TaxTMI 
TaxTMI 
2025 (8) TMI 337
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....nkruptcy Code, 2016 (hereinafter referred to as "IBC, 2016") filed by the applicant against the Corporate Debtor, Sarguja Rail Corridor Pvt Ltd (hereinafter referred to as "Corporate Debtor" or "CD" or "SRCPL") was dismissed. 2. The brief facts of this case as per appeal paper book are as under: i) Sarguja Rail Corridor Pvt. Ltd. (later the name was changed to Adani Track Management Services Private Limited) was ordered the contract to build railway line on behalf of South East Central Railway Zone (SECR). SRCPL awarded separate contracts to Gannon Dunkerley and Company Limited (hereinafter referred to as "GDCL") and M/s Vijay Nirman Company Private Limited (hereinafter referred to as "VNCPL"). The work was sub-contracted to the appellant EBPL by both the contractors, GDCL and VNCPL. ii) SRCPL issued a Letter of Intent (LOI) on 21.05.2014 to GDCL and on 07.08.2014 and 05.12.2015 to VNCPL for execution of work relating to part of the project. The contractor VNCPL gave work to sub-contractor EBPL through two contracts dated 15.05.2015 and 21.05.2017. The GDCL sub- contracted the work to the Appellant, EBPL on 13.05.2015. The contracts of the Appellant with GDCL d....
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....tract dated 13.05.2015 for Phase IIA (33 Km to 54 Kms) for Rs. 230 crores, and further awarded contracts dated 15.05.2015 & 05.01.2016 for Phase IIB (54 Km to 70 Kms) for Rs. 171 crores and for Phase IIC (70 Km- 75. 77 Kms) for Rs. 35,37,89,327/- respectively to VNCPL. The works relating to OHE and linking of tracks were further awarded to the applicant in turn by the GDCL and VNCPL. The GDCL vide work order dated 01.08.2015 bearing reference No. D/CE/003840 awarded the work of design, supply, erection, and commissioning of overhead equipment (OHE) of rail track (33Km to 54 Kms) for Rs. 10,72,00,000/- and vide work order dated 01.08.2015 bearing reference No. D/CE/003841 for construction work for supply, laying, linking, testing, and commissioning of permanent way work of Rail Track (33 Km to 54 Kms) for Rs. 10,55,30,000/- of phase IIA to the applicant. The total contract amount was of Rs. 21,27,30,000/- both the aforesaid works. It is not in dispute that the value of the work orders was thereafter reduced to Rs. 18.06 crores due to the reduction of the scope of phase-IIA work. 6. The VNCPL also awarded works to the applicant vide work order dated 16.06.2016 beari....
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.... respect of the extra claim on VNCPL, it was agreed that the differential amount of Rs. 1.70 crores plus GST shall be payable to applicant on the same terms. Though as per these MoM and Indemnity Cum Undertaking, the respondent had agreed that differential amount i.e. Rs. 26 crores less the gross values actually paid for GDCL after verification and reconciliation respect of the work awarded by GDCL and settled amount of Rs. 1.70 crores plus GST on to the work awarded by VNCPL was to be paid to the applicant as per the terms set out in the said Minutes/ Indemnity Bond, but that nowhere has mentioned as to who amongst respondent, GDCL or VNCPL would pay the money. It is also noted that as per clause 2 of Indemnity Bond-cum-Undertaking, the applicant has clearly stated that it was appointed as a subcontractor by the GDCL and VNCPL for the execution of the awarded work of railway siding. Hence, the contention of the applicant that it became a direct contractor to the respondent on the strength of above stated MoMs and Indemnity Bond does not sustain. For ready reference, the relevant paras of the MoM & Indemnity Bond-cum-Undertaking dated 09.04.2018 are reproduced hereunder; Minutes....
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.... i) 50% of the due payment shall be released within two working days of signing EIG documents. ii) 25% of the due payment shall be released within two working days of obtaining EIG approval by SECR iii) Balance payment shall be released within two working days from the date of commissioning and placement and removal of rake with OHE loco '' Minutes of Meeting dated 09.04.2018 (between SRCPL and VNCPL) "3. All other terms and conditions of the work orders issued by VNCPL to EBPL shall remain unaltered" INDEMNITY BOND - cum - UNDERTAKING (MoM with respect to VNCPL) 1. "We, EBPL Ventures Pvt Ltd (for short 'EBPL'} are willingly giving this irrevocable and unconditional indemnity bond - cum- undertaking to Sarguja Rail Corridor Pvt Ltd (for short 'SRCPL'1 in the following terms. 2. We state that we were appointed as a sub-contractor by Vijay Nirman Co. Pvt Ltd (for short "VNCPL") for execution work under Work Order No. VNCPUSRCPL/0016-17 /EBPL/003 dated 16.06.2016 for OHE and Work Order No. VNCPL/SRCPL/0016- 17/EBPL/010 dated 12.12.2016 for OHE P-Way work for contract values of Rs.13.37 Cr & Rs.13.33 Cr res....
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....d Rs. 1,70,000/- as a TDS) on behalf of the VNCPL and to the extent of such payment, the Respondent stands discharge towards its payment obligation to VNCPL and the balance 50% of the remaining amount shall be paid by VNCPL after reconciliation of amount. Relevant paras of tripartite agreement dated 27.06.2018 are reproduced hereunder; "Now, therefore, the parties hereby agree and this agreement witnessed as follows; 1. VNCPL and EBPL hereby acknowledge and confirm that SRCPL has made following payments directly to EBPL on behalf of VNCPL and to the extent of such payment, SRCPL stand discharged towards its payment obligation to VNCPL under the contract no SRCPL/Ph-IIB/5700135126 dated 15th May 2015. Table A: Details of Payment: Date of payment Amount paid to EBPL (Rs.) TDS deducted and deposited in name and on account of (Rs.) Total Payment including GST (Rs.) 17-04-2018 93,50,000 1,70,000 95,20,000 EBPL hereby acknowledge the receipt of aforesaid payment and confirms that to the extent of the aforesaid payments, obligation of VNCPL to make these payments to EBPL under its agreement with VNCPL stand discharged. - Further, VNCPL....
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.... and GDCL Contracts) are reproduced hereunder; "11.4 regardless of whether or not the contractor obtains approval from the Employer for a Sub Contractor or whether the contractor uses a Sub Contractor recommended by Employer, use of a Sub Contractor by the contractor will not under any circumstances; (a) give rise to any claim by the Contractor against the Employer if such Sub Contractor breaches its subcontract or contract with the contractor; (b) give rise to any claim by such Sub Contractor against the Employer; (c) create any contractual obligation of the Employer towards the Sub Contractor; (d) give rise to a waiver by Employer of its rights to reject any Defects or deficiencies or defective work; or (e) in any way release that Contractor from being solely responsible to Employer for the Work to be performed under the Contract." "11.11 the Contractor shall make payments to all Sub Contractors, unless otherwise specified in the Contract, in accordance with the respective agreements between the Contractor and its Sub Contractors such that Sub Contractors will not be in a position to enforce liens and/or other rights against Employer or any of its Affiliates, th....
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.... and dates can be issued to two different entities with the same invoice number? So, upon considering evidence and material on record, we have noted that there is a serious dispute pending between the parties to this application, about the existence of the Operational Debt against the respondent and its alleged default by the respondent. In view of the Hon'ble Supreme Court ruling in the case of "Mobilox Innovations Private Limited Versus Kirusa Software Private Limited", (2018) 1 Supreme Court Cases 353:2017 SCC online SC 1154: (2018) 1 Supreme Court Cases (Civ) 311 that requires details investigation/ inquiry of the disputed facts and for that reason too the application cannot be admitted. 13. Accordingly, CP (IB) No. 11 of 2021 stands rejected and disposed of." (Emphasis Supplied) 4. The Learned Counsel for the appellant referred to various clauses of the General Conditions of Contract between the contractors (GDCL and VNCPL) and employer (SRCPL). It is stated that the agreement with terms of the contract have been altered by the minutes of meeting held on 09.04.2018 wherein representatives of the SRCPL, GDCL and the appellant were present. 4.1 The Le....
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....iately on signing of this minutes of meetings. 5) By signing and submitting the EIG application, the termination notice issued by GDCL shall stand withdrawn and cancelled. Sd/- For EBPL For GDCL For SRCPL Sd/- 09.04.2018 4.4 The Learned Counsel for the Appellant submitted that indemnity bond has been recognised in the said minutes of meeting and as per para 5 of the indemnity bond the liability for payment of the differential Rs. 26 crores less the gross value actually paid, was on SRCPL. For easy reference, the indemnity bond cum undertaking is reproduced below: "1) We, EBPL Ventures Pvt Ltd (for short "EBPL") are willingly giving this irrevocable and unconditional indemnity bond-cum- undertaking to Sarguja Rail Corridor Pvt Ltd (for short "SRCPL") in the following terms. 2) We state that we were appointed as a sub-contractor by Gannon Dunkerley & Co. Ltd (for short "GDCL") for execution of work under Work Order No. D/CE/003840 dated 01.08.2015 for OHE works and Work Order No. D/CE/003841 dated 01.08.2015 for P-Way work for contract values of Rs. 10.72 Cr & Rs. 10.55 Cr respectively (collectively Rs.21.27 cr.). The said coll....
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....fix his signature and his signatures shall be deemed to be treated as our signature and authorisation on our behalf for the purposes of EIG approval and EBPL shall be bound by the same. 8) EBPL will complete their scope of work in all respects, as called for vide the above referred contacts, EBPL shall extend all support for obtaining the EIG approval. 9) EBPL confirms that all the materials supplied and consumed in the project are as per the required specification and quality standard and same have been duly inspected and certified by the competent agencies like CORE/RDSO/RITES/Consignee. EBPL confirms that they have provided all inspection certificates and wherever the inspection certificates have not been provided, the same will be provided within two days of signing of this bond. 10) EBPL confirms that no substandard work has been executed in the project and EBPL fully takes the responsibilities and indemnify SRCPL against any loss or damage due to any substandard work. 11) Mr. Ajay Agrawal, the signatory of this indemnity bond to SRCPL and GDCL and this bond shall be binding on EBPL, its successors and permitted assigns. We have willingly si....
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....OHE work of SRCPL. He further referred to email dated 11.05.2019 from the Adani Group inquiring whether the Appellant was a MSME under MSME Act. This email was replied by the Appellant on 12.05.2019 confirming that it is a registered MSME organization. 4.10 The Learned Counsel for the Appellant also referred to invoices for the work done and further submitted that no payment has been received against two invoices dated 14.05.2018, being EBPL/P.I/268 and EBPL/P.I/269 for Rs. 97,60,275.84 each. It was submitted that the amount due from SRCPL relating to the contractor GDCL in itself is more than threshold value of Rs. 1 crore specified under Section 4 of the IBC, 2016 and thus the application under Section 9 should have been admitted. 5. The Learned Sr. Counsel for the Respondent submitted that two identical contracts were made with GDCL and VNCPL wherein portions of work relating to the new railway line was contracted by SRCPL to GDCL and VNCPL. In the documents SRCPL is referred to as "Employer" and GDCL and VNCPL were referred as "Contractors". GDCL and VNCPL sub-contracted the work to the appellant, EBPL. 5.1 Subsequently, due to differences between GDCL and EBPL and bet....
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....nda 1 as above i.e. 21st October, 2019 through M/s EBPL has requested for processing of payments before 25th October, 2019 on which SRCPL has conveyed that it will be attempted on fast track basis on receipt of confirmation as per agenda 1." (Emphasis Supplied) 5.5 The Learned Sr. Counsel referred to P.S-1 of MoM dated 14.10.2019 wherein the following is recorded: "P.S:1. EBPL requests to SRCPL for release of the due balance GST amount of 1,80,00,000/- (Rs. One crore eighty Lakhs only) on behalf of GDCL as EBPL shall give GST Invoice to GDCL for availing GST credit of the same amount." These minutes are duly signed by Mr. Ajay Agarwal on behalf of EBPL. 5.6 It was submitted that payments, if any, made or promised by SRCPL were on behalf of GDCL. There were no contractual obligation of SRCPL to pay the amounts to EBPL. Reference was made to the general condition of the contract between SRCPL and GDCL, and it was submitted that identical clauses were also in the contract with VNCPL. 5.7. It was further submitted that basic responsibility for completion of project was on SRCPL and since the conduct of the appellant was holding up the completion of project....
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....n account of services given/material supplied without valid GST invoices (in case of post GST period). All the amounts debited should be substantiated with relevant GST invoices; however, till date we have not received the copies of valid GST invoices from EBPL team. Further it has already resulted in delay in deposit of GST liability by EBPL. 5. We have also been provided the minutes signed dated April 10, 2018 meeting wherein between GDCL and EBPL agreed for the total value of contracts D/CE/003840 dated August 1,2015 and D/CE/003841 dated August 1, 2015 pertaining to Phase 2A for OHE and PWAY works respectively as INR 26,00,00,000 (excluding GST). It was duly discussed and concluded in the meeting held on October 14, 2019 at SRCPL's office that EBPL shall provide us adequate supporting evidences/invoices in respect of certain payments or other adjustments which are claimed by EBPL from GDCL in relation to such project as mentioned in minutes signed April 10, 2018.However EBPL has not provided us any such information to us till now. 6. As per EBPL ledger in the books of GDCL, total amount of Rs. 71,240,158 is debited to EBPL by GDCL in respect of th....
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....ent, it is clear that so as to facilitate the respondent, ONGC had made payments on behalf of the respondent to the appellant directly. 25. Simply because some payments had been made by ONGC to the appellant, it would not be established that there was a privity of contract between ONGC and the appellant and only for that reason ONGC cannot be saddled with a liability to pay the amount payable to the appellant by the respondent. ......... 27. We are in agreement with the view expressed by the majority of the Arbitral Tribunal. In our opinion, the High Court had committed an error by not considering the above facts and by observing that the appellant will have to take legal action against ONGC for recovery of the amount payable to it. If one looks at the relationship between the appellant and the respondent, it is very clear that the respondent had given a sub-contract to the appellant and in the said agreement of sub-contract, ONGC was not a party and there was no liability on the part of ONGC to make any payment to the appellant. Moreover, we could not find any correspondence establishing contractual relationship between ONGC and the appellant. In the cir....
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....PL) had got the contract from railways to build railway line on behalf of South East Central Railway (SECR) and that SRCPL, referred as Principal Employer, awarded separate contracts to Gannon Dunkerley and Company Limited (GDCL) and M/s Vijay Nirman Company Private Limited (VNCPL), referred to as contractors, for separate sections of the railway line. The contractors GDCL and VNCPL further sub- contracted the work to appellant, EBPL Ventures Pvt Ltd (EBPL), referred to as sub-contractor. 7.2 It is apparent that the work of the railway line was not being completed and it was not being put to operational use because of differences between sub-contractor EBPL and contractors GDCL and VNCPL. The position regarding complacency of work is best explained by contemporaneous email dated 29.03.2018 written by Howe India, the project management consultant to GDCL wherein the project management consultant wrote as under : "Please note that GDCL has failed to resolve long-pending dispute with their subcontractor, EBPL which has adversely impacted the EIG approval and SRCPL is unable to utilise the track by electric traction. This delay will further cause us huge financial losses. W....
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....Indemnity Bond and the differential amount shall be payable to EBPL. However, nowhere it is mentioned as to who shall make the said payment. The minutes of the meeting also record that all other terms and conditions of the work orders issued by GDCL to EBPL shall remain un- altered and on signing of the EIG application, the termination notice issued by GDCL shall stand withdrawn and cancelled. 7.6 We also note that on our specific query, the Learned Counsel for the appellant fairly admitted that appellant's contract with GDCL continued, as termination notice issued by GDCL stood withdrawn and cancelled. 7.7 We note that another meeting was held between EBPL, GDCL and SRCPL on 14.10.2019. The minutes of this meeting have been signed only by EBPL, though belatedly. The minutes of meeting dated 14.10.2019, as signed by the appellant, the following is noted in point no. 4 of the agenda: "Bases the minutes of meeting dated 10th April, 2018 it was agreed between the parties M/s GDCL and M/s EBPL that M/s GDCL will make payments to M/s EBPL as per following iv. INR 1,74,29,063 v. INR 87,14,532 vi. INR 87,14,532 Against Point No. 4(i) as a....
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....t, in accordance with the respective agreements between the Contractor and its Sub Contractors such that Sub Contractors will not be in a position to enforce liens and/or other rights against Employer or any of its Affiliates, the Works or any part thereof. Contractor shall provide and shall obtain from all Sub Contractors and deliver to Employer, waivers of all unpaid liens under all applicable Laws. Employer reserves the right, upon written intimation to Contractor, to make payments due hereunder directly to Sub Contractors of Contractor whenever Employer has reason to believe Contractor has not paid or is likely not to pay such suppliers amounts due to them on a timely basis, provided that Employer shall give the Contractor notice prior to making such payments. In the event Employer makes such payments to Sub Contractors, Contractor shall immediately credit, secure or repay to Employer, the amount of such payments." (Emphasis Supplied) 7.10 A bare perusal of the clauses 11.4 and 11.11 indicates that the prime responsibility of payment to sub-contractor lies on the contractor with the employer reserving its right, with intimation to contractor, to make payments due to....
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.... (Emphasis supplied) 7.13 The said judgment of the Hon'ble Supreme Court has been followed by this Tribunal in the case of Hardwin Construction Pvt. Ltd. v. ONGC Petro Additions Ltd., (2022) ibclaw.in 223 NCLAT wherein it was held that only limited liability to make payment was accepted by the Corporate Debtor subject to certification of the bills by the original contractor, the Corporate Debtor cannot be treated as substituted in place of original contractor. 7.14 This Tribunal in the case of Sterling and Wilson Private Limited v. Embassy Energy Private Limited in Company Appeal (AT) (CH) (Ins.) No. 161 of 2022 has followed the decision of Hon'ble Supreme Court in M/s Essar Oil Limited v. Hindustan Shipyard Ltd. on similar facts and held that there is no privity of contract between the appellant and respondent. It was held in para 14 and 15 of the said judgment, as under: 14. It is clear from the record that there are no 'goods and services' supplied directly by the 'Operational Creditor' to the 'Respondent' herein and therefore it cannot be said that there is any 'Operational Debt' between the 'Operational Creditor' and the 'Respondent' herein. Merely because th....
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....quested EBPL to refund excess amount of Rs. 10.6 crores which was over paid to EBPL at the earliest. 7.18 We also note that subsequently an independent Chartered Accountant's Firm had examined the various claims and counter claims and had given a report placed at page 255 of Convenience Compilation (reproduced in para 5.10 supra) wherein they have concluded that no amount is outstanding towards the complainant EBPL. 7.19 The pendency of reconciliation of account has been treated as a pre- existing dispute by this Tribunal in Amit Wadhwani v. M.s Global Advertisers [Company Appeal (AT) (Ins.) No. 616 of 2021], (2022) ibclaw.in 480 NCLAT, wherein it has been noted as under: "14. Besides other documents letter dated 11th March, 2020 addressed to the Corporate Debtor issued on behalf of the Operational Creditor makes it clear that for reconciliation of account date was fixed to 14th March, 2020. However, record shows that thereafter no reconciliation of accounts had taken place in between the parties. It goes without saying that in accounting, reconciliation is the process of ensuring that two sets of records are in agreement. Accordingly it can be inferred that in absen....