the parties. The Defendant had requested the Plaintiff to provide for a security deposit of Rs. 10 Crores to enable it to procure the materials. On 7th April, 2012, itself the Plaintiff paid Rs. 10 crores by RTGS to the Defendant as an accountable advance being the security deposit. 4. On 23rd Ap....
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....3.6 Million (Rs. 21.9 cores) plus interest is payable by the Plaintiff to suppliers sourced by the Defendant. (ii) Amount of Rs. 5.45 crores out of Rs. 25 crores security deposit was refunded as the balance retained by the Defendant was the approximate amount to be paid by the Plaintiff. (iii) In view of the fact that the Plaintiff is yet to clear the outstanding amount, the Defendant is well within its right to hold back the remaining security deposit as a security towards the payment of balance amounts by the Plaintiff. It has been agreed between the parties that the said amount will be paid to the Plaintiff only once the Plaintiff makes full payment towards the raw materials supplied. 12. On 9th February, 2017, the Plaintiff filed its affidavit in rejoinder to the summons for judgment. 13. On 30th June, 2017, a Petition came to be filed by the financial creditors of the Plaintiff (when it was known as "Essar Steel India Ltd.") i.e. State Bank of India and Standard Chartered Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) for initiating the Corporate Insolvency Resolution Process (CIRP) of the Plaintiff. 14. On 17th July, 2017, th....
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....efendant by passing the following order:- ". Heard learned Counsel for the parties. This summons for judgment is taken out in a summary suit seeking a decree in the sum of Rs.19.55 crores. The case of the Plaintiff is that the Defendant had agreed to procure certain raw materials/consumables for and on behalf of the Plaintiff worth an amount of Rs.150 crores on certain terms and conditions to be mutually agreed between the Plaintiff and the Defendant. It is submitted that as a security for this commitment, a sum of Rs.25 crores in two tranches of Rs.10 crores and Rs.15 crores was kept by the Plaintiff with the Defendant. It is the case of the Plaintiff that all goods supplied by the Defendant to the Plaintiff were fully paid for and there is a failure on the part of the Defendant to refund the security deposit of Rs.25 crores. It is submitted that the Defendant has refunded so far only Rs.5.45 crores, leaving a balance of Rs.19.55 crores recoverable from the Defendant. The suit is filed for recovery of this amount. 2. In reply, the Defendant submits that the agreement with the Plaintiff was for procurement of raw materials/consumables from suppliers identified by ....
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....ess the Plaintiff clears the amounts due and payable to Moorgate under the invoices and debit notes mentioned in the email, it would be unable to refund any security deposit. (iii) It was expressly agreed to by the Plaintiff that the security deposit kept with the Defendant was to be returned only once payment is made in full against the various contracts executed by the Plaintiff with the Moorgate group. (iv) The return of the security deposit was subject to the understanding and agreement between the Plaintiff and the other group companies of Moorgate and the Plaintiff has expressly agreed to the condition that the security deposit with the Defendant shall be refunded only after the Plaintiff has paid all sums due and payable to the concerned group company under respective contracts. (v) The email dated 23 May 2014 further clarifies that the remaining security deposit can only be released once the balance payment is made in full by the Plaintiff. (vi) The Defendant has repeatedly reminded the Plaintiff that the security deposit is aimed at securing the dues owed from the Plaintiff to the suppliers identified by the Defendant. (vii) In ....
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....as has been pointed out by us hereinabove. For these reasons, the NCLAT judgment must also be set aside on this count." 22. On 16th December, 2019, payments were made to Moorgate UK and Moorgate DMCC as per the approved resolution plan:- Rs. 1/- was paid to Moorgate UK and Rs. 43,68,686/- was paid to Moorgate DMCC. It is the case of the Applicant that, therefore, the debt of Moorgate UK and Moorgate DMCC stood extinguished. 23. It is submitted that in the meantime Moorgate UK continued to pursue a certain LCIA arbitration against the Plaintiff, during the moratorium and an arbitration award dated 11th June, 2018, came to be passed during the period of the moratorium, which obviously was not permitted. It is the case of the Applicant that in view of the express provisions and settled law on the subject, the Plaintiff is not bound by this arbitration award and having participated in the CIRP of the Plaintiff, Moorgate UK was aware of the fact of the moratorium and equally subjected to the IBC. 24. It has been further submitted that between 16th September, 2019, and 14th February, 2020, the Defendant made payments in several tranches to Moorgate UK pursuant to the LCIA arbitr....
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....orgate UK and Moorgate DMCC. 31. Mr. Jagtiani submits that during the pendency of the present Suit, the CIRP was initiated against the Plaintiff under the IBC vide order dated 2nd August, 2017, passed by the NCLT, Ahmedabad and Moorgate UK and Moorgate DMCC filed its claims before the resolution professional and those claims have not only been adjudicated but also paid, which constitutes a legal discharge of the debts owed to Moorgate UK and Moorgate DMCC in their entirety. Mr. Jagtiani would submit that, therefore, the only reason cited by the Defendant to refuse the return of the security deposit of Rs. 19,55,00,000/- prior to the CIRP viz. that certain dues were payable by the Plaintiff to Moorgate UK and Moorgate DMCC no longer survive in law since those dues stood discharged by operation of law and pursuant to the order of the Hon'ble Supreme Court regarding the Plaintiff company i.e. Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta and ors. (2020) 8 SCC 531. Mr. Jagtiani would further submit that the decision of the Gujarat High Court in GAIL (India) Limited and Ors Vs. Essar Steel Limited and Ors. (supra), where it has been held in paragraph 15 t....
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.... and therefore, no decree can be made in favour of the Plaintiff on admission or otherwise. 37. It has also been submitted that the deposit was never meant to be returned at all and that it was infact a payment made to the Defendant. Mr. Modi has referred to the amendment to the Plaint on page 15 of the Plaint as well as the amendment including page 24A. Mr. Modi submits that not only that, by email dated 7th April, 2012, it has been clearly recorded that the said deposit would stand forfeited in case of non performance. 38. Mr. Modi has further submitted that the LCIA arbitration proceedings between Moorgate UK and the Plaintiff which culminated in the arbitration award dated 11th June, 2018, were governed by the laws of England and hence the same were not affected by the CIRP moratorium in respect of the Plaintiff as IBC does not have extraterritorial application and the arbitration between Moorgate UK and the Plaintiff is governed by English law. 39. Further with reference to the arbitration award dated 7th March, 2019, with respect to the Moorgate UK and the Defendant, Mr. Modi submits that the said award is also not affected by the moratorium in respect of the Plainti....
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.... dispute that prior to the order of unconditional leave on 8th February, 2018, on 2nd August, 2017 CIRP was initiated against the Plaintiff on a Petition filed by State Bank of India and Standard Chartered Bank, under Section 7 of the IBC, whereby the Petition was admitted and IRP was appointed, as a result of which a moratorium was imposed under Section 14 of the IBC on the continuation of any litigation / arbitration initiated against the Plaintiff. 45. The IRP who was later confirmed as the RP issued public notices inviting claims from all persons claiming to be creditors of the Plaintiff under Sections 13 and 15 of the IBC. 46. It is not in dispute that only Moorgate UK and Moorgate DMCC who were part of the suppliers identified by the Defendant filed their claims as operational creditors in Form B respectively in the sum of Rs. 21,63,03,148.44/- and Rs. 2,18,43,429/-. It is also not in dispute that the claim in Moorgate UK was admitted by the RP with a notional value of Rs. 1/- and the claim of Moorgate DMCC was admitted by RP with a sum of Rs.2,18,43,429/- and that after the approval of the resolution plan by the Committee of Creditors on 23rd October, 2018 and the impr....
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....alculations on the basis of which the resolution applicant submits its plans would go haywire and the plan would be unworkable. 48. The Hon'ble Supreme Court has also held that once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31 of the IBC, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, Government, guarantors and other stakeholders. That on the date of approval of the resolution plan by the adjudicating authority, all such claims, which are not a part of the resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect of a claim, which is not part of the resolution plan. Consequently, all the dues including the statutory dues, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 can be continued. 49. Paragraphs 93, 102.2 and 102.3 of the said decision are relevant and usefully quoted as under : "93.....
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....ngs in respect to a claim, which is not part of the resolution plan." "102.3. Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 could be continued." 50. Therefore, once a resolution plan is approved by the Committee of Creditors and which has received the imprimatur of the NCLT, it binds all the stakeholders and the Corporate Debtor, which emerges from the CIRP, begins on a clean slate with no continuing liabilities on account of claims, whether decided or undecided. 51. Moorgate UK and Moorgate DMCC as noted above had made a claim as Operational Creditors and have also received their claims as per the amended resolution plan approved by the Hon'ble Supreme Court. The Plaintiff accordingly emerges from the CIRP on a clean slate with no continuing liabilities on account of claims decided or undecided. 52. In the case of Committee of Creditors of Essar Steel India Limited vs. Satish Kumar....
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....vil Appeal Diary No. 24417 of 2019), Gujarat Energy Transmission Corporation Ltd. (Respondent 17 in Civil Appeal Diary No. 24417 of 2019) and Indian Oil Corporation Ltd. (Respondent 18 in Civil Appeal Diary No. 24417 of 2019) are concerned, the resolution professional admitted the claim of the abovementioned respondents notionally at INR 1 on the ground that there were disputes pending before various authorities in respect of the said amounts. However, NCLT through its judgment dated 8-3-20193 directed the resolution professional to register the entire claim of the said respondents. NCLAT in paras 44, 45 and 201 of the impugned judgment upheld' the order passed? by NCLT as aforesaid and admitted the claim of the abovementioned respondents. We therefore hold that this part of the impugned judgment deserves to be set aside on the ground that the resolution professional was correct in only admitting the claim at a notional value of INR 1 due to the pendency of disputes with regard to these claims." 56. In fact in the case of Gail (India) Ltd. & others vs. Essar Steel Ltd. & others (supra), the Gujarat High Court while relying upon the decision of the Hon'ble Supreme Court dated 15t....
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....ents received pursuant to the resolution plan by the Claimants viz. Moorgate UK and Moorgate DMCC and the admitted position that no other claims were filed by the Defendant or any other group entity of the Defendant before the RP, the said basis of the unconditional leave no longer subsists in view of what has been observed above. Therefore, there would be no question now of the Defendant being entitled to withhold the security deposit in respect of the outstandings of the suppliers. 59. Having observed as above with respect to the claim of the suppliers, let us now consider the principles governing an Application under Order XII Rule 6 of the CPC. 60. In Uttam Singh Duggal & Co. Ltd. vs. United Bank of India and others (2000) 7 SCC 120., the Hon'ble Supreme Court has with regard to the object of Order XXII Rule 6 of Code of Civil Procedure, 1908 observed that the Court has jurisdiction to enter a judgment for the plaintiff and to pass a decree on an admitted claim. The object of the Rule is to enable the party to obtain a speedy judgment and that the Court should not unduly narrow down the meaning of this Rule as the Court can draw inference on the basis of the pleadings in ....
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.... only the extent to which the admission is made in dispute, and the court had a duty to decide the same and grant a decree, we think this approach is unexceptionable. 14. Before the trial Judge, there was no pleading much less an explanation as to the circumstances in which the said admission was made, as to take it out of the category of admissions which created a liability. On the other hand, what is stated in the course of the pleadings, in answer to the application filed under Order 12 Rule 6 CPC, the stand is clearly to the contrary. Statements had been made in the course of the minutes of the Board of Directors' meeting held on 30-5-1990 which we have already adverted to in detail. In the pleadings raised before the Court, there is a clear statement made by the respondent as to the undisputed part of the claim made by them. In regard to this aspect of communicating the resolution dated 30-5-1990 in the letter dated 4-6-1990 what is stated in the affidavit-in-opposition in application under Order 12 Rule 6 CPC is save what are matters on record and save what would appear from the letter (sic resolution) dated 30-5-1990 all allegations to the contrary are disputed and ....
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.... evidence independent of the admission. That is not the position in the present case at all. We fail to see how this decision can be of any use to the petitioner. The decision in Pandam Tea Co. Ltd., Re pertains to the manner in which the balance-sheet should be read and has no bearing on the case. The decision in Shikharchand v. Bari Bai is to the effect that the Rule is wide enough to afford relief not only in cases of admissions in pleadings but also in the case of admission dehors pleadings. State Bank of India v. Midland Industries and Union of India v. Feroze & Co. cannot have any relevance because the facts arising in these cases and the present case are entirely different." 62. In the case of Karam Kapahi and others vs. Lal Chand Public Charitable Trust and another (2010) 4 SCC 753., the Hon'ble Supreme Court has observed that the principles behind Order XXII Rule 6 are to give the plaintiff a right to speedy judgment and that the said provision is to be exercised by the Court suo motu "ex debito justitiae". That keeping the width of this provision (i.e. Order XXII Rule 6) in mind, the Hon'ble Supreme Court has held that under this Rule admissions can be inferred from th....
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....n, SCC at p. 285, para 8). Admissions in answer to interrogatories are also covered under this Rule (see Mullas's Commentary on the Code, 16th Edn., Vol. II, p. 2177). 42. In Uttam Singh Duggal & Co. Ltd. v. United Bank of India this Court, while construing this provision, held that the Court should not unduly narrow down its application as the object is to enable a party to obtain speedy judgment." 64. Mr. Pesi Modi, learned Senior Counsel for the Respondent/Defendant has relied upon the decision of the Hon'ble Supreme Court in the case of Rajesh Mitra alias Rajesh Kumar Mitra and another vs. Karnani Properties Limited (supra) to submit that in view of the said decision, this Court reject the application. I am afraid that the said decision does not assist the case of the Respondent/Defendant as the rejection therein was on the basis that the admission was in another unconnected matter which is not the case here. In fact, the principles laid down in the said decision, clearly support the case of the Applicant/Plaintiff herein. In the concluding portion of paragraph 3 of the said decision, it has been observed that what has to be kept in mind is that Order XXII Rule 6 is....
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....the security deposit to the Plaintiff but also the additional affidavit dated 5th April, 2018 filed by the Defendant as well as the written statement contains these admissions. The said paragraphs are usefully quoted as under:- "(i) Additional Affidavit dated 18th July, 2017 filed by the Defendant:- "5. From the Addendum Agreement it will be seen that the Defendant is only holding the amount mentioned therein as security deposit. The security deposit amount was to be retained by the Defendant until full payment was made by the Plaintiff to Stemcor UK Pvt. Limited. The amount mentioned as security deposit in the Addendum Agreement is a part of the total security deposit by the Defendant towards certain suppliers procured by the Defendant under the invoices / debit notes annexed at Exhibit A of the Affidavit in Reply." (ii) Additional Affidavit dated 5th February, 2018 filed by the Defendant:- "19. The Defendant has time and again in several emails repeated and reiterated that the deposit held by the Defendant would not be repaid to the Plaintiff unless the Plaintiff has cleared all the outstanding over dues of Stemcor UK Limited. 20. The ....
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....ctive contracts. ... (j) In fact the email further clarifies that the remaining Security Deposit can only be released once the balance payment is made in full by the Plaintiff...() On the contrary, by the very documents relied upon by the Plaintiff to make the claim, it is evident that the Defendant has repeatedly reminded the Plaintiff that the Security Deposit is aimed at securing the dues owing from the Plaintiff (now an insolvent company under resolution process under the IBC Code) to the suppliers identified by the Defendant. ... (m) In view of the fact that the Plaintiff is yet to clear the outstanding amount, the Defendant is well within its right to hold back the remaining Security Deposit as a security towards the payment of balance amounts by the Plaintiff. It has been agreed between the parties that the said amount will be paid to the Plaintiff only once the Plaintiff makes full payment towards the raw material supplied." 67. The Defendant has submitted that all the admissions on the basis of which the Interim Application has been filed, were on record of this Court prior to the order dated 8th February, 2018, granting unconditional....
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....on Vs State of Maharashtra and Ors. (supra), as in this case it was held that the decree on admission could not be granted as at an earlier stage, summons for judgment had already been rejected. It must be noted that although no fault can be found with the principle, however, in the facts of the present case, on the basis of events that have transpired post disposal of the summons for judgment, the resolution plan has been approved on 8th March, 2019, by NCLT, Ahmedabad modified on 27th March, 2019 by the Committee of Creditors pending the appeal and approved by the Hon'ble Supreme Court on 15th November, 2019, although the Application is based on the admissions on the basis of undisputed original facts. 71. It has been contended on behalf of the Respondent /Defendant that under Order XII Rule 6 of the CPC the admissions are required to be unconditional and that the admissions in this case are conditional and therefore, no case is made out for a decree on admission. 72. I am unable to agree with this contention. The condition was that the deposit made by the Plaintiff would be returned once payments due to Moorgate UK and Moorgate DMCC have been made. As noted above, these en....
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....rity deposit are annexed hereto and marked as Exhibit D. (viii) The fact that the Plaintiff has made a payment of Rs. 25,00,00,000/- (Rupees Twenty Five Crore Only) with the Defendant by way of security deposit can be further understood from the below emails- it is noteworthy that the Plaintiff admits to the amount being a security deposit, but is trying to lie about payments towards the obligations for the security deposit allegedly having been made without a shred of evidence to show that such payments have indeed been made: [...] 21. The Defendant by its email dated 12.7.2013 (at Exhibit F) recorded the understanding with the Plaintiff that the security deposit with the Defendant would be returned to the Plaintiff only after all invoice/ interest payment is made to Moorgate. Despite there being a clear understanding between the parties, evidenced by both the correspondence and indeed by the documents and agreements, some of which are subject matter of pending arbitration, the Plaintiff wrote an email dated 31.1.2014 seeking refund of the security deposit. The Defendant replied to the same by its email dated 23.5.2014 clarifying that unless the Plaintif....
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..... The former class of admissions are fully binding on the party that makes them and constitute a waiver of proof. They by themselves can be made the foundation of the rights of the parties. On the other hand, evidentiary admissions which are receivable at the trial as evidence, are by themselves, not conclusive. They can be shown to be wrong." (emphasis supplied) 76. Accordingly, the aforesaid admissions in the pleadings constitute judicial admissions and that the security deposit has been admitted as such to be returned to the Plaintiff once the Plaintiff has performed its obligations. In my view, therefore, it is an admitted position that this deposit in the hands of the Defendant did not belong to the Defendant or any of its group companies. The Defendant itself does not have any claim on the money nor had the Defendant supplied any goods to the Plaintiff. The money is a deposit which admittedly is to be returned to the Plaintiff. 77. The Defendant has also contended that there is no proof that the deposit has been included in the assets carried forward in the CIRP or that the deposit was mentioned in the Information Memorandum. In my view, the entire submission i....
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....the Limitation Act, the Defendant's email are acknowledgments extending the period of limitation. The Suit was filed by 18th July, 2016, i.e. within three years of the date of acknowledgment dated 23rd May, 2014. In fact in paragraph 12 of the Plaint, this aspect has been specifically pleaded. The said paragraph 12 is usefully quoted as under:- "12. The Plaintiff states that the Defendant has confirmed acknowledged its liability to repay the Outstanding security deposit amount vide its email dated 23/05/2014. Thus, the present suit is well within the period of limitation." 82. In Khan Bahadur Shapoor Freedom Mazda Vs. Durga Prasad Chamaria AIR 1961 SC 1236, it has been held that acknowledgments must indicate the jural relationship and that they must be construed liberally, even though they do not specify the exact nature and specific character of the liability for it to constitute an extension of limitation. Paragraph 6 of the said decision is usefully quoted as under:- "6. It is thus clear that acknowledgment as prescribed by s. 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgment of the liability in respect of the right....
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.... the amount in question is a deposit and not a payment and therefore, this contention on behalf of the Defendant has to be rejected. The fact is that the Applicant has consistently demanded the repayment of the deposit and the same has also been admitted by the Defendant that it must be paid back. Therefore, to raise this new contention at the time of hearing only needs to be rejected. It is observed from Exhibit D -1 at page 41 of the Plaint that the incorrect ledger entry of Rs. 15,00,00,000/- to the account of Stemcor DMCC (Moorgate DMCC) instead of the Defendant was rectified by crediting the Stemcor MESA DMCC account and debiting the Defendant's account. Therefore, this contention only deserves to be rejected not only as an afterthought but also on the basis of the facts on record. 84. Coming to the contention raised on behalf of the Defendant with respect to the forfeiture of the deposit, it has been pointed out to this Court that this argument is contrary to the subsequent correspondence addressed by the Defendant and the pleadings in the written statement as it has been clearly admitted that the amount paid by the Applicant to the Defendant is a deposit and will be retur....
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....not apply to the arbitration between Moorgate UK and the Plaintiff which is governed by English law. In any event, nothing would turn at this stage in as much as the payment made to Moorgate UK as part of the CIRP to the Plaintiff constitutes a valid discharge of all debts owed by the Plaintiff to Moorgate UK. Therefore, this contention cannot be sustained. 89. The Defendant has also contended that the LCIA arbitration proceedings between Moorgate UK and the Defendant culminating in the award dated 7th March, 2019, would also not be affected by the moratorium since the Plaintiff is not a party to those proceedings and that the Defendant has paid over the sum of Rs. 19.55 crores to Moorgate UK pursuant to the said award. That the allegations of collusion and fraud in the making of the said award of 2019 is a matter to be decided after trial by considering the evidence led by the Plaintiff and the Defendant and its probative value. 90. It has been submitted on behalf of the Applicant and rightly so that the proceedings between Moorgate UK and the Defendant culminating in the award of 2019 are irrelevant to this Application in as much as the Applicant/ Plaintiff is concerned wit....