TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 337
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....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 dated 13.05.2015 and with VNCPL dated 15.05.2015 and 21.05.201....
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....5.05.2015 & 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 bearing reference no. VNCPL/SRCPL/2016-2017/EBPL/003 for OHE works for Rs. 13,37,00,000/- and work order dated 31.12.2016 bearing r....
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....icant 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 of Meeting dated 09.04.2018 (between SRCPL and GDCL) "3. All other terms and conditions of the work orders issued by GDCL to EBPL sh....
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....g 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 respectively (collectively Rs. 26.70.cr.). However, we were required to undertake certain works beyond the scope of work under the aforesaid work orders and consequently we believe that we are entitled for additional cost of....
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....partite 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 acknowledge and confirm that SRCPL had deducted TDS on the aforesaid payment in compliance with the applicable laws and VNCPL shall further comply with all the applicable laws including requirement of deduction of TDS for the payments made to EBPL on its behalf. That for the time being, without going throu....
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....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, 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 bel....
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.... 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 Learned Counsel for the appellant also referred to Indemnity Bond, specifically, para 4, 5, 6 and 10 of the said Indemnity Bond. Further, he referred to emails dated 11.08.2018, written by Mr. Viral Gandhi which promised payment of 50% of the due amount within two working days of submission of signed documents of phase IIA and 50% on submission of signed EIG documents for phase IIA, ....
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.... 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 collective value was subsequently amended to Rs. 18.06. However, we were required to undertake certain works beyond the scope of work under the aforesaid work orders and consequently we believe that we are entitled for revision of the aforesaid amended value of work orders to Rs.31.00 Cr. For this purpose, we have approached GDCL with the relevant document evidence and have requested GDCL to consider our claim for extra work and make payment after verifying our claim. 3) GDCL has reviewed the docum....
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....nt 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 signed this indemnity and this is not signed under any undue pressure or coercion. 12) In case of any clarification required in respect to this letter or in case of any dispute arising of this letter or related thereto, the decision of SRCPL shall be final and binding on EBPL without any protest or demur." 4.5 On specific query by the Bench, the Learned Counsel for the Appellant submitted that appellant's contract with GDCL continued. This is also recognised in para 5 of the MoM which records that the termination notice issued by GDCL stands withdrawn and cancelled. It was subm....
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....reshold 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 between VNCPL and EBPL the completion of the project was getting delayed. SRCPL facilitated discussions and identical minutes were drawn with EBPL, GDCL and SRCPL, and between EBPL, VNCPL and SRCPL. Identical second set of minutes were drawn. A tripartite agreement was signed with VNCPL, the appellant and SRCPL. Though, in its application before the Ld. NCLT under Section 9, the appellant had also taken up alleged debts relating to VNCPL but the said allegations are now dropped in the appellate proceedings as admitted by the Learned Counsel for the appellant, there by recognising that it was always respons....
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.... 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, SRCPL only acted as a facilitator and there was no direct contractual obligation of SRCPL to pay any amount to EBPL. 5.8 The Learned Sr. Counsel referred to minutes of meeting dated 09.04.2018 and submitted that simultaneously an exercise was done to reconcile the accounts and as per the document placed at page 53 of Convenience Compilation, there were differences in accounts and the amounts were subject to reconciliation. This sheet has been signed by J.K. Samaiya on behalf of GDCL and Mr. Ajay Agarwal on behalf of EBPL on 10.04.2018. 5.9 It was submitted that pendency of reconciliation of accounts in itself is a pre-existing dispute, as held in the case of "Amit Wadhwani v. M....
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....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 the expenditure incurred by GDCL in relation to the project. As per GDCL, such amount is debited to EBPL because such work was supposed to be carried out by EBPL as per the agreed terms of contract, however they have not executed such work. Please refer Annexure 1 in relation to the details verified and supporting documents received for Rs. 71,240,158. 7. GDCL and EBPL: Account Reconciliation Summary for SRCPL Ph- IIA * As per information and explanations given to us, there is pending work amounting to Rs. 2.30 crores which is not yet executed by either parties i.e. GDCL and EBPL. Such work was required to be executed by these parties in accordance with the contract terms. ** As per information and explanations given to us, total payment made to EBPL includes payment towards applicable GST which is in accordance....
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....act 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 circumstances, ONGC cannot be made legally liable to make any payment to the appellant. As stated hereinabove, only for the sake of convenience and to get the work of ONGC without any hassle, ONGC had made payment to the appellant on behalf of the respondent without incurring any liability to make complete payment on behalf of the respondent. .......... 29. For the aforestated reasons, we do not agree with the view expressed by the High Court and the impugned judgment' delivered by the High Court is set aside. ONGC shall not be liable to make payment, as rightly decided by the Arbitral Tribunal, to the appellant but the payment shall have to be made by the respondent, who had given a sub-contract to the appellant. Majority view of the Arbitral Tribunal on the above issue is confirmed and the view of the High Court is not accepted. The respondent shall accordingly make payment to the ap....
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.... "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. We are constrained to conduct meeting directly with your subcontractor and make an effort to resolve the disputes. We continuously kept stressing that it was most urgent for GDCL to resolve the issue on topmost priority. However, we regret to state that GDCL could not conclude. In your absence we will try to do our best to resolve the disputes. Since this dispute is between you and your subcontractor, any cost implication resulting from the resolution, if any, shall be entirely borne by GDCL. The said implication would also include the expenses that would be incurred by SRCPL on account of non-availability of electrical lines for operations. The alternative solution of terminating this subcontractor and engaging alternate subcontractor at this critical stage of the project may lead to multiple complexities and also we don't have sufficient time that would be required for conclusion of matter through this alternative....
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....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 above, payment of INR 1,95,20,551 (i.e including GST) was made by M/s SRCPL on behalf of M/s GDCL to M/s EBPL (dated 17th April, 2018) and balance instalments as per point 4(ii) and point 4(iii) are yet to be paid by M/s GDCL" (Emphasis Supplied) After discussion, the following was decided in the said meeting : "Agenda-4 Action: M/s SRCPL will make above two payments (i.e including GST) to M/s EBPL as per agenda No.4(ii) on behalf of M/s GDCL within 10 days of agreed date by M/s GDCL as per agenda 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) 7.8 We have also noted that in PS-I of minutes of meeting dated 14.10.2019, it is admitted that the GST amount shall be released on behalf of GDCL as EBPL has given GST invoices to GDCL. The minutes of the meeting dated 14.1....
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....ity of payment to sub-contractor lies on the contractor with the employer reserving its right, with intimation to contractor, to make payments due to sub-contractor, whenever employer has reason to believe contractor has not made the payment on a timely basis, though these payments shall be made on behalf of the contractor and that the contractor is required to immediately credit, secure or repay the amount of such payments to the principal employer. It is clearly recorded that under no circumstances the sub-contractor can make a claim against the employer. 7.11 The minutes of the meeting dated 09.04.2018 nowhere record that SRCPL has taken over the responsibility of payment, as the payer is not identified. The unilateral Indemnity Bond given by EBPL records in para 11, that the Indemnity Bond is given both to SRCPL and GDCL, and it is binding on EBPL. 7.12 We note that a similar issue was considered by the Hon'ble Supreme Court in M/s Essar Oil Limited v. Hindustan Shipyard Ltd. & Ors. in Civil Appeal Nos. 3353 and 3355 of 2005 wherein ONGC, as principal employer, had entered into a contract with Hindustan Shipyard Ltd, which in turn has entered into a sub-contract with M/s Essa....
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....that there is any 'Operational Debt' between the 'Operational Creditor' and the 'Respondent' herein. Merely because the 'owner' had given a bona fide assurance that if IEDCL fails to pay the amount they would pay the same on their behalf, the amount will not fall within the definition of 'Operational Debt' as defined under Section 5(21) of the Code. Learned Sr. Counsel for the Respondent submitted that all payments 'due and payable' by the 'Respondent' towards ISPL were made and discharged. The Hon'ble Supreme Court in the matter of 'Essar Oil Limited' Vs. `Hindustan Shipyard Ltd. & Ors.', has held that when a 'principal employer' grants a contract to a Construction Company the sub-Contractors cannot sue the 'principal employer' for any issues, if payable, as there is no 'privity of contract' between the sub-Contractors and the 'principal employer'....." 15. This Tribunal is of the considered view that any promise made in the letter dated 17.10.2018, specifically having regard to Clause 6.1.4 of the 'Agreement for Civil Works and Construction' entered into between Embassy Energy Private Limited and ISPL, whereby and whereunder, it was clearly specified that the sub-Contractor, wo....